Mike
Lipper’s Monday Morning Musings
A
Good Time to Sell?
Editors: Frank Harrison 1997-2018,
Hylton Phillips-Page 2018
When an investor, distinct from a trader, asks me if they should
sell some portion or all of their holdings, I first try to determine the
critical time period in judging the results of the action. If one is persuaded by
media voices the answer will usually be tomorrow or at the end of the calendar
year. For me, it is when the money is expected to be needed. For example, for
my newborn great grandchildren's retirement or the replacement of the new
university dorm, it could be a 100-years. Another matrix could be the future
low price point needed to protect future funding of a desired goal.
Regarding a future low price point, it is important to recognize that prices move in cycles. The important cycles can be labeled as seasonal, cyclical, secular, and structural. It is how I think of the latter part of last week’s drop in prices, where what I follow fell -15% to gains of +7%. To conserve your time and the blog's space I will comment on the year-to-date period for those impressed with media voices and include some other screens as well.
The first thing that hit me was the largest average gain of +15.94%
in non-leveraged, diversified large growth mutual funds. These gains were driven
by the biggest positions in technology stocks. However, they missed out by
focusing on securities registered with the Securities Exchange Commission.
After many years of SEC registered stocks performing very well, there were some
foreign markets that generated much better performance multiples. The leading
countries were Ghana +130.25%, Cyprus +94.75%, Luxembourg +74.8%, Greece +71.45%,
Columbia +70.05%, Nigeria +65.1%, Korea +61.1%, South Africa +48.02%, China +32.85%
and Chile +31.02%. Weekly Barron's performance charts showing 14 European and 7
Asian countries had 7 Asian and 4 European indices gaining. (As an analyst that
has followed non-US stocks and invested in some, I believe this is a good time
to examine these opportunities.)
Most Analysts Focus on Rising Stocks
I glanced at those stock prices not doing so well. For example,
the Dow Jones Industrials (DJIA) and Dow Jones Transportation (DJTA) stocks fell
-2.739 and -4.88% respectively for the week. Perhaps more importantly, their year-to-date
performance results were +6.90% and -5.21% respectively. (This suggests the US
goods economy is not doing well. Tariffs could be a problem. Freight movement
is down for both the rail and truck business and may forecast Halloween and
Christmas sales being behind earlier expectations.)
Down Prices = Opportunities
Three industry sectors are showing small declines on a
year-to-date basis: Banks -4.26%, Insurance -1.64% and small companies -1.1%. Restrictions
on all companies are the same, but small companies may be impacted more due to
their staff size. To the extent the current administration reduces some of the
regulatory overhead, it cou1d restore a competitive advantage to smaller companies.
However, many restrictions on smaller financial and insurance companies appear
to make it easier for new entrants.
AI, An Unrecognized National Problem
Some are beginning to comment on the absence of large
profits from Artificial Intelligence companies due to lack of public discovery
of relevant financial disclosure, so I will not. At a recent meeting hosted by the
London Stock Exchange Group, one of their headline speakers noted that the
challenge for the AI industry was to produce "more with less". It is
well recognized that AI is taking over an unidentified number of job functions,
reducing the need for human labor. Great! Where are these laid off people going
to get jobs anywhere near similar wages? This could be a concern for future
Administrations.
The 4th Activist President
Just like Andrew Jackson and the two Roosevelts, President
Trump is trying to solve various national problems by changing how they are handled.
Some of these attempts will survive the Courts. What I am not seeing is how the
restructuring of the economy will work. Looking at the aftereffects of prior
activist Presidents, I suspect it will materially change the outlook for
investments, something people are not currently focusing on.
I would like to know if anyone has any thoughts on what restructuring will mean to their investment orientation.
Did you miss my blog last week? Click here to read.
Mike
Lipper's Blog: Tactical Headlines Show Strategic Clues - Weekly Blog # 908
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Lipper's Blog: Anticipation Pays; Deliveries May Not - Weekly Blog # 907
Mike
Lipper's Blog: Selected and Casual Road Notes - Weekly Blog # 906
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A. Michael Lipper, CFA
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