2015 has been a difficult year, investment-wise.
Most of us know how this works. We have periods where we laugh and laugh about how much money we’ve made, and other times where we want to cry and cry.
In addition to the ups and downs of the market, our accounts have spells where they behave differently than the broad market averages. Everyone has noticed the divergence this year.
So 2015 reminds us a lot of 1999, when the tech stock boom was in full swing. Midyear, we turned negative on large growth companies. But that was what everyone was buying. We preferred the bargains in “old economy” stocks like railroads and food companies and tractor makers. They went down and down while technology stocks went up and up. We seemed awfully stupid as our favorites ground lower month by month.
Of course, that all changed when the bubble burst. The high fliers ended up declining about 80% over the next two and a half years (the tech-heavy Nasdaq Composite index slid from a high of 5,408 in 2000 to a mere 1,108 in 2002), while the “old economy” stocks staged a good rally. In other words, we turned smart.
In trying to understand the carnage of 2015, one glaring fact stands out. All year long we have held the strong opinion that the best bargains in the market could be found in the natural resource sector. Companies that had anything to do with extracting minerals or oil from the ground started the year at amazingly depressed levels—bargain prices, in our view. Then they became cheaper. Then they became cheaper. Then they became cheaper. We seem awfully stupid, again!
We know how this works. At some point the gluts that have been so painful for many of our holdings will turn into shortages. Higher prices and growing revenues are the likely result. We’ve been through this with other holdings in the past, watching values getting chopped in half before tripling or quadrupling.
What we do takes patience. We never wanted 2015 to require so much of it, to require an explanation of performance divergences. But we believe the tide will turn, as it always seems to. Thank you for your business.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Investing involves risk including loss of principal. No strategy assures success or protects against loss.
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