Some of you have asked recently whether the market too high: is a pullback coming? It pays to remember that the market drops 10% once a year, on average. We can’t know when; it isn’t possible to profitably trade by guessing the timing. So a pullback is always coming, to be followed by a seemingly inevitable recovery.
But let’s talk what we’ve been doing the last few months in response to the market and economic environment—our research in action.
We’ve pared back half a dozen stocks that moved higher. These grew to be an uncomfortably large fraction of your accounts. They may present additional downside risk despite bright long-term outlooks, in our opinion.
We’ve found bargains. Three of them are selling at 10 times earnings or less—phenomenal bargains in our view, on companies that lead their sectors. These include the largest grocery, the largest retail health company, the largest food processor. If their earnings are durable (as we expect), they have the potential to do well from these low valuations. No guarantees, by the way. But they are paying 2–3% in dividends—so we’ve got that going for us, which is nice.
We’ve gotten rid of a few duds. These are holdings we deemed less attractive than others we could own. We also recently added three agriculture-related stocks, expecting a change in fortunes for farmers after some rough years, finding perceived bargains in a big green tractor maker and a pair of leading global ag suppliers.
The short-term outlook is always uncertain, but we are comfortable with the moves we have made on your behalf. Our accounts don’t always go up, but we are always working to improve your position. Long game.
Clients, if you would like to talk about this or anything else, please email us or call.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Investing involves risk including loss of principal. No strategy assures success or protects against loss.
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