At the end of each session, we forward to paid subscribers an overview of all our open Hotline ideas, and the ideal weightings (balance) for their portfolios. Yesterday, I added a special note in the morning that I'll share today with everyone. It's a short note underscored, however, by yesterday's action in the market. There is a hint of caution in the air, even as more bears migrate to the bull bandwagon. Big-time high-flyers are stalling, and lots of money is going into blue chip names. While it feels like "we" really dodged the big one, there continues to be an aura of angst; a natural feeling after such a massive rally and persistent doubters.
The great news is that tops don't happen when there's an aura of angst.
December 19, 2013:
I'm still working on obligatory 2014 predictions, but I want to give a heads- up about the different kinds of rotations that have already been telegraphed by the market.
We like industries that are coming on, and we should see significantly higher growth over the next five- years, versus the past five- years. We still love the global prosperity thesis, but I sense US-centric names could catch a bid with the Fed's de facto nod; that the worst is over, and good times are gradually coming back to the point we could be on our feet in 2016.
Value is our hallmark, but obviously the higher the market goes the harder it is to decipher value. You have to understand, value has nothing to do with share price per se; even a stock up 100% can be undervalued. If companies are executing, have pricing power, and are taking market share, they can be undervalued. I don't rub it in much, but research on Wall Street is so awful, great companies are generally always undervalued.
We'll have greater details, but want to caution- gigantic gains can be had, but just not overnight. And sometimes, if you want to beat the crowd, the stocks you're in could underperform initially. This is the essence of being a great investor, which is different than being a great trader. People that have wisely picked routes in life that are presented with rewards, and understood the investment angle of their career path - investing is not unlike that at all.
Still, my goal is to find great value, that's on the cusp of a turn, or the next leg higher.
This happens slower with low Beta (read less volatile) names, particularly in the industrial patch. In addition there will be pullbacks, corrections and crashes. However, for us owning great companies is the best way to weather those periods, and of course buying those names under general pressure has been an amazing way to create wealth from the beginning of time.
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