Issues
California is burning and the rest of the country is in a deep freeze. It seems like a metaphor for the mixed messages we’ve been getting from the market in recent weeks, with stocks running very hot and cold since the start of December as the major indexes have mostly held near their highs but the under-the-surface action has been wobbly at best. The last six weeks have been rough on small caps in particular. As both a value investor and a contrarian, that spells opportunity!
So today, we add one of the highest-profile, more beaten-down small-cap stocks out there to our Buy Low Opportunities Portfolio. The stock is miles from its Covid-era highs, but it’s starting to build momentum for the first time in years: shares have tripled since bottoming five months ago. And it’s a name virtually everyone knows.
Details inside.
So today, we add one of the highest-profile, more beaten-down small-cap stocks out there to our Buy Low Opportunities Portfolio. The stock is miles from its Covid-era highs, but it’s starting to build momentum for the first time in years: shares have tripled since bottoming five months ago. And it’s a name virtually everyone knows.
Details inside.
Updates
What a difference a week makes!
Early last week, things were looking pretty gloomy for the market, with stocks on a six-week losing streak dating back to early December and interest rates, as measured by the 10-year Treasury yield, stretching to 14-month highs. More than 300 stocks on the New York Stock Exchange and Nasdaq were trading at 52-week lows.
Early last week, things were looking pretty gloomy for the market, with stocks on a six-week losing streak dating back to early December and interest rates, as measured by the 10-year Treasury yield, stretching to 14-month highs. More than 300 stocks on the New York Stock Exchange and Nasdaq were trading at 52-week lows.
Alerts
We are recommending shares of CNH Industrial (CNHI) as a new Buy. The company is a major producer of agriculture (80% of sales) and construction (20% of sales) equipment for customers around the world and is the #2 ag equipment producer in North America (behind Deere). It also provides related supplies, services and financing.
Strategy
I want to point out a problem that I foresee, potentially on the scale of the technology bubble in 2001 and the housing bubble in 2007. I think we’re going to have an “inverse ETF bubble.”
My stock-picking strategy has been refined over the course of 28 years, and has been quite stable for the last six years. My investment goals are (1) minimize stock market risk, (2) achieve capital gains, with dividends as a welcome addition to total return and (3) outperform the U.S. stock markets.
I was talking with an investor recently about the latest stock market downturn. He was puzzled; if General Motors (GM) is supposedly such a great stock and vastly favored among portfolio managers, why would it fall 30% during a market correction?
Our instincts warn us that stocks reaching all-time highs are invariably overdue to fall. Sometimes yes, sometimes no. We examine two common scenarios involving stocks that are about to rise—or fall—from new high prices.