Article by Kelley Wright - Published Mid December Issue 2018
Daughter Trinity, at the conclusion of one of her lectures to her high school students, will often end with, “So, here we are.” Here we are, indeed. It seems like only yesterday that I was writing the Investment Outlook for the First-January issue, yet here we are at Mid-December wrapping up the twenty-fourth and last issue of 2018. How time flies when you’re focused on the task at hand, let alone when you have a publishing deadline on the first and fifteenth of every month.
For sections of the country winter has arrived with a vengeance; for some sectors of the stock market winter arrived early in the fourth quarter. An old Wall Street axiom says that it’s hard to make a harvest in the winter. For those sectors that are suffering from frost-bite, truer words were never spoken.
Each market year is unique, who knows what news the markets will pick up on and the impact it will have on investor emotions and perceptions. After years of scattered bouts of minor to no volatility, volatility has been making up for lost time, although, from a historical perspective, it really hasn’t been that bad, unless of course you think the last nine years are the rule rather than the exception.
The books on 2018 are still open, but that hasn’t stopped the intrepid from looking ahead to 2019. While it is impossible to know for certain what Mr. Market has in store for us in the coming year, rest assured that something will catch investors completely off guard.
There are so many variables that affect investor thinking, and consequently their actions, that it is impossible to predict in what direction the markets will take us. One thing I can write with total confidence, however, is that the markets will move up and they will move down. Someone brilliant once noted that the markets fluctuate; indeed.
The challenge for investors is to avoid the temptation of participating in the markets’ fixation de jour. These excursions into excitement, while often entertaining, can prove detrimental to one’s long-term goals of building both capital and income.Per the norm, the cognoscenti are all abuzz about this measurement and that reading and what it all means. At the end of the day though, it doesn’t amount to a hill of beans. The key to investing, according to Charles Henry Dow, is to understand values.
To some, market valuations are hostile. To others, market valuations offer opportunity. We will leave the discussion about market valuations to others because what is important to us is to know how to value stocks.
Understanding values, as it applies to stocks, is a simple proposition: Simply limit your buying considerations to those stocks that are of high-quality and offer good present value, then sell them when the value has been fully expressed at their repetitive area of high-price/low-yield that we call Overvalue.
That high-quality stocks will move from Undervalued levels to Overvalued levels is inevitable, the only variable is time. The dividends that you will collect and compound into additional positions in the interim will be your reward for exercising patience and good common sense. What this process may lack for excitement, the end result is infinitely more rewarding. For the investor that seeks both long-term growth of capital and income, this end most certainly justify the means.
We won’t close the books on performance until the close on December 31, but as I write the Lucky 13 for 2018 is hovering right on the breakeven point. I’m not happy about that given the long-term track record of the portfolio but given what we had to work with in the Undervalued category last December when we put the portfolio together, and the broad market correction of this fourth quarter, breakeven sure beats a loss.
Despite the lackluster nature of the market this year, it was gratifying to be named to the Hulbert Honor Roll for 2019, which marks the seventh consecutive year of this achievement. To be included in this list a newsletter must meet a stringent criterion over a considerable period, which I believe commenced in April 2000. This suggests a level of consistency and an affirmation of our process, which I call sticking to our knitting.
Sticking to our knitting in Trendspeak means limiting our investment considerations to only high-quality stocks that offer good value, holding them through their Rising Trend, and selling them when they reach Overvalue.
Our goal is to provide subscribers with independent research and analysis that is ahead-of-the-pack and cuts through the, well, bull. In a universe clogged with noise, we strive to provide clear, relevant and timely information. Lastly, while I must rein it in often, I try to write as I think and speak, albeit with much of the irreverence toned down and the edge removed from the wit. At the end of the day, however, I would prefer almost any other reputation than to be labeled as boring.
We tackled some relatively involved technology projects this past year, mostly behind the scenes but important, nonetheless. As mentioned in this space in the prior issue, our chart project is coming along nicely, and I think it will be a welcome improvement to the Service.
In closing we know you have a multitude of choices when it comes to investment advice and we are humbled you have chosen us to accompany you on your journey. While the results will make themselves known in the fullness of time, I can assure you that our effort and commitment will remain focused on finding quality companies that offer historic value and are worthy to be called Select Blue Chips.
May you and yours enjoy the Holidays and know much love, laughter and friendship. Have a Merry Christmas, Happy Kwanza, Winter Solstice, Festivus, or whatever your celebration of choice, if any. May you have a safe, profitable and Happy New Year!
That is all, now soldier on.