Category Archive

July 2023 Dear clients and fellow shareholders: The 15% S&P 500 increase during the first half of 2023 caught most pundits off guard – a fact that likely says much more about pundits than the stock market itself. (In December, the median forecast of 41 strategists polled by Reuters was a 6% return for the S&P 500 for the year.) It serves as a reminder of the substantial risk long-term investors assume when they try to predict short-term movements in stock prices – regardless of whether their forecasts are based on politics, the economy, underlying business fundamentals, the Federal Reserve … Read More

January 2023 Dear clients and fellow shareholders: The S&P 500’s almost 20% decline last year was the stock market’s third worst year since 1937 and the largest annual drop since the Great Recession decline in 2008 (-38.5%.) While we are never pleased with losses, our focus on valuation helped us sidestep much of the market’s 2022 decline. Our stock portfolio declined approximately 7% last year, buoyed by our positions in healthcare (McKesson, Cigna, AbbVie, DaVita and CVS) and homebuilder Green Brick Partners. (Your actual equity portfolio return may differ because of legacy positions or cash flows in/out of your portfolio.) … Read More

October 2022 Dear clients and fellow shareholders: Following the worst January-September stock performance in 20 years, worldwide equity indices have clearly entered into bear market territory. The US benchmark S&P 500 is down 25 percent year-to-date, with the Nasdaq Composite down a whopping 32 percent.  (Our stock portfolio has declined approximately 15 percent this year.) The biggest shock to many investors in the third quarter wasn’t the miserable return of the stock market; it was the revelation that the supposed risk mitigating portion of their portfolio – the “safe bonds” – turned out to be not quite as safe as … Read More

July 2022 Dear clients and fellow shareholders: Sir John Templeton once famously said that the most dangerous words in investing are “this time it’s different.” In the past 100 years, U.S. stocks have experienced 22 bear markets, the most recent of which began two weeks ago. The market eventually recovered from all 21 previous bear markets – and we expect this one to be no different. (We sent you an email on June 14 with historical bear market statistics and a white paper about bear market severity and duration. If you missed the email and would like us to resend … Read More

April 2022 Dear clients and fellow shareholders: Stock prices generally continued their decline in the first quarter, with the tech-heavy Nasdaq Composite posting the largest loss among the three major U.S. indices.  Our stock portfolio held up well, declining approximately one-half percent. Generally absent from the constant commentary about rising consumer prices is the effect inflation has on the actual value of financial assets, particularly bonds. Conventional wisdom is that including bonds in a portfolio provides a volatility-dampening balance to the unpredictability and risk of owning stocks. That conventional wisdom is naïve. Since 1982, interest rates have been in an … Read More

January 2022 Dear clients and fellow shareholders: By almost every broad measure, 2021 was a great year for investors. All major U.S. stock indices increased more than 20 percent, finishing the year at all-time highs. Our stock portfolio performed even better (up approximately 30 percent, excluding cash and bonds), despite not owning the ridiculously priced tech stocks that always seem to grab headlines. We enjoy those types of returns at least as much as anyone else, but not to the point of ignoring the components that generated those returns. Not all price increases are created equal – and some are … Read More

July 2021 Dear clients and fellow shareholders: When the overall stock market increases 15% in a 6-month period (a 30%+ annualized return), it means 1 of 3 things is happening. Investors are accelerating future gains into the current period, they are correcting for prior periods when stock returns trailed increases in corporate earnings, or a combination of the two. This year’s exceptional returns-to-date fall into the third category.  That is, investors are broadly building almost perfect expectations into the pricing of the large S&P 500 stocks, while correcting some previous price/value disequilibrium in some specific sectors.  We won’t complain too … Read More