Keep it in Perspective
April 09, 2012
– Comments (13) |
RELATED TICKERS: SPY
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So just before the end of March, when everybody was still ll atwitter with joyjuice and the world was our oyster, I wrote about how I was not buying and had not bought since January. I'd just like to note that post predated Doug Kass' "Sell in April" call, and predated just about all other statements of risk-offedness.
Almost like clockwork, suddenly after Q1 ended, people rediscovered that Europe is not fixed, some data indicative of slowing crept in, bad China inflation numbers came out, people started talking about gas prices gain, and the market tanked. Wait. Tanked? Nah. Let's keep it in perspective. After the recent 'drop' we are still not even down to the levels we were at on March 1. The S&P would have to drop to 1320 for us to get a 10% correction. (Apple's weight in the S&P index may however disguise the severity of the drop a bit, which likely feels a lot worse to you if you don't own any Apple shares and you are not otherwise invested in Dow type stocks.)
Personally, my view has not changed. As discussed in this separate post on my standalone blog, I rarely sell and I never sell because of market drops. My primary concession to market timing is in the amount that I buy from my saved income. Since January that has been virtually nill. I would still like to see an actual correction in the S&P down to around 1320 or so, or else a strengthening of fundamental data before I buy a whole lot more.
That's not to say I see no cheapness, but it's not as extreme as it was six months ago. Apple and Microsoft have had great runs and are probably not overvalued still. All the talk of an Apple bubble is preposterous at its current forward P/E -- people are just scared by the numbers, because they don't seem yet to grasp yet the power of the iPad market that Apple created from scratch. Phillip Morris is beating gold over a two year holding period but looks affirmatively expensive to me right now. So does Altria.
Transocean is still cheap but I am questioning my deepsea drilling thesis more and more in the wake of the continued emergence of fracking: it's going to release lots more onshore oil, not just gas. I think this decade will be all about what fracking did for oil production, just as last decade was about what it did for natural gas production.
I think Hewlett Packard still has some potential and I will buy more of that on a drop. Exxon remains a bit elevated; it looks cheap because cyclicals look that always look cheapest when they are near highs. I think Sodastream is undervalued but I am fully invested there after more than doubling up at $28.50/share, and I'm not confident enough in the call to add more. McDonalds is in a total holding pattern after its run. Coke and PG do not look extremely compelling to me at these levels. JNJ is a decent value still. ABT has had a nice run and is not longer as cheap as it was before the spinnoff was announced.
VHT continues to a nice way to play our country's idiotic healthcare system, and our idiotic obesity and stress levels and proclivity for medication rather than basic exercise and moderation. If this country started collectively exercising 30-minutes a day, cut red meat to minimal levals, cut sugar consumption, and started charging fat people, heavy meat eaters, smokers, and heavy drinkers more for even employer-funded insurance (which I would wholly advocate for), the value of this ETF would go into terminal decline. Since I can't change America, I'm at least going to profit from our collective stupidity and from the horrible incentives our policies have put in place.
On my DRIPS: UNP, LMT, and BDX, I think all are neither under- or over-valued much, and frankly I don't care. These are bonds as far as I'm concerned. I invest $50/month though DRIPs that are free, and I will never sell anything unless I think the firms are seriously threatened with business model obsolescence, which they will not be.
Berkshire is still a good deal, and a likely add for me. AT&T is overvalued. Intel and Cisco are still decent deals, particularly Cisco. United Health is going to see a big drop if Obamacare is overturned, at which point it will be a good buy. HMC is a play on an eventually falling Yen and is still a phenomenal company: it has been really hurt by the Tsunami, by the strength of the Yen, and in investor's minds by the idea that American car companies are resurgent. HMC and TM still have major competitive advantages that are surpassed only by the Koreans. Walmart is reasonably priced, but not terribly compelling to me right now. Ituran seems like a decent value especially below $12, and it and SODA have been hurt by the perception that Israel and Iran might have a little war.
Intuitive Surgical continues to be a f^cking beast. I am struggling with some serious stock-price-anchoring on this one. That combined with the very high P/E, and the fact that the Livermore-loving "traders" view it as a "market leader" that is "holding up well" and a winner to "let run" "for now" has me VERY leery of it. I have no plans to sell. But I'm looking to see their next report, and I would really like to see at least a 20% drop here, and for the technical guys to abandon it.
My geographical ETFs continue to be some of my worst laggards. Yet again (as with my purchase of a European mutual fund in 2007) I am learning the lesson that diversification for its own sake is a fool's errand. Yet my initial purchases were very small, and I have added to VWO and EPI at lows. I think the best regions for the next ten years are going to be Africa, India, and....the Middle East.
I ran a screen this weekend and I did not see many compelling values amongst stocks that I do not own but would like to own forever. As of now, my likely next adds are to Ituran and Berkshire. But we shall see.
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