That Was Fun While it Lasted – Now What Do I Do?

For the last couple of years what has worked exceptionally well in the stock market has been an exciting story along with above average sales growth. Money has flowed into these types of stocks at a record pace and pushed their prices up accordingly (Tesla, Netflix, and Amazon to name a few). The ability to generate excess cash over and above their ambitious spending requirements has been secondary. These types of stocks have been propelled by momentum investors whose main requirement is a stock chart that is going up, constant optimistic television and internet commentary and an exciting product or service along with a stock symbol -now all that’s left is to watch it go higher.

So, what is the easiest thing for these so-called ‘investors’ to do when the stocks they bought stop going higher, they start losing money, the analysts get negative and they have no clue about what they own or whether the stocks they bought even make money? Sell!!

The amount of money that has gone into these types of stocks and unmanaged index funds during the last few years is staggering. You can imagine what the charts will look like if this money decides this is not fun anymore and decides to get out.  It won’t be pretty for the momentum stocks of the last few years.

Stocks don’t always go up and bonds are struggling now as interest rates begin to move higher. It just might get tougher to make money going forward – time will tell.

Our plan is different from the momentum-based speculators mentioned above;

  • We have some cash to take advantage of short-term fear and uncertainty (a good chart is not a requirement).
  • We are only buying the highest quality short-term bonds to take advantage of higher rates in the future.
  • We own a portfolio of financially strong growing companies trading at a fair price or better.
  • We plan on owning these companies for years! Some companies that fit that description that I’m currently adding to include – Exxon, Schlumberger, Whirlpool, Johnson & Johnson, Wells Fargo, China Mobile, and Rolls Royce.

Ups and downs in both the stock and bond markets are inevitable, the fear and greed of the daily traders and commentators are useless for long-term investors.

As you already know – the tortoise wins the race.

David Burgess

The information contained herein does not suggest or imply and should not be construed, in any manner, a guarantee of future performance and/or investment advice. Past performance does not guarantee future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended and/or purchased by Burgess Investments), or product made reference to directly or indirectly on this newsletter or company website, or indirectly via link to any unaffiliated third-party website, will be profitable or equal to corresponding indicated performance levels. Returns are historical and based on data believed to be accurate and reliable. We believe the above information is reliable and true but cannot guarantee its accuracy.
David Burgess