This Cranky Market
Hello from Sycamore,
As I type this the market is down about 25% from its recent high and down about 9% today. The recent decline and wide daily fluctuations combined with the current media frenzy can make us all uneasy as investors. We wanted to review some points about your account(s) and let you know what we are thinking.
First, at the core of our stock selection process is the business of the corporation and its ability to consistently grow earnings. We work hard to try to reduce risk by not paying too much for those earnings. Companies or industries that we feel are not consistent profit generators or are in a business that we feel may have a limited future are not in your portfolio. For instance, we do not own any airline stocks and about two years ago we sold out of oil and gas securities as well as oilfield service companies. We also broadly diversify to try and limit the exposure to any single industry or company. Currently, we believe that the fundamental health of the companies in your portfolio(s) is good.
We do not do any market timing. While we are no happier with the current decline than anyone else, we will not be making any adjustments in your portfolio based on that decline.
Second, this market decline has been quick and volatile, but it doesn’t seem too bad when we compare it to other declines. Stock market declines are fairly common though certainly not much fun. The link below will take you to a communication we sent to our clients in 2010. While this information is a bit dated…it represents the big picture and we believe is pertinent today.
We cannot see into the future so we are not certain of the best path to take but history has taught us many times that share prices will follow corporate profitability over the long run. That is how we select investment holdings for you and why we continue to advise holding those investments over long periods.
One final thought. This may be a good time to put any idle cash to work. We’re finding several bargains.
Thanks for your business and trust!
Sycamore Financial Group
*Past performance does not assure future results. Investors cannot invest directly in the stock market indexes such as the S&P 500. Investment return and principal value of an investment will fluctuate. Investor value, when sold may be worth more or less than their original cost.