Every month, The Prudent Speculator produces a newsletter that includes a market summary, helpful charts and graphs, recent equity market news, economic outlook and specific stock investment strategies focused on value stock investing. This month, we feature another brand-new recommendation, while our Graphic Detail looks at Seasonality and Index Composition, the latter illustrating yet again that it is a market of stocks and not simply a stock market. In addition, our Editor’s Note offers perspective on the incredible market volatility witnessed during April. Note that the entire list is available to our community of subscribers only.
Editor’s Note: Seasonality, Index Composition, Market of Stocks and Volatility
March did not go out like a lamb, as the average stock in the broad-based Russell 3000 index was dragged lower by 7.2%, and April saw the proverbial lion joined by a real-life bear when the S&P 500 was mauled by a 10.5% post-Liberation Day two-session bloodbath on April 3 and April 4.
No doubt, peaceful sleep was not easy for many that first weekend of April, especially as the New York Post shouted, “CNBC Host Jim Cramer warns of ‘Black Monday’ market crash over Trump tariffs rivaling record 1987 collapse.” Of course, as we wrote on a recent Market Commentary, “Certainly, those of us who live in a glass house should not throw stones, but the Mad Money host has lately provided a vivid illustration of why many forget the Paul Samuelson admonition, ‘Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.’”
After all, he posted on X about 1987 on the evening of April 4, writing, “We knew when to sell…and we were proud that we did,” adding, “But we felt like idiots because the week BEFORE the crash was so bad and we were late to sell.” To be sure, avoiding the 22.6% one-day carnage on October 19, 1987, when the Dow Jones Industrial Average cratered 508 points to close at a reading of 1738, would have been nice, but the index ended that tumultuous year at 1939, stood at 2169 at the end of 1988 and at 2753 at the end of 1989, and is above 40000 today!
Happily, given that we offered our usual advice to stay the course as downside volatility is always part of the investment equation, with the 2025 setback the 39th correction of 10% or more since the launch of The Prudent Speculator in March 1977, we did not witness a repeat of 1987 when trading resumed on April 7. True, the S&P 500 saw its plunge from the recent February 19 high pierce the 20% Bear-Market threshold on an intra-day basis that day and again on April 8, but even Mr. Cramer was offering the reminder that time in the market trumps market timing, given his reaction to the massive equity-market rebound on April 9, following the announcement by the White House of a 90-day pause in the tariffs.
The near-3000 point (7.87%) rebound in the Dow that day was the 22nd best single-day advance in history dating back to 1928, with Mr. Cramer proclaiming, “NOBODY EVER MADE A DIME PANICKING,” and “STAYING THE COURSE IN THE MARKETS IS ALWAYS THE WINNING STRATEGY.”
To be sure, as discussed in this month’s Graphic Detail, there remains plenty of ground to make up just to get back into the black for the year, and stocks seem to be at the mercy of a social media post from the President, a media headline from a member of his cabinet or a trade development from a foreign government.
However, we are now in the 40th rally of 10% or more over the last 48 years, as some progress on trade deals seems to have been made, with U.S. Treasury Secretary Scott Bessent recently stating, “I think the aperture of uncertainty will be narrowing, and as we start moving forward announcing deals, then there will be certainty. But certainty is not necessarily a good thing in negotiating.”
Equally important, despite a flurry of dismal “soft” data points on how folks are feeling, the “hard” numbers on how the economy is actually doing have held up fairly well. The first estimate of real (inflation-adjusted) U.S. GDP growth came in at -0.3%, much better than recent projections from the Atlanta Fed, and the Federal Reserve’s preferred measure of inflation, the core PCE (Personal Consumption Expenditure) index, dipped to a 2.6% year-over-year increase in March vs. 2.8% in February.
Further, first quarter report cards from Corporate America have been solid, with 76.5% of companies in the S&P 500 that have turned in results beating earnings expectations. Yes, forward guidance is murky, to say the least, but as Warren Buffett reminds, “The future is never clear; you pay a high price for a cheery consensus.”
“Time is your friend; impulse is your enemy.” — John C. Bogle
Graphic Detail:
Stocks suffered miserable returns (average total return of -8.5% for Russell 3000 Index members) during the Nov. 2024 – Apr. 2025 seasonally favorable period, and a sharp decline in the latest month had many pundits warning folks that they should Sell in May and Go Away.
Of course, the historical data shows Dividend Payers and Value Stocks have enjoyed positive absolute and relative returns, on average, during the seasonally less favorable May-to-October periods, so we see no reason to make any changes to an appropriate asset allocation.
Graphic Detail
Market of Stocks – Index Composition
Equities performed well in 2024, even as the 10.5% return for the average stock in the broad-based Russell 3000 (R3K) lagged the hefty advance of the capitalization-weighted index. 2025 also has seen the proverbial soldiers trail the generals as the average R3K constituent lost 11.2% over the first four months of the year, versus a negative 5.4% return for the index. No doubt, many indexes are top-heavy as Apple, Microsoft, Nvidia and Amazon account for about the same weight in the R3K Growth index as do the top 40 in the R3K Value index.
Recommended Stock List
In this space, we list all of the stocks we own across our multi-cap-value managed account strategies and in our four newsletter portfolios. See the last page for pertinent information on our flagship TPS strategy, which has been in existence since the launch of The Prudent Speculator in March 1977.
Readers are likely aware that TPS has long been monitored by The Hulbert Financial Digest (“Hulbert”). As industry watchdog Mark Hulbert states, “Hulbert was founded in 1980 with the goal of tracking investment advisory newsletters. Ever since it has been the premiere source of objective and independent performance ratings for the industry.” For info on the newsletters tracked by Hulbert, visit: http://hulbertratings.com/since-inception/.
Keeping in mind that all stocks are rated as “Buys” until such time as we issue an official Sales Alert, we believe that all of the companies in the tables on these pages trade for significant discounts to our determination of long-term fair value and/or offer favorable risk/reward profiles. Note that, while we always seek substantial capital gains, we require lower appreciation potential for stocks that we deem to have more stable earnings streams, more diversified businesses and stronger balance sheets. The natural corollary is that riskier companies must offer far greater upside to warrant a recommendation. Further, as total return is how performance is ultimately judged, we explicitly factor dividend payments into our analytical work.
While we always like to state that we like all of our children equally, meaning that we would be fine in purchasing any of the 100+ stocks, we remind subscribers that we very much advocate broad portfolio diversification with TPS Portfolio holding more than eighty of these companies. Of course, we respect that some folks may prefer a more concentrated portfolio, however our minimum comfort level in terms of number of overall holdings in a broadly diversified portfolio is at least thirty!
TPS rankings and performance are derived from hypothetical transactions “entered” by Hulbert based on recommendations provided within TPS, and according to Hulbert’s own procedures, irrespective of specific prices shown within TPS, where applicable. Such performance does not reflect the actual experience of any TPS subscriber. Hulbert applies a hypothetical commission to all “transactions” based on an average rate that is charged by the largest discount brokers in the U.S., and which rate is solely determined by Hulbert. Hulbert’s performance calculations do not incorporate the effects of taxes, fees, or other expenses. TPS pays an annual fee to be monitored and ranked by Hulbert. With respect to “since inception” performance, Hulbert has compared TPS to 19 other newsletters across 62 strategies (as of the date of this publication). Past performance is not an indication of future results. For additional information about Hulbert’s methodology, visit: http://hulbertratings.com/methodology/.
Portfolio Builder
Each month in this column, we highlight 10 stocks with which readers might populate their portfolios: Benchmark Electronics (BHE), PPG Industries (PPG), Tinken (TKR)
Kovitz Investment Group Partners, LLC (“Kovitz”) is an investment adviser registered with the Securities and Exchange Commission. This report should only be considered as a tool in any investment decision and should not be used by itself to make investment decisions. Opinions expressed are only our current opinions or our opinions on the posting date. Any graphs, data, or information in this publication are considered reliably sourced, but no representation is made that it is accurate or complete and should not be relied upon as such. This information is subject to change without notice at any time, based on market and other conditions. Past performance is not indicative of future results, which may vary.
