Insights

Warren Buffett states, “In the business world, the rearview mirror is always clearer than the windshield.” And even though investors are constantly bombarded with the standard compliance warning that past performance is no guarantee of future performance, it should come as no surprise that many can’t help but chase the hottest asset class, sector or stock, often to their financial detriment.

In this Special Report, we discuss Morningstar’s rating system and remind that we think the best advice is to find a strategy with a history of success (Value and Dividends, perhaps?) and stick with it through thick and thin!

We think the tax rate analysis is eye-opening and, as is often the case, we believe it supports an emphasis on Value stocks in one’s asset allocation mix. We like the perspective offered by Vannevar Bush, “Fear cannot be banished, but it can be calm and without panic; it can be mitigated by reason and evaluation,” and we think this quick-read report is well worth a look.

We even offer a listing of 10 undervalued stocks that are already paying an elevated tax rate, suggesting that their bottom lines might not be so heavily impacted by a hike in the corporate tax rate.

In this special report, we discuss why we think the future continues to look bright for Value, even as we understand that some are worried about an equity market bubble. Of course, we are not invested in the thrills…and chills…of so-called “meme” stocks like GameStop and AMC Entertainment, nor are we falling for the euphoria over special purpose acquisition companies (SPACs) whereby one is betting that the proprietors will one day find a viable business in which to invest.

While returns for Value stocks were terrific in 2019 and Value turned in a very good decade of returns, Growth stocks have outperformed for a while now, as shown in this report. And while Value may continue to lag Growth in the future, we continue to recommend investments in Value stocks, especially as those stocks trade for what we believe are inexpensive price multiples and largely higher dividend yields.

In this report, we identify a few of the most common events which have historically caused temporary market disturbances. These events could easily deter you from staying on track with your long-term investment plan. But historical data suggests that doing nothing can be the best course of action.

Stock prices will always gyrate up and down, especially as geopolitical events now more than ever drive short-term market moves, but the secret to success in equities is not to get scared out of them. Yes, there are question marks about how strong Q4 earnings will be, but with the economy in OK shape, investor sentiment far from euphoric, the Federal Reserve remaining very accommodative, and corporate balance sheets and income statements generally healthy, we can’t help but be optimistic about the long-term prospects of our portfolios of what we believe to be undervalued stocks.

No doubt, the huge advance in 2019 has many questioning whether the equity market gains can continue in 2020. Hopefully, it should come as no surprise when our answer is that nobody can predict short-term market movements with any certainty and we must always be braced for downturns, corrections and even Bear Markets.