Morningstar Stars: 5 Star Supernovas
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!
Where To Invest In 2021 – Mid-Year Update
Nothing ever goes exactly as planned, but the first half of ’21 for the U.S. equity markets went even better than most would have hoped. To be sure, as we wrote in December 2020 in our Market Outlook (Where to Invest in 2021), we thought the year would be favorable for equities in general and inexpensively priced stocks in particular.
Such was the case over the first two quarters of 2021, but Value has taken a bit if a breather since the advent of summer, which we think affords another opportunity to add undervalued stocks to portfolios. In addition to the seven investment themes we highlighted at the end of 2020, we have just added three more in our latest Special Report entitled Where to Invest in 2021 – Mid-Year Update.
Death & Taxes, but Not Death from Taxes
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.
2021 Market Outlook
Even as the equity markets showed remarkable resiliency this year, rebounding strongly from a massive five-week Bear Market that ended March 23, 2020, we suspect that most will be happy to see the calendar turn to 2021. This is especially true as significant progress on COVID-19 vaccines, we think, will provide a favorable stock market environment in the new year, especially for inexpensively valued companies.
Time For Value
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.
Election 2020: Racing towards November
As the 2020 presidential election campaign heats up and polls show Joe Biden holding a lead of 7.5 points (49.2% to 41.7%) over President Trump, while the betting odds suggest a tighter spread, we must caution that the race is far from over. Indeed, pollsters and oddsmakers are hardly infallible as just four years ago, Hillary Clinton led Donald Trump in the presidential race by four or five percentage points one month before Americans cast their ballots. Market historians, and perhaps everyone, should be thrilled to see the page turn to 2021, even as the winner of the Oval Office will still be dealing with COVID-19, as well as political and economic uncertainties.
The Death of Value
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.
Epidemics: COVID-19 Not the First, Nor the Last
In this report, we offer perspective on epidemics and the equity market turbulence associated therewith as we have long believed that the secret to success in stocks is not to get scared out of them, while we are always focused on the long-term, multi-year prospects of the businesses in which we are invested. Happily, capitalism’s immune system is quite strong.
Turbulent Markets: Act Quickly and Do Nothing
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.
Rising Interest Rates and Inflation are Not Fatal
In this report, we discuss the Taper Tantrum in 2013, stock performance during rising and falling rate environments and the Federal Reserve’s inflation and rate targets.
The Most Wonderful Time of the Year
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.
The Value of Dividends
Dividend income and its reinvestment has comprised a significant portion of long-term stock gain. Dividends today compare very favorably to income that can be generated from competing investments as the S&P 500 yields 1.8%, a smidge less than the yield on the 10-year U.S. Treasury (as of 12.31.19), while the yield for Value stocks (represented by the Russell 3000 Value index) is some 70 basis points higher at 2.5%.
2020 Market Outlook
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.