Quote of the Week
Whatever you do this Thanksgiving, I wish you the best. Working with you is something my team and I are truly grateful for, and we wish you a happy Thanksgiving. – Larry Lof
Last week the markets were flat, with the Dow down -0.73%, the S&P 500 down -0.77%, and the Nasdaq up +0.22%. Over the next three months, the question is whether the vaccine’s positive or the virus’s negative will win out. The mathematics currently says the vaccine will win. We are now in Quadrant 3 projected to move to Quadrant 2 sometime in the first quarter of 2021. This will be good for the markets.
Right now, we are positioned with investments that take advantage of increasing inflation and China’s growth. We added Energy to the portfolio and eliminated our U.S. bond positions while maintaining a small position in Global bonds. We have lowered our position in Utilities to 2.5% of the portfolio. Remember, in Quadrant 3, inflation increases, so if that proves accurate, interest rates will rise, bond prices will fall.
The other change we have made to the portfolio is adding individual stocks. Since June, we have been tracking Hedgeye’s top-rated stocks. The performance has nearly doubled the performance of the S&P 500 Index during that period. The number of top-rated stocks varies between 7 to 13 stocks at any one time. Currently, we own 11 stocks with an exposure of 2% to each stock. Because of the uncertainty for the next few months, we are just sticking our toe in the water rather than taking a larger exposure. We are excited and encouraged that this change will work out.
Another change we have made is adding a 10% exposure to Sharespost 100, a mutual fund that invests in companies nearing either an Initial Public Offering (IPO) or are in a position to be bought by more prominent companies. These companies are not yet sold on the open market, so in theory, the fund buys the companies at a discount (liquidity discount) to their actual value. We have owned Sharespost 100 in many client accounts, and it has done well. We are adding the fund to client accounts that don’t have the position currently.
Again, we wish everyone a happy and safe Thanksgiving. Lynne and I are celebrating by ourselves. We usually have six to eight for dinner. Unfortunately, no one wanted to take the chance of spreading or catching the virus. The smallest turkey I could find in the grocery store was 18 pounds, so we will have plenty of leftovers, which is fine by me. Be safe, and don’t be a catcher or spreader of the virus.
I thought you might like to read an in-depth analysis of the COVID-19 situation. It’s from a blog I follow. Be mindful that this analysis is a week old.
These are the opinions of Larry Lof and not necessarily those of Cambridge, are for informational purposes only, and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.
The S&P 500 is an index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.
Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.