Covestor produced the following video featuring Charles Sizemore, the manager of the Dividend Growth Portfolio and three other models at Covestor.
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The annual InvestorPlace contest has a host of double-digit winners, including $DDAIF and $INTC.
It has been an interesting ride for the stock market in 2013, with the S&P 500 up about 16% year-to-date.
As a whole, not bad. Here’s the rundown as of the closing bell Thursday, May 23:
- Sherwin-Williams (SHW): +21%
- Intel (INTC): +19%
- Mylan (MYL): +16%
- Two Harbors (TWO): +15%
- Daimler (DDAIF): +11%
- Fomento Economico Mexico (KOF): +10%
- Global X Funds Greece ETF (GREK): +8%
- Qualcomm (QCOM): +4%
- Great Lakes Dredge & Dock (GLDD): -7%
- Vale (VALE): -24%
Daimler is going strong with a nice dividend and upside potential in China’s luxury market, even if some data in the nation isn’t looking so hot.
As for Intel, the semiconductor company has a wide moat and a big market share even if it has mobile struggles in a post-PC age. We’ll have to see how the new CEO steps up to the plate.
It’s worth noting that collectively, the list has unperformed in 2013. But there still are many months left to go before the end of the contest … so stay tuned to see which pick wins!
This piece was originally published on The Slant.
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China made waves with a bad manufacturing report this week, sending world equities–and particularly Japanese equities–sharply lower. But the issues in Asia go beyond just exports and currency rates. It’s about plummeting birth rates and demographics, and what it means for Chinese and Japanese investments. Jeff Reeves of InvestorPlace.com and I talk things over.
As I mentioned on the video, I would run away from Japan screaming right now, or at least I would run away screaming from Japanese equities. The short yen / long Japanese equity trade has been the most profitable macro trade in recent years, but it is a short-term trade supported with very weak fundamentals. The next fortune to be made in Japan will likely be in shorting its bonds.
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Watch me discuss General Motors’s earnings and the outlook for the auto sector with InvestorPlace’s Jeff Reeves.
Auto sales have enjoyed a nice bounce in 2013, with sales the strongest they’ve been in six years, but is it sustainable?
I argue that much of the sales surge is “catch up” buying that was postponed during the financial crisis. The average age of cars on American roads has been stretched out to 11 years. At some point, old vehicles have to be replaced, and that is what we are seeing.
Longer term, the picture for mass-market autos is not particularly good. Quality improvements have stretched out the useful life of the average car, which means longer time between purchases. And Echo Boomer (a.k.a. Generation Y) consumers are not embracing auto ownership to the same extent as past generations. Modern communications and the internet have made a lot of routine driving unnecessary, and America is re-urbanizing–which means more public transportation and less driving.
If there is a bright spot, it would be the luxury market, which is less affected by economic worries, enjoys higher profit margins, and has great exposure to emerging markets.
Related video: Are Automakers a Buy in 2013?
The language of Wall Street is infused with pithy maxims. “Don’t frown; average down.” “The trend is your friend.” And perhaps most relevant to us at this time of year, “Sell in May; go away.”
The last one is perhaps the most dangerous because, at least for the past several years, it has held true. Since 2010, we’ve had strong first quarters followed volatile, choppy springs and summers.
But it is important to not be fooled by randomness here or, more accurately, be swayed by the recency bias. I’ll never forget a simple study that money manager Ken Fisher published years ago in The Only Three Questions That Count. Using data back to 1926, Fisher calculated the average return of the S&P 500 by month.
What did he find? Well, as it would turn out, May happened to be one of the least profitable months, with an average return of 0.30%, though February, at 0.26%, was lower. The only negative month was September. Interestingly enough, October—which was the month of the 1987 Crash and the 1929 Crash—had an average return of 0.62%.
Yet the summer months of June, July and August were three of the most profitable months of the year, with returns of 1.37%, 1.87%, and 1.25%, respectively. July was actually the most profitable of all months; even December and January, the two months believed by many investors to be the best, were lower at 1.78% and 1.69%, respectively.
My point by now should be clear: “Sell in May, go away” is a losing strategy if you are basing it on seasonality alone. In any given year, there could be legitimate reasons for selling in any particular month, but selling because it is a particular month is sloppy analysis that will lead to sub-par results.
So, what about this year? After the great start we had, I’m not expecting much from the next quarter. And in fact, given that the market has traded sideways since mid-March, you could argue that we are currently in a mild correction.
But any weakness here should be used as an opportunity to put new funds to work. There is never an “ideal” time to invest, but I like to see valuations that are modest and sentiment that is lukewarm at best. Today, both of these conditions are in place.
I’ve recommended income investments such as dividend paying stocks and master limited partnerships as the best way to generate returns in a sideways market. If you haven’t loaded up your portfolio with them yet, do so on any weakness. For “one-stop shops” I continue to like the Vanguard Dividend Appreciation ETF (NYSE:$VIG) for dividend-paying stocks and the JP Morgan Alerian MLP ETN (NYSE:$AMJ) for MLPs. I own both personally and in client accounts.
Charles Sizemore is the Chief Investment Officer of Sizemore Capital Management, a registered investment advisor based in Dallas serving individual families and institutions. (Read More)
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