400 bps

The secular value investor's portfolio is now outperforming the S&P 500 by 400bps (I'm up 14% while the market is up 10%.). helpful positions include NVT, ILMN, AB, Asia, Energy, Goog, CME, etc.


Some keep wondering about the disconnect between a record setting market and the expected slow down in the economy and the risk that brings to corporate profits. First point to keep in mind is that the best performers right now -- what is driving the indicies upward is a select few stocks -- mostly the secular growers like CME, GOOG, AAPL, FLIR, etc.

These are stocks that have a reason to grow even in weak economies. They generally have large international revenues. Their stocks have been flat or have dipped at some point over the last couple of years -- so they haven't necessarily been the best performers all the time (think about GOOG and CME spending lots of time in the low to mid 500's, look at NVT and ILMN last spring, etc.) Their valuations are high but going higher as various types of growth investors bid them up on the theory that there aren't any other choices so they must bid these up.

Its not true -- what is ugly today can become a swan tomorrow and what is a perfect stock today can become ugly tomorrow -- keep that in mind as the market takes off. AFFX is my reminder -- I bought in around the low $30's and within a year the stock was nearly $60. Then a competitor came along and their success took all the revenues straight from AFFX -- a few earnings misses later and I sold AFFX around $30ish. its in the 20's now -- still. So rather than a double I ended up round tripping -- perhaps now you understand why I have chosen to take profits in NVT and ILMN this year.

So called growth stocks do best when economic growth is decelerating because they can grow and the cyclical stocks can't.

If we get any sort of reacceleration in the economy, we will see the cyclicals take off again.

To the extent that my portfolio is invested in the secular growers, my performance will be great. these types of markets are great fun for my strategy -- but eventually these stocks will go up too much and then pull back hard -- its best to keep an even keel about performance but I find that hard to do. The roller coaster is where I live -- happy when I am right and sad when I am wrong.