Should we follow the money?
BY CARTER E. ANTHONY, CFA
I’ve always been a Contrarian and a Value Investor. For years through the 1990s, nothing pleased me more than to find a common stock that was off the beaten path, beaten down and beaten out.
I looked for large-cap, well-known stocks with experienced management and popular marketable products.
An above-market dividend was required to get paid while waiting for the company to rebound. It was not easy research and required a lot of study.
I invested in brick and mortar, the Balance Sheet, not forecast earnings by some young Wall Street analyst. By the time the order was placed, I knew the company well.
During the decade of the 90s, my returns were better than Warren Buffet’s Berkshire Hathaway, no small feat in my mind, an investor’s mind.
Come the 2000’s and the investing public loses its mind chasing the dot.com stocks. Compared to the dot.com stocks, my portfolio looked like a herd of plodding oxen.
It was ugly, no names in the news nor mentioned at cocktail parties. Still, it remained stable and paid a 3%-4% dividend yield.
The dot.coms paid little more than 1% if any. A doctor client cursed me about my plodding portfolio and moved his assets.
Later, I learned his new portfolio had fallen 50%. My composite fell only 26%. I was not disappointed. Several others left for the same reason.
In that same period, 2000, when I moved to Regions, I found client portfolios laced with dot.com stocks.
No one seemed to know what the companies did. “They’re going up, let’s buy ‘em”. Regions had no “sell discipline”, no investment discipline at all.
There was no research group, no approved lists, no model portfolios, nothing.
Problem solved quickly by the smartest young people in the Birmingham investment community which I brought in.
One day, I designated 12 dot.coms to be sold. Half the 12 companies went bankrupt. Saved clients’ money!
From those experiences, I have been slow to join the crowd and buy the popular AI, Quantum Computing and EV stocks.
In the 1980s, when desktop PCs were introduced, Peter Lynch, who managed the Fidelity Magellan Fund to extraordinary heights, did not own a computer stock.
He did not understand them. Probably half the desktop manufacturers went bankrupt.
Warren Buffet, considered the greatest investor of all time, said recently that he has never been one to buy into a new concept, meaning the AIs of the world.
Apple is Berkshire’s largest holding. He did not accumulate it until 40 years after Apple’s inception. I am in good company but I have changed my stripes a little.
Abbie Joseph Cohen, the Strategist for Goldman Sachs, labeled the late 90’s run-up to the dot.com bust “Irrational Exuberance”.
The Regions portfolio managers said, “They’re going up, let’s buy em”.
With Trump’s election and all he has accomplished, are we back to “Irrational Exuberance” and “They’re going up, let’s buy ‘em” or is an actual long-term foundation being laid?
For the foreseeable future, it appears President Trump is going to keep us on the edge of our seats with changes every day.
The opposition is going to fight him every step of the way. They are going to win some which is going to stunt the exuberance.
The snap-back from the April 2nd Tariff announcement has been one for the ages with crowds piling in.
For the six months ended June 30, the Dow is up 4.97%, the S&P 500 up 7.00% with the tech-heavy NDQ showing off again at plus 16.32%.
The S&P is over 6,000 and most are predicting a continued climb this year. One outlier forecasts a 5,500 yearend finish.
One thing is for sure, the climb, if it is, won’t be straight up.
