Portfolio Strength. Four Moves Toward More.

sumoringer-3199591_1920Graphic, STOCKjAW banne, Quality View

OCTOBER 12, 2019

Trade

“agreements” are never final and “deals” are firstly talk. Meanwhile your portfolio turns in the wind created by all that gas. Individual investors can’t stop such. We can however reposition. Trade’s a drag, but not the only macro funk we face. Additionally there’s that pesky “economic slowing” thing. O.K.


Many people talk and some actually make sense. Here’s some. Opportunities only truly end when we stop looking, or thinking. Here’s more. Everything good’s now too expensive. Hog shit. The door toward greater safety or growth’s now closed. Pish-posh.  
Sometimes the good stuff stares you in the face to the point you don’t even notice anymore. Or maybe that stuff simply looks very different in this macro light.

 

We have one, or two, and they’re not secrets. Both are in fact perfect examples of five characteristics that work brilliantly now. Buy either, or use them as ideas to narrow your process. Your portfolio will love you back for that. The future’s yet coming. Now is always when we’re preparing, Sumo-style. “Portfolio Strength. Four Moves Toward More.”

 

 

Graphic, metro shanghai
The trade train is always fumbling. Now is what it looks like when it comes off the tracks, and now has been in the mail for decades. Metro, Shanghai. By the way, Sumo is of course Japanese, not Chinese.

Trade

is not tea on the lawn at two and political science isn’t science, it’s academic rigor turned on politics.  Fall is not summer but the sun shown on our markets yesterday just the same.  We enjoyed the rush of goodness.  We enjoy it still in the form of relief.  Relief matters.

 

 

4.  Rebalance or reduce the portfolio’s collective P/E exposure.  High multiple high flying stocks are crushed first.  The current S&P 500 P/E ratio is 22.1.  The historic average is between 18 and 16. 

 

People are amazing, wonderful, duplicitous, and contentious, and trade is not tea, and poly-sci isn’t science.  But it does point to a pair of truths.  One of America’s most bent presidents, Nixon, opened the door to modern relations with China, and China is amazing, wonderful, contentious, and duplicitous.  And so are we.  Ask the Kurds.

 

 

3.  Loving the quality.  Established companies have more balance.  They can weather the ugly, in part because they’ve been there.  Think JPM–yeah, even during very low rates.  We can’t have it all when markets are mad.  Besides, attractive prices only come when sectors are unfashionable, or even hated.

 

Nixon was also correct concerning trade.  Trade is war.  Trump considers business to be war.  Anyone witnessing the costs of this trade struggle might agree.  STOCKjAW has lost thousands, not including the loss of momentum.  That brings us back to relief.  Yesterday’s rally was relieving and celebratory, and we all deserve it, emotionally.

 

 

Blame him–he started it–with ping-pong.

Nixon, Victory
…and the right hand? Is that backward “victory” sign some sort of “plumbers” gang signal? Thanks for the China thing–we think. We could have done without the constitutional crisis.

  Investing

wisdom informs us to “check our emotions at the door.”  Adherence to that rule is always relative.  Even the most seasoned or accomplished of investor will struggle with that.  The point for us seems to be recognizing that, enjoying the ups when they come, anticipating the downs, and remaining gentle along the way.

 

No one paying attention believes this trade war over.  The Chinese have a well established history of position shifting.  They prefer such late in the game.  Classic negotiations involves imbalancing.  Think Sumo.  Good news.  All else aside, Trump’s a mater at that.  What’s next?  Locate you best balance.

 

2.  We love cash flow.  Hum…JPM, again.  Cash flow is what creates earnings.  Earnings are what create love.  Don’t you get a kiss when you come home with the goods?  You should.  Think Amazon, yeah AMZN, even during anti-trust dust.  Fact.  Everything’s challenged now.  Bezons will lead his investors through these times.

 

 

We’ve specifically used the last two rallies as opportunities to adjust our portfolio.  We want four things; a lower collective P/E ratio, higher quality, more cash flow, and dividends.  

      

 

1.  Get Fa King paid.  Waiting counts more when you’re being paid..  Dividends.  How annoying is this?  JPM–again.  Why?  They’re as bullet-proof and savvy as it gets, and they pay you 3.15%.

 

JP Morgan Chase. JPM: NYSE

Chart, JPM, 10-11-19
JPM reports on Tuesday. All things considered, we feel JPM’s very attractive here. Monday may be an up day. If shares are not up, or barely up, a small buy makes sense. Then wait until after earnings to fill it out at a better price.

 JPM

is a perfect example of the four savvy qualities that will both protect and pay you in these uncertain times.  Is JPM a good stock to buy?  Shares trade at a P/E of 11.8 trailing and 11.4 forward.  It trades at 1.6x book.  Again, market wisdom says that quality selling at close to 1x book is a steal.  Over the pat year JPM’s grown sales by 19.4% and EPS by 22.2%.  It’s one year forecast EPS growth is 13% and return on equity 14%.

 

 

Amazon’s not an example of cheap,, or dividends, like JPM.  AMZN’s an example of hyper-quality, strong cash flow, and secular growth.  It’s also beloved and trusted by it’s massive and expanding user base.  It also sells greater than 200 million items, conveniently, including everything people use regardless of any recession.  Size does matter–along with that AWS monster.

 

JPM is considered by most to be the best bank on the planet.  It’s a 371 billion dollar fortress who’s shares have pulled back by -3.4% over the last month.  Far more importantly, JPM is expected to increase revenue from 2018’s 77.4b. to 114.4b. for 2019.  That’s 47.8% revenue growth.  Does that sound safe?

 

 

 

The Investing Journey

graphic, flying s.

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Additional resources:

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https://www.schwab.com/public/schwab/client_home
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