Monthly Archives: July 2016

Its Not About Numbers; Its About Expectations

Facebook delivered yet another amazing quarter the other day. The stock moved higher, then tailed off later on in the trading session. How could this be? They beat all expectations! The thing is, investors have become used to Facebook beating their expectations. It sounds silly, and it is, but that is clearly what the day’s trading revealed.

Apple, on the other hand, had a poor quarter. However, it was not as bad as analysts thought it would be and the stock moved higher and sustained its rally.

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Biotech Update

Back in March, I mentioned that it was time to look at the Biotechnology sector. As I explained in the post, we choose to invest our core biotech holdings with very capable fund managers rather than a broadly based ETF such as the iShare NASDAQ Biotechnology ETF (IBB US). So far our chosen managers at the Polar Biotechlogy Fund have done a great job in a very challenging sector:

LINK: Contrarian Thoughts – Biotech Edition

polar bio

Looking at the biotech chart we have seen two nice runs coupled with two equally damaging sell-offs:

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Putting Things in Perspective: Current Bond Yields -vs- Capital Appreciation

About a month ago, I wrote a post comparing the disparity between historically low bond yields and low equity valuations for German automakers:

LINK: German Automakers

Here is a chart that shows the stock performance of the big three since then:

dai

I ended up choosing Daimler shares for our portfolios.

At the time 5yr Daimler bonds were yielding 0.19%. Take a quick guess how many years you would have to hold on to a bond yielding 0.19% in order to generate a total return of 11.91%?

Ready?

About 62 years. No joke.

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What to Buy….

Earnings season is once again upon us. The S&P 500 is at all time highs and developed market investment grade bond yields are at all time lows.

And it seems as if everyone is complaining and no one knows what to do…

Here’s what you do: you buy strength and you buy the future.

This means buying stocks that keep growing their revenues and increasing their profits. This means looking at the relative merits of asset classes and understanding that five years from now you will have been better off holding blue chip stocks than sacrificing quality and increasing duration on bonds in order to chase ridiculously low yields.

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