Bullseye Thanksgiving Newsletter
by Timothy Guthrie on Nov 19, 2017
Tim is taking a week of vacation Tuesday 11/21 through Monday 11/27. I will have my phone and laptop handy if you have an urgent need, or if there is any serious market activity that requires me to take action. I will also continue to watch all our top holdings.
Tuesday 11/28 through Saturday 12/01 I will be moving into my new Cincinnati Office. It is near my current office, just a bit further down Beechmont. While moving I will also be watching the markets and available to address client needs. I will resume a normal schedule by Monday December 4th.
The address is:
431 Ohio Pike, Suite #214, Cincinnati, OH 45255
The Building is located behind the Toyota dealership, and is known as the ‘Waycross North” building. I have a signed a 3-year lease. I am sharing the space with Andrew Smith, EA. He has a tax focused accounting practice concentrating on tax return preparation and representing clients before the IRS. He is a friend from church, and I look forward to sharing the space with him. This office is much larger than my current little spot and will have room to add support staff when needed. My 2018 ADV Part 2A disclosure (distributed in January 2018) will list this address change as a ‘material change’.
Very soon I will be sending out information on an open house we plan to have in January. I will also have the map on my website updated. My mailing address will not change:
PO Box 123, Milford OH 45150
My son Peter is a junior in college (I know, it is hard to believe!). Over the Christmas break he will be working on several projects for me, the largest of which will be to help me update investment policy statements if needed (it is the 1st exhibit in the investment contract and specifies your asset allocation, and thus your risk tolerance). Over time, peoples’ investment needs may change, and I want to make sure your accounts reflect your actual current investment needs, and not the risk/return profile you had 10 years ago. He may email or call you to set up a time for you and me to discuss these issues. He will be using a ‘@bullseyeinv.com’ email address. Peter is not planning on joining his father’s business long term, but appreciates the chance to contribute over the holiday. He will sign a confidentiality contract, and maintain professional standards.
Overall, on a composite basis (meaning all accounts) through 10/31 we were up 17.1% for the year to date. This is somewhat better than the S&P 500 and almost 6% ahead of the NYSE composite index (a very broad index that many believe is a more useful benchmark). Of course, conservative accounts have generally not performed quite that well, and aggressive accounts have often done better. One other important note is that we have achieved these results while having less risk (measured by several different metrics) than the broader market.
Those who are new clients, or have held investment reviews the past year or so, have already heard, but I have changed how I construct portfolios. I am now using three to four conservative funds (mutual funds and ETFs) as a ‘core’ or foundation and more aggressive higher growth funds as ‘satellite’ positions. I vary the risk by varying the proportions of the ‘core’ vs the ‘satellites’. I really like this system, and find that it allows me to invest more precisely in growth sectors than the ‘value equity’ style I used prior to 2016. I will, of course, continue to monitor all the components of these portfolios and make changes when products are no longer competitive or when market conditions dictate. I have a graphic artist working on a one-page graphic I can use to help explain this system. The most difficult aspect is finding ‘core’ positions that reduce risk and still contribute to the account return in a meaningful way. Right now, the core positions I have are working very well. I can write more about this in future newsletters.
Market Update, or When is the Market Going to Fall?
I am getting calls. Calls from anxious clients who have experienced good results for a few years now, and they are worried. They ask, “When is the market going fall?” The past decade has built in an expectation of periodic pain. Further, they do not know what is pushing the market up.
I reply, that I do not know when the market will fall. My crystal ball is broken. It an old Romain model, and I can’t get parts for it anymore since Radio Shack filed bankruptcy. Seriously, I respond that I don’t know when the market will decline in a meaningful way. I then go on to explain that right now something uncommon is happening. Economic growth is accelerating globally. In the US, economic growth is jumping from 1.5%-2% a year to 3%. Don’t think that is just a 1-1.5% change, and no big deal. It is a 50-100% increase in growth. The same thing is happening in Europe, Asia, and the developing markets. Higher growth supports higher sales, and higher profits, which in turn supports higher stock prices. Aiding this backdrop is the fact that interest rates are still low and energy prices are also. Some of the tech companies that I was not excited about when they had slim profits, are now not just earing good profits, but have profits growing 20-50% a year. I have allocated about 15-25% of many accounts to various technology sectors. The best long-term prospects, in my mind, are industrial automation, artificial intelligence, robotics and medical technology. These may be long lived trends.
The Trump administration should get a small amount credit for being business friendly, but this is far bigger than Trump. Some of this growth is likely countries just now really emerging from the 2008 crash and subsequent deep recession.
This Thanksgiving, I want to thank God for blessing my family so much. We have enjoyed health, safety, family, friends, and a growing business. You are a huge part of that blessing. By trusting my little firm to invest your savings you create the employment that makes our life possible. Thank You. I will strive make my business as big a blessing to you and your family as you have been to us.