We are well into the correction we talked about in our last commentary. To reiterate – we believe this is only a correction in an otherwise strong, long-term bull market and we will bottom sometime in October and usher in the most powerful move seen yet. Corrections are inevitable and even healthy. They usually represent some sort of change in leadership sector(s) so we may be adjusting portfolios during this time. We believe the correction could take the indexes down between 10%-15%, or to between 29,000-31,000 on the Dow Industrials.
From a portfolio management perspective, there is only one reason to buy a stock, but there are many reasons one might sell. Selling a position is the trickiest part of investing in stocks. In the late 1990’s, the prevailing wisdom was to never sell. The biggest companies like GE and WorldCom could never go down so why worry about selling? WorldCom went bankrupt and GE was trading at $455 (after a reverse split) in the year 2000 and is now selling at $105. The adage is “Never fall in love with a stock.” We look at a lot of indicators to decide whether to sell and it may or may not be that we believe the stock will go down appreciably. We are always looking for the best place to put your money now, which means we want to stay with the leaders that are increasing their earnings growth the fastest, in the present cycle of economy. Of course, there are capital gains taxes involved in this decision, but our average hold period of about 15 months means we will likely pay the least amount possible. Our investment strategy called “Cycle Investing” was born from this philosophy.
Gary and Dianne
This report is provided as a general market overview and should not be considered investment or tax advice or predictive of any future market performance.
Any security mentioned in this report may not be suitable for all investors. No investment mentioned in this newsletter constitutes a recommendation to buy, sell or hold a particular investment. Such recommendations can only be made on an individual basis after an assessment of an individual investor’s risk tolerance and personal circumstances. Past performance of any investment mentioned is not a guarantee of future performance. Statements regarding the investment concerns and merits of any company and fair market value computations are strictly the opinion of Marin Group. Employees of Marin Group and Marin Group clients may have positions and effect transactions in the securities of the issuers mentioned herein.