Weekly Market Assessment
Just like that, we're back in the black! What a difference a week makes. Putting risk on paid off, even in the face of the terrorist attacks in Pairs, that should have put the markets in defense mode. However, markets rallied across the globe in what many call a patriotic rally. Going from the worst week in over three months to having one of the best weeks in a year can make understanding the market even more difficult as at times it seems very irrational. Is the market irrational or is it what many theorists call Efficient Market Hypothesis? This happens to be an investment theory that states it is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information. This is why they have created Index Funds, so that you are aligned with the market and have limited exposure to one individual stock that could "blowup" your account when the CEO resigns to "spend more time with family." Sounds nice, however it usually is a sign of trouble. So, you can deal with mirco events or macro events which at times have a greater affect on the overall market compared to an individual stock. Which naturally brings us to the long standing argument of active and passive investing. So, was it possible for the markets to digest the events from last Friday and that explains why it was down last week and now up this week? Well, that is of course the million dollar question.
I am trying my best to keep interest rate talk out of this assessment as I feel it has been non-stop. I ended the last assessment with a small insight into what has been going on in the commodity sector and if you are a holder of any commodity related stock, this year has been extremely stuff to say the least. We have reached thirteen year lows in most commodities and the pain looks like it will never end. Is the market oversupplied that bad or is the demand side the reason? It's again a question of who you are asking and how they perceive the environment that makes up the foundation of any market, supply and demand. Have we finally reached a bottom where demand will pick up as prices are at record lows, or are we entering a consolidation phase where companies are able to merge/buyout other companies related in their sector to try and create synergies and growth through acquisitions. For now it has been wait and see however with low rates that are going to be raised in the near future, you would think companies would want to get in before the cost to finance an acquisition becomes more expensive. Like so many times in the past, a commodity looks like it will never recover when its at its lows and will never fall when its making new all time highs, however something always changes and the buying opportunity is passed up and we are left saying, "why didn't i buy it when it was so cheap!"
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
Square (SQ)- $12.85- This went public on Thursday and is run by the same person who founded Twitter. It's a payment processing company, that also provides capital to small business that aren't able to receive traditional funding. I have purchased shares in SQ and may look to add to it.
See What I'm Trading:You can now view all my real-time trades by following this link, BlackPacific Capital1. This new site shows my trades, in real time the minute they are bought and sold. Below you can also click on the stock symbols, trade strategy or prices which will lead you to this new site. The site offers a full risk/return profile and video detailing the strategy of the trade. Note: When looking at the option positions every contract equals 100 shares.
BlackPacific Capital has created two funds. The first is the Total Return Fund and the other is the Growth Fund. Both of these funds will be compared against the S&P 500. Both will hold a total of no more than five companies each. The Total Return Fund is a low turnover fund where every holding must have a dividend and be undervalued to its peers. The growth fund is made up of momentum high growth stocks where the turnover rate is much higher. Below are their Weekly and Year to Date returns. For more information and to see the holdings in each fund click here.
New holdings and liquidated positions: None this week. I am looking for a right entry level still in JP Morgan, Exxon Mobil and Phillip Morris for the Total Return Fund. For the Growth Fund I'm looking for an entry into Tesla and may swap that out for Square.
S&P 500 Return
Year to Date: 1.69%
Total Return Fund Return
Year to Date: 2.5%
Year to Date: 6.16%