At Young Research, patience has always been at the heart of our investment strategy, but on Wall Street, patience is in short supply. In investing, patience means passing on marginal opportunities in speculative markets and waiting for the truly compelling opportunities to arise. It means having the willingness to wait years for an investment to work out in your favor. It means being willing to underperform major market averages in certain environments. And when it comes to common stocks, investing with patience means giving your portfolio companies time to breathe, time to correct temporary problems, and time to work through industry down cycles.
When you invest in stocks that are out of favor, patience is your number-one ally. Your number-two ally is knowledge of the sentiment cycle, or the range of different emotions that investors go through as stocks go from loved to hated. In this month's letter, I take an in-depth look at out-of-favor opportunities found in our Equities Master List. In particular, I examine where we are today in the sentiment cycle for commodities, including energy, precious metals, and coal. Speaking of coal, this month I'm recommending that you add to your position in one of our coal holdings. This low-cost producer has one of the strongest balance sheets in the industry, and in the event of a recovery in coal, you can expect its shares to trade at a significant premium to your average cost. More >>
Six years into a bull market and it would appear that rational investment decision making has been thrown out the window. Speculators and traders are bidding up glamour stocks to levels that would make even dot-com era day traders blush. Meanwhile, the stocks that this same crowd was infatuated with only a few years ago teeter on the brink of collapse. Savvy investors recognize that in order to achieve long-term investment success, glamour stocks must be avoided at all costs. Instead, focus should be placed on the out-of-favor areas of the market where much of the bad news is already priced in. I advise an emphasis on the ignored and neglected.
Spin-offs are a fertile hunting ground for neglected businesses selling at discounted prices that offer unusual opportunity for long-term profit. Numerous studies have shown that shares of spin-offs have significantly outperformed the market and industry averages during their first few years as independent companies. This month, we are recommending two new spinoffs. Also this month, I am recommending you close out your short position in Treasuries–if you've followed our advice, you should be up 10.5% over a six-month period in which the broader fixed income market has stalled. More >>
The Young Research Commodities chart book includes price, both real and nominal, for different time periods and annual rates of change for the commodities covered on the Global Investment Scorecard.
The Young Research Equities chart book includes a range of charts featuring indicators on stock market valuation, sentiment, relative strength, etc. for U.S. stocks over a variety of timescales.
The Young Research U.S. Economy chart book includes short and long-term charts on output and activity, the labor market, inflation, and consumer and business sentiment.
Since 1896, the average bull market has lasted 835 days and resulted in a doubling of stock prices. For more historical perspective on the duration and magnitude of bull and bear markets, check out our new Dow Bull and Bear Markets table.
Our Credit Markets chart book includes many of the charts we monitor and use regularly to formulate fixed-income investment strategy. The chart book includes long-term charts on nominal and inflation-adjusted treasury rates, policy rates, interest rate valuation indicators, and credit spreads.
Jeremy Jones, CFA, is the director of research for Young Research & Publishing and editor of the Global Investment Strategy newsletter. Jeremy is also the Chief Investment Officer at Richard C. Young & Co., Ltd., an investment advisor to high net-worth families and businesses. More »