Cheat Sheet Q&A:
Today’s topic: Revenue & Earnings growth of stocks
Now that we're into earnings season for stocks I'm wondering what the outlook is for companies & whether it’s worth the risk to continue to stay fully invested. You've mentioned that you're worried that the stock market may be overvalued & earnings season always results in more volatility.
Bottom Line: We are into another earnings season and yes we do generally see more stock market volatility during earnings season (although with all of the geo-political turmoil, we may see more volatility related to world events than even company specific earnings). I don’t like the premise of your question though. The implication is that you’re trying to time the market. I’m not one who likes to attempt to time the market unless a truly extraordinary event appears to be on the horizon.
The only time I’ve ever suggested that we needed to get to the sidelines altogether was heading into the fall of 2008. Otherwise I like to take as pragmatic approach as possible. I view success as much by the month growth of dividend income from my portfolio as capital appreciation. With regard to the market here are some numbers to support your concern:
- S&P 500 is still trading at a value that is about 25% higher than its historic average
As for the current quarter:
- 5.6% revenue growth & 4.6% earnings growth are expected for the S&P 500
I think the estimates may be a bit optimistic but to your point, if you’re a value investor, there is reason to be skeptical. Rather than just bailing on the market by trying to time it… Maybe rethinking the way you go about investing will help.
I have a rule of 5 years. That is to say that if a downturn in the stock market will change your day to day life within the next five years; you likely should look to make adjustments to your investing and likely take on less risk. This is especially true of people preparing for retirement. Otherwise being strategic makes sense. For example, when I’m screening for companies that fit my new investment profile I’m identifying about 220 or so companies. For new investment I’m choosing the company that’s performed the worst of that group over the last year. Perhaps somewhat surprisingly my performance relative to market on a capital appreciation basis has actually accelerated over the past year with the technique.
It’s important to remember that the average performance of the stock market is about 9% per year and about two-thirds of that return comes from reinvested dividends. I prefer to be strategic and stay on plan that to attempt to time the market unless something truly game changing and unforeseen is about to take place (a la 2008). As always seek an investment professional for your personal
If you have a topic or question you’d like me to address email me: firstname.lastname@example.org
Its official unlimited e-reading is here:
Bottom Line: Last week I previewed the soon to be unlimited e-reading service that would be forthcoming from Amazon.com. Today it’s ready to go. Kindle Unlimited is here. Here are the finer points:
- $9.99 monthly subscription for e-reading to any device from Amazon.com
- Library of 600,000+ e-books that are available
- 30 day free trial
There is also a bit of a surprise on the audio side. This is what I didn’t preview… Amazon is also offering an audible book monthly subscription service as well. Here are those details:
· $14.95 monthly subscription
· Undetermined number of audible books available (far fewer than the 600,000 figure)
· 3 audible book free trial available
So Hurricane season has been quiet but actually pretty average... Named storms by month historically:
Bottom Line: As we head down the home stretch of July, and a third of hurricane season passes us by, you might be thinking that it’s been really quiet. You’d be right. We have only had one named storm so far this year (the hurricane that skirted the east coast of the 4th of July weekend). On the flip side if you’ve been in a hurricane impacted area for long you also know that the peak of hurricane season has yet to arrive. So with that in mind let’s take a look at the percentage of named storms in the Atlantic by month (credit data from the Weather Channel for the percentages):
- June = 6% of named storms
- July = 8% of named storms
- August = 27% of named storms
- September = 34% of named storms
- October = 17% of named storms
- November = 5% of named storms
So we defied the odds in June and we’re just about average for July. In other words we average two to three named storms by the time we reach August. So if no more named storms take place this month we will be in the mist of a very calm season. Of course it takes just one and we’ll soon be entering the peak time of the year.
Back on top - for larger cities two Florida destinations rank best for retirement:
Bottom Line: You will see a myriad of “Best places to retire” type of stories these days. With thousands of Boomers doing so each day it’s understandable. That being said they’re commonly smaller towns. While the slower pace and affordable living of small towns might be nice, it’s not necessarily realistic or in the best interest of retirees. The cultural opportunities, entertainment options & importantly healthcare infrastructure of larger locales likely are in the best interest of most retirees. With that in mind NerdWallet.com studied the top 75 cities in the country and indentified the top cities for retirees. Two of the top 6 are in Florida including the top city of all:
- #6 Tampa Bay, FL
- #5 Corpus Christi, TX
- #4 Mesa, AZ
- #3 El Paso, TX
- #2 New Orleans, LA
- #1 Miami, FL
Add in the other factor. The “it” factor. Of all of those cities the two Florida choices really jump off of the page as being more desirable. Yes I’m biased but I don’t think it’s just me. So yes you’re already where you should be in Florida.
Top countries for innovation in the world & where the US now ranks:
Bottom Line: By virtue of the headline you know that we aren’t the most innovative (or even near the top). Sadly for the first time in the annual World Intellectual Property Organization published by CornellUniversity the United States is not one of the top 5 most innovative countries. We fell to #6 this year… More on that in a moment… The top 5 are:
- #5 Netherlands
- #4 Finland
- #3 Sweden
- #2 United Kingdom
- #1 Switzerland (same as last year)
So Scandinavia kicks our butt along with our top ally. Why? I liken the economy to a sporting event. If at the end of the game we’re talking about the officiating of the game rather than the outcome based on player performance – the officiating failed the teams and fans. The same is true in the economy. If businesses spend their productive time talking about & dealing with the Government & its latest regulations – it’s not innovating. That’s just what we have under this administration. We now have the highest corporate tax rate in the world. Businesses and individuals alike worry about complying with and paying for mandates like the ACA. When we’re doing that we’re worried about surviving and compliance. Not about innovating. It’s a shame but until we make better political decisions I’m afraid the Government will be as much of a consideration as a poorly officiated sporting event.
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I work every day to keep you ahead of the curve on the crazy state of the economy, business, investments and technology.
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My faith: Don’t worry I don’t use the mic to preach but… I firmly believe that without God in our lives happiness will never be found. I believe that many of our societal failures have resulted from a general willingness to distance ourselves from our founding values while embracing political correctness.
I'm in my 19th year with iHeartMedia and 11th in South Florida. With my father as inspiration, I started investing in the stock market when I was 11 and co-founded a smoothie company at 18. The highlights of my radio career have been serving as a fill-in for Sean Hannity.
I've made my share of mistakes along the way as well. I shape my perspective from success and failure to provide you with a truly objective picture of business and money in your world. Business and investing are passions of mine. Some read Dean Koontz... I read financial reports.