Over the years I have found Gavekal to be a very interesting read. They are a Hong Kong based “global investment research” firm. They are featured in this week’s Outside the Box by John Mauldin. Based on their analysis of the various likely scenarios in 2018 they arrive at the following conclusion:
So pulling it together, investors who responded “no” to all five of the above questions with confidence should stick with the winners of recent years. In this eventuality, the investment environment in 2018 should not prove too different from the one that prevailed in 2017. However, investors who answered yes to the above questions may want to start building cushions in their portfolios against shocks. These cushions may be a greater exposure to energy stocks, financial stocks, renminbi bonds, the yen, rotating away from US growth stocks and towards value stocks, or simply buying puts on US equities.
I don’t know the answers to the questions but having some cash earlier today I was looking at my wish list for something to buy. VISA (V) and MasterCard (MA) looked very attractive. They are credit risk free financial growth stocks which would be perfect for both outcomes.
I think MA has been and will continue to be a great stock no matter what times we are in. What other financial stocks beside V and MA would you consider to ‘rotate’ into in preparation for that eventual reversal? I would think having some cash would be a good idea but what would be the ‘value’ stocks to consider now? What energy stocks would you consider now?
My style is not to play these ‘rotation’ games but to play the long term game. I am interested to bring in some more ‘value’ to try to soften the blow somewhat during a reversal, and to build a bit of cash to play the recovery (apres la pluie, le beau temp…).
I can also simply ride through the speed bump and do nothing of the sort now.
I don’t trust myself with energy stocks, I’ve been burned too often. In finance I look for companies with no credit risk. There are four on my wish list:
MKTX MarketAxess Holdings Inc.
TREE Lending Tree
I’m long TREE and added some V today.
Mastercard and Visa are two of my ballasts in my portfolio, MA managed to do quite well in 2017. 2018 is going to be interesting, and no one has the crystal ball.
What companies will benefit from an increase in interest rates, and the Fed not buying new debt?