When the market is in EUPHORIC phase, companies can report poor or mediocre results, but the analysts and investors will find some positive slant to bid the stock up. Until it reaches ridiculous extremes, and reverses.
We are in a totally reversed market now. When a company like UBNT, with a very reasonable PE ratio, can report
Revenues up 78%
Adjusted Earnings up 108%
Operating Expenses of 10.4% down from 14.4%
Gross Margins at 44.3%
And DSO’s of 30 days
And say that they are hiring R&D engineers like mad so they can get their new products out even faster,
That they are taking market share,
That they have so much business that they are frequently out of stock and have decided to build up inventory to overcome that problem.
And the market focuses on the increase in inventory and the stock sells off 25%(!?) – 25%!!! - we know we are in the insane PANIC phase of the market, where analysts and investors will look for any possible reason to sell a stock. This too will reverse!
Or look at HZNP which reported yesterday. Revenues of $52 million, up from $9 million! Estimates of a loss of 2 cents, and they made positive 16 cents!!! and they couldn’t maintain a bounce and finished just 4/10 of a percent above the low close of the week.
This is the phase of the market where nothing is good enough and the market is never satisfied. It’s LOOK FOR SAFETY, AND ONLY SAFETY.
This panic phase won’t last either. Especially in a growing economy.
Is it possible to chalk up a positive yr end return from here? Is everyone else so devastated? Annualized port growth seems difficult from here; just finishing down 10% may well b a victory.
Rizzz,
As of Friday’s close I am at 87.4% for the year (starting at 100%), so I am down 12.6%. I do expect to finish the year positive. In fact, until I read your post I never even considered the possibility of not finishing the year in positive territory. It didn’t even occur to me. I think of what is going on now as a period of temporary insanity. We are in a growing economy, with rising employment, growing GDP, and growing corporate earnings, especially for our stocks. Take UBNT (for instance) since we’ve been talking about it. They made 50 cents this quarter and forecast at least as much for each remaining quarter. Figure $2.25 for the year (conservative). At $31, do you see much risk of further decline? (The forward PE is 13.7!) The only thing that would lock in your losses would be to sell at these ridiculous prices. Hang in there.
I joined TMF in November of 2006, stayed pretty conservative without buying much for the first year and then went on a buying spree just in time for the 2008 debacle. My portfolio was a sea of red. Some companies were down massively (haircut of %60 or more) . I really thought my portfolio would NEVER recover, let alone make it back into the black in a year or two. By the beginning of 2010 my portfolio was back well into the positive territory. And I’m a very mediocre investor compared to Saul.
The market will come to its senses and you will look at these sell offs as huge buying opportunities. Breath deeply and stay the course.
I enjoy pullbacks like we have been getting. I have very little cash, but even so, I will get some shares of some company soon at a sale price.
Personally, I wouldn’t mind if the market stayed depressed for a year or two.
I hope everyone that is like me and is near 100% invested in stocks is in a position like me where you don’t need this money anytime soon.
My plan, when I know I’m within 5 years of needing to draw on my accounts is to do this.
Let’s say I want to withdraw $10,000 a year to live on. 5 years out, I will withdraw $10k and put it into something “safer” than stocks. From then on, every year, I will withdraw $10k, adjusted for inflation, to move to something safer.
That way, I will always have 5 years worth of needed money available. All the rest I will keep fully invested in stocks.
Remember, a safe figure is to save up 25x your annual expenses.
If you need $10k a year, then you need to have $250k saved up.
So, market corrections, to me, are a good thing because I can then get shares on sale.
During the 3rd and 4th quarters of 2011 my portfolio was down 25-30%. It was back up 6-9 months later. I made myself look at the red on a daily basis, and told myself that life would go on just fine if it never came back. But, who was I kidding? I knew that it would come back, and I would also try to project what those values should really be. Kind of a strange, but helpful exercise.
30% annualized growth sounds great but just seems like an improbable dream.
A few months ago, I was averaging an annualized 22% a year since 2005. With this recent pullback, I’m down to averaging 17.68% a year since 2005.
When the market picks back up, maybe this year or whenever, I hope to get my average annual return back above 20%. Until then, I’ll keep plugging away and try to make monthly buys of some company. If I can get some on sale, that is a good thing.
Here’s a great quote from huddaman’s post on the BOFI board.
I just read through the press release issued yesterday. I found the growth in earnings, growth in deposits and in loan portfolios along with reduction in efficiency ratio, improvement in tier 1 capital ratio and improvement in npa ratio to be all spectacular.
What beats me is why BOFI did not rally at least 10 pct as a result. Of course I am shocked why UBNT is down today or why PCLN and TRIP didn’t rally despite their awesome results. So this is an across-the-board crazy market.
What beats me is why BOFI did not rally at least 10 pct as a result. Of course I am shocked why UBNT is down today or why PCLN and TRIP didn’t rally despite their awesome results. So this is an across-the-board crazy market.
My portfolio resembles these remarks - probably because I own all if them!
At $31, do you see much risk of further decline? (The forward PE is 13.7!) The only thing that would lock in your losses would be to sell at these ridiculous prices. Hang in there.
In 2012, it had a PE in the 12 range…so yes, it could go lower.
It is very difficult for most stocks to fight the tape. The tape right now has been heading down…if interest rates start going up, would expect more of the same. On top of that, we now enter the summer doldrums.
Strange market. I was talking to a friend who is a world class bridge player and invests conservatively ‘only because of his age’. He said that utilities are the best performing sector this year - up 13%!
This friend likes high dividend paying companies with a low p/e.
He’s ‘transitioning’ to insurance companies and banks gradually, anticipating higher interest rates.
At current prices, I think we have to add to our favorite companies, (UBNT, etc.). As long as we carefully monitor these companies, with some money in reserve to buy even more, we should do well.