Category Archives: Strategy

Right Conclusion (maybe), Wrong Reason (definitely)

This morning's Wall Street Journal joined (actually, re-enlisted in) the chorus of those arguing that 2014 would be a time for stock pickers to "shine."  The lynchpin of the Journal's case will be familiar to advocates of a "stock-picker's market."  That argument is that since correlations in the U.S. equity market are declining (perhaps as a consequence of the Federal Reserve tapering its support of the Treasury market), stock selection strategies will perform better than in a more macro-driven Read more [...]

S&P 5-YEAR DIVIDEND SNAPSHOT (and know when your paycheck comes in)

March marked the fifth anniversary from the Bear market low. Dividends have not only recovered from their bottom, but are setting new records. Yields are less, but relative to other instruments they remain competitive, and have a much lower tax rate. Two observations that became apparent are the risk-reward trade off and the yields. For the S&P indices, the large-cap market has more issues which pay a dividend and more issues which increase year-after-year. On a risk-reward note, the S&P Read more [...]

U.S. Domestic Dividends Set Record Increases

Data is for U.S. Domestic Common Stock, not just the S&P 500 U.S. domestic common issues set a first quarter record for dividend increases, as the 'shareholder' return theme continued. Increases have been made easier by record earnings and record cash holdings. Additionally, many issues (especially large-caps) have heard the knocking at the boardroom door – from activists. I expect strong dividend growth to continue in 2014, as ‘shareholder return’ continues to be the battle cry from boardrooms, Read more [...]

March On

TAKEAWAYS & FYIs (commentary): U.S.-Russian relations continued to decline, but markets didn’t see it as major issue; European markets have been more concerned about oil and gas sales from Russia, as Russia needs the currency and Europe needs the products The Fed moved the conversation from stimulus ending to increasing interest rates, but after an initial negative impact the market accepted this (rate increases are at least a year away), just as it accepted the end of QE4-ever Interest Read more [...]

What’s In Their Wallet?

S&P 500 Industrials have easily set a sixth consecutive quarterly record for cash and equivalent on hand (under current assets, mark-to-market), sitting on what amounts to 94 weeks of net earnings (latest 12 months). The $1.3 trillion is not making much as it sits in short-term investments or banks, regardless of its U.S. or foreign domain. The cash is however getting a lot of attention, especially from activist investors, who see the pot of gold at the end of a short rainbow. The How is Read more [...]

2013: A year in SPIVA Perspective (Part I)

2013 was the blockbuster year for equity as the domestic equity markets posted double-digits returns.  In a year marked by record breaking gains, it is particularly important to measure the relative performance of active funds versus the indices as bull markets often present challenging conditions for active managers to overcome. The 2013 year-end SPIVA report findings confirm that while active managers may do very well on an absolute basis, the majority of them can end up underperforming on a relative Read more [...]

Companies buy fewer shares, but issue even less, reducing their share count and pushing up EPS

Companies continue to increase their shareholders’ returns through buybacks and cash dividends. These two expenditures, combined, reached $214.4 billion in the fourth quarter – the second highest level (Q3 2007 holds the record at $233.2 billion) and three times the Q2 2009 Bear market level ($71.8 billion). Helping companies do this are record earnings, record cash-flow and record cash reserves; pushing companies are activist investors and the growing concern within board room over outside holders Read more [...]

Don’t just do something, sit there.

At the beginning of this year, we suggested that 2013 might well have been a another tough year for active managers. Judging from the response received at the time, this expectation was somewhat controversial: the more common refrain was to point to falling correlations during 2013 and predict a return to “stock-pickers’ market.” In such an environment, the reasoning goes, it pays to be more active with your investments. Our regular SPIVA® scorecard regularly reports on the relative performance Read more [...]

Touching Clovers Is Like Gold, Not VIX

Thus far on the blog, we have written a few pieces about busts in the stock market. David Blitzer wrote, "Whenever this bull market ends, it is likely to be with a bang, not a whimper." He also wrote about Deflation, Debt and Disaster where he pointed out we may be on the edge of deflation, which leads to stagnant economies and depression. I also pointed out the cycle of stock-to-commodity outperformance may be switching back in favor of commodities. With the possibility of doom and gloom over Read more [...]

Some Inconvenient Truths

Today's Wall Street Journal brought the latest in a string of articles suggesting that we have entered a period of particular opportunity for active investment management -- a so-called "stock-picker's market."  Because the average correlation of stocks within the S&P 500 or other major indices has declined, it's argued, "active managers are going to do better" as the "cream rises to the top." Or maybe not.  The argument in favor of active management in 2014 has to contend with at least Read more [...]