Thursday, November 10, 2011

Welcome Back

Hello All,

I'm writing my first post in quite some time.  I'm still following the market and watching for good investments, but haven't had a lot of time to blog about them.  Hopefully, I will be able to find the time to keep this up again.

A quick synopsis of my thoughts on the macro situation:

I'd be lying if I said I was an expert of what is going on in Europe with regard to various countries' debt situations.  I do not buy into the fear of contagion and what effect it may have.  Our market overreacts time and time again to these various threats.  Are the situations serious? Yes.  Is the US debt problem serious? Yes.  Because I can't predict what will happen there, I'm not going to worry about it.  Do I have confidence that the they will get through this? Of course.  And I do know this: when the market responds, it often does so so swiftly that it becomes impossible to try and maneuver around news.

In our country, I'm most concerned not about the issues we face, but more about the political climate.  No politicians or party seem to have the political will to make any necessary/tough decisions.  Until we can return the view of serving in political office as a "service" and not a "job", we will have poor politicians who only care about how to get re-elected.  If a candidate showed real leadership and was ready to make the tough decisions showed up, I would support him or her completely.  But it appears that we have another empty election cycle coming up with more "Reality TV" politics.

Even though we have a tough political climate, a disturbing debt situation, and a tough job market, there are still some segments of our economy that are improving, and things are certainly moving in the right direction.  Many companies have cut capacity, cut employees, and cut costs to adapt to this climate, and are now finding it to be very profitable.  Is it ideal?  Of course not.  I hate seeing 9+% unemployment.  I do see all these things improving over time though.

A quick update on my portfolio:

Like for most people, things were looking good for most of the year until early August.  I hold a lot of small cap, value type stocks.  I look for situations where I can buy these stocks a great prices relative to their current asset position, and hopefully they have a catalyst in play which will unlock growth.  Or at least have something in play to get people to notice to stock and that its undervalued.  What happens to these stocks typically is that over time, the value is eventually noticed and the price catches up.  While waiting for this, these stocks can be subject to wild price swings though.  Because of their small size, these companies can be subject to inconsistent revenues and or profits per quarter as we go along because they may not have enough of a product mix to balance things out.  And because there is little to no news that comes out on these companies, investors often panic if a quarter is not so great or if the market as a whole is not doing well.

I am seeing value out there in a lot of companies, both large and small.  But overall, I still mostly prefer smaller companies.  They fit my investment goals best.  I'm willing to be patient and have developed a tolerance for holding through market swings (its not easy at times, I know).  I do mix in some larger stocks, but still using the same value philosophy.

I don't want this post to get too long here.  I will be doing additional separate posts about stocks I like and what I'm doing with my portfolio.

If you're reading this, I do appreciate it, and as always, I welcome your interaction here.

Thanks!

Michael