Inflation data came in hotter than expected. Inflation had dropped three months in a row before January. The jobs market remains robust despite layoffs in the tech sector. Although the market is pulling back, stocks and growth stocks, in particular, have shot up in 2023. These are not things the Fed likes to see, and now the fear is that the Fed will raise interest rates by 0.5% rather than 0.25%. Suffice it to say these factors contributed to the pullback in stocks last week. And let's not forget the fact that, whatever the decision, JPow can make matters worse by talking.
Whether or not there is a recession, the market generally bottoms before a recession ends. This is an example of the market being forward-looking.
The coming week/weeks could give some opportunities to lower one's cost basis on stocks. Just as growth stocks rise faster than the broader market, they also fall faster. For some investors, that type of volatility is (understandably) too much to handle. I designed the Model Portfolio to be a combination of blue chips and growth stocks and, thus, in theory, less volatile. But with the right opportunities, I am okay with making the portfolio more aggressive.
Here is a macro-look at the tech sector.
Tech is pulling back after breaking the bearish trend line. Is this a short-term pullback or a larger move down? No one can say, but I'll be watching the current support level. A large, red indicator candle would signal another leg down to me.
Another leg down would not be all bad news -- it would be another opportunity to pick up some growth stocks at discount prices. I am planning to DCA into the stocks in the portfolio except for GOOGL. I am not impressed with their leadership, and the stock hasn't had much resilience over the last year. I am still bullish long-term. Ad spending will pick up as the economy recovers. GOOGL also has AI tech that could be a boon for the stock in the coming years.
I may also add some new positions to the portfolio. These are companies I've thought about adding since the inception of the Model Portfolio. A pullback in prices over the next week/weeks could be a good time to add shares. Here are the stocks I'm watching (including a group of stocks I affectionately call the "Straight A's").
TRTN -- An exemplary shipping company with a generous dividend and good for portfolio diversification. The stock is cheap, in my opinion.
ADYEY -- A truly excellent company that provides digital payment services. I like it much more than SQ and PYPL, although I'm not bearish on either. Valuation is demanding but fair for such a great company.
ANET - A high-quality company that provides network solutions (and has a history of impeccable execution). Valuation is not cheap, but reasonable with a long-term outlook.
AMD - A lead semiconductor company with excellent leadership and execution. While it probably doesn't have the same explosive growth potential as other growth stocks, I expect more than satisfactory annual returns. The valuation here is cheap, in my opinion.
ASML -- A semiconductor company with a moat so deep you'd need a submarine to get to the bottom. The company makes lithography tools, which are must-haves for semi manufacturing. No other company can do what ASML does at scale. I also expect the semiconductor industry to be robust for the foreseeable future. The valuation is demanding but reasonable, considering ASML's quality and moat.
NET -- An explosive cyber-security company taking the sector by storm. Execution has been impeccable, and the growth potential is enormous. Valuation is my primary concern, but I don't think waiting for a "perfect" time to buy makes sense for such a young company. I prefer to buy at $50 or less, but the difference between the current price and $50 is probably negligible from a long-term perspective.
MELI - An e-commerce and fintech giant in Latin America. One of my highest-conviction picks and one I should have added at the inception of the Model Portfolio.
I haven't been able to pin the Model Portfolio at the top of the home page, so here are the current Model Portfolio holdings.
CRWD $117.30 x10 $1,173.00 22.5%
GOOGL $89.13 x12 $1,069.56 20.5%
SNOW $148.46 x9 $1,336.14 25.6%
CB $210.91 x3 $632.73 12.1%
MA $353.06 x2 $706.12 13.5%
WM $151.46 x2 $302.92 5.8%
$5,220.47
Model Portfolio Return: 2.2%
SPY Return: 0.3%
QQQ Return: 3.8%
That's all for now. Have a great weekend!
This website is created and authored by Marlin Sandlin and is published and provided for informational and entertainment purposes only and merely cites my own personal opinions. I am not a financial advisor, and this website is not intended to constitute investment advice or provide specific advice or recommendations for any individual or on any specific security or investment product. Any action you take upon the information you find on this website is strictly at your own risk. This website may share links to articles and information which is interesting to me, but it is in no way an endorsement by me or by anyone associated with me. The views reflected in the commentary are subject to change at any time without notice. I may or may not hold investments in the companies or securities discussed on this website.
Marlin Sandlin owns shares of Alphabet Inc. (GOOGL), Triton International Limited (TRTN), Adyen N.V. (ADYEY), Arista Networks, Inc. (ANET), ASML Holding N.V. (ASML), Cloudflare, Inc. (NET), MercadoLibre, Inc. (MELI), Crowdstrike Holdings, Inc. (CRWD), Chubb Limited (CB), Mastercard Incorporated (MA), and Waste Management, Inc. (WM).
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