April 13, 2020
S&P 500 2,790
10-Year Treasury 0.73%
Dear Clients and friends,
We wanted to give an update on how we are approaching the management of our client’s portfolios during this difficult time, with the world’s economies essentially shutting down from the Covid-19 virus. At this moment there have been nearly 2 million cases worldwide, with over 115,000 deaths. The entire world is in a quarantine shutdown. Of course, this is unprecedented in any of our lifetimes.
Nothing has changed in our strategies since our website posting in March, or since we started managing portfolios, 25 years ago in 1995. We have raised some cash over the last 30 days by selling or trimming a few investments. We trimmed one position and sold our Treasury Inflation Protected securities (TIPS), only to generate cash, so that we can have “dry powder” ready for some investments we are looking to enter.
This is a link to our posting from March 9, 2020. https://rbcpa.com/value-investing/keeping-our-clients-informed-as-the-djia-dropped-over-2000-points-today/ As we wrote, our portfolios were and still are focused in sectors that are for the last 3 months under-performing the S&P 500. These sectors include energy, financials, and our Russian investments. We also have a core position in Alaska Airlines (ALK $31.61). We have studied each of our investments and continue to believe they should continue to be integral positions in our portfolios. For the last 25 years, we have written and discussed with our clients that one can’t effectively time the markets, and that corrections occur. Of course, a shutdown of the world economies is a “black swan” event, and we for sure didn’t anticipate the magnitude of the Covid-19 virus effects. We expect that once the horror of the virus ends, the world will start “rolling” again economically.
We have been entrenched in research of world events, potential opportunities, and trying to determine the survivability of the companies we currently own. We are heavily invested in energy throughout the world. We hold some of the world’s strongest energy companies from a financial perspective. These include Chevron (CVX $84.31), Exxon (XOM $43.13), Gazprom (OGZPY $5.05), Conoco Phillips (COP $34.73), and PBF Energy (PBF $7.71), to name a few. Because of the virus and the world shutdown, oil demand has fallen by 33%. The price of WTI crude is at $22.91 per barrel, whereas it was over $60 at the beginning of the year. We are always mindful of our choice in investments, and if we think specific investments should be reduced, we will do so. We do not currently anticipate any major changes in our portfolios.
Of course, difficult times are ahead. When will the bear market end? That is obviously not answerable now, and never has been answerable in the past. We firmly believe that for the most part, the companies we own are financially strong, and will survive and thrive. Peter Lynch notes in his book, ‘Beating the Street’ “A decline in stocks is not a surprising event; it’s a recurring event ‑ as normal as frigid air in Minnesota. If you live in a cold climate, you expect freezing temperatures, so when your outdoor thermometer drops below zero, you don’t think of this as the beginning of the next Ice Age. You put on your parka, throw salt on the walk, and remind yourself that by summertime it will be warm outside.”
We are not at all focused on short term results. It is our opinion that no one can consistently time markets. Our clients should recognize that most of what has been discussed in this letter has always been our central investment theme for the last 25 years.
If you have any concerns, please reach out to me.
We hope you are and remain healthy and safe.
Ronald R. Redfield, CPA, PFS
Redfield, Blonsky & Starinsky, LLC
1024 South Avenue W.
PO Box 2069
Westfield, NJ 07091-2069
- Redfield, Blonsky & Starinsky, LLC (RBS), only transacts business in states where it is properly registered, or excluded or exempted from registration requirements.
- Past performance assumes reinvestment of dividends and other distributions and may not be indicative of future results. Therefore, no current or prospective client should assume that the future performance of any specific investment, investment strategy (including the investments and/or investment strategies recommended and/or purchased by adviser), or product made reference to directly or indirectly in this presentation or on our website, or indirectly via a link to any third-party website, will be profitable or equal to corresponding indicated performance levels. The investment return and principal value of an investment will fluctuate and, when redeemed, may be worth more or less than their original cost.
- Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will either be suitable or profitable for a client’s investment portfolio. No client or prospective client should assume that information presented is a substitute for personalized individual advice from the adviser or any other investment professional.
- Historical performance results for investment indexes, such as the S&P 500, generally do not reflect the deduction of transaction and/or custodial charges or the deduction of an investment-management fee, the incurrence of which would have the effect of decreasing historical performance results of the S&P 500 Index. Whenever RBS performance is referred to, results have been reduced by all fees, including RBS management fee.
- Returns for the RBS portfolios have been calculated using actual time-weighted returns obtained from all accounts over the time periods indicated. All RBS returns assume the reinvestment of dividends and are shown net of the investment management fees and all other expenses. Please see our form ADV for a full fee disclosure. Actual individual account performance may be materially different from our composite results.
- RBS files an annual form ADV, which includes an easy to read brochure. Form ADV is a valuable read for anyone interested in learning more about RBS. Additional information about Redfield, Blonsky & Starinsky, LLC is also available on the SEC’s website at adviserinfo.sec.gov. The searchable IARD/CRD number for Redfield, Blonsky & Starinsky, LLC is 128714.
- The S&P 500 Index is a widely recognized, unmanaged index of 500 of the largest companies in the United States as measured by market capitalization. The S&P 500 Index performance assumes reinvestment of all dividends and distributions and does not reflect any charges for investment management fees or transaction expenses, nor does the Index reflect any effects of taxes, fees or other types of charges and expenses. The S&P 500 Index is one of many indices and is not necessarily the most appropriate index when comparing performance results.
If you are a client of ours, and if you have questions regarding the company or investment mentioned in this report please call our office. If you are not a client of Redfield, Blonsky & Starinsky, LLC Investment Management Division and are reading these notes, we urge you to do your own research. We will not be responsible for any person making an investment decision based on these notes. These notes are a “by-product” of our research. We are not responsible for the accuracy of these notes. We are not responsible for errors that may occur in these notes. Please do not rely on us to monitor or update this or any other report we may issue. In theory, we could come across some type of data or idea, which causes us to eliminate our long or short position of the company or investment mentioned in this report from our portfolios. We will not notify reader’s revisions to these notes. We are not responsible to keep readers of these notes updated for changes or material errors or for any reason whatsoever. We manage portfolios for clients, and those clients are our greatest concern as it relates to investing. Certain clients of Redfield, Blonsky & Starinsky, LLC may not have the company or investment mentioned in this report in their portfolios. There could be various reasons for this. Again, if you would like to discuss the company or investment mentioned in this report , please contact Ronald R. Redfield, CPA, PFS (partner in charge of investment management division).
Information herein is believed to be reliable, but its accuracy and completeness cannot be guaranteed. Opinions, estimates, and projections constitute our judgment and are subject to change without notice. This publication is provided to you for information purposes only and is not intended as an offer or solicitation. Redfield, Blonsky & Starinsky, LLC and Ronald R Redfield, CPA, PFS, may hold a position or act as an advisor on any investments mentioned in a report or discussion.