March 9, 2020
DJIA (24,100)
S&P 500 (2,773)
The following notes are two recent posts from our Facebook page. The intention of this note is to keep our clients in touch with our views during these volatile times.
March 9, 2020 (DJIA 24,100)
Just a quick update on our portfolios, as the DJIA is currently down ~7% to 24,000. It was as low as 23,706 so far today.
We have large allocations to energy (oil, refining, natural gas and solar), as well as financial services, and Alaska Airlines (ALK). These three sectors are underperforming the indexes this year. Yet we are only a little over 2 months into the year, and as all of our clients know, we are not at all short-term minded. We will once again remind our clients that we don’t believe that short term investing is anything other than gambling. These sectors, as well as the large drops in markets throughout the world are causing current investor pain.
We are not selling into this market, nor do we expect to. We are looking to deploy any available cash in our portfolios for increased investments in many of the names we already hold. We have a sizeable position in TIPS (Treasury Inflation Protected Securities), and we could use those monies to invest into equities. As this is written, we don’t expect us to sell our TIPS position, yet.
Today oil is down almost 25% to $31 per barrel. The consensus reason for this drop is lower demand from the Coronavirus, and failed recent negotiations between OPEC and Russia. Ultimately, we expect energy will continue to be used, and once again world economies are expected to stabilize. The energy companies we own are typically financially strong.
We think the core of our investments are long-term solid companies and investments. As I mentioned last week in our March 5, 2020 post, we have an expected dividend yield of 3.5%. which is 7X greater than the 10-year Treasury. The 10-year Treasury is at 0.499%. Notice at the time of that writing, the evening of March 5th, less than two business days ago, the 10-year Treasury was at 0.92%, which was almost 100% higher than today’s levels.
With that mentioned, we offer no assurances as to the future, as we never have.
My portfolio, my families portfolio, of which includes people in their 70’s and 80’s are not selling, and have no plans to sell, unless I suspect material over-valuation, which I don’t think will occur. My families portfolios are treated just like our clients portfolios. We continue to, and always have “eaten our own cooking.”
We will always do what we think best for all of our portfolios. I spent a lot of time assessing the risk parameters and solvencies of our companies, and I feel real comfortable with that. Our long-term thesis, beliefs and analysis have not changed, and I expect our investment philosophy that really hasn’t changed in 25 years, will be the same for as long as we are still on this planet.
We urge you to read this easy to read PDF titled “The Wisdom of Great Investors.” We have linked it several times in the past, and we think it is an important read for any investor. https://www.rbcpa.com/wp-content/uploads/2016/12/wisdomgreatinvestors.pdf
March 5, 2020 (DJIA 26,121)
This post is a quick update about our thoughts on the current investment climate. We have discussed corrections constantly during our 25 years of investing for clients. They are often painful, and in our opinion, impossible to predict when they will start and when they will end. I do think this is a text book, run of the mill correction, which is being exacerbated by the Coronavirus.
Investors are often concerned that the losses they suffered during 2007 to 2009 can once again come back and decimate their savings. Keep in mind that any of our clients who remained with us had only temporary losses in their portfolios. It is important to mention that past performance is not necessarily indicative of the future. In our opinion, 2007 – 2009 was a financial crisis where the US financial system could have imploded.
I think the drops that became fierce a month ago is merely a normal run of the mill correction. The market needs to eliminate the fearful, and that is often done via lower and scary market prices. In my opinion one can’t predict short term movements in the market. My take is that for long term investors downdrafts are normal and are often buying opportunities. I do believe we are in such a period for the investments we have in our portfolios.
For the most part, we own financially strong companies. The companies we own, typically don’t have excessive debt levels. They seem to be fairly priced to future earnings, cash flows and book values. There are always bumps in the road. We think the key to investing is investing in companies that have a sustainable business, even in very difficult economies, as well as the need for a strong stomach and patience.
The 10-year Treasury is at a record low, and is yielding 0.92%, and the 30-year Treasury is yielding 1.57%. The current expected dividend yield of our typical portfolio is 3.50% as of February 29, 2020. This yield is 380% of the 10-year Treasury. We think that most of our companies are paying healthy and sustainable dividends.
Many clients were with us during the crash of 2008, and all worked out just fine for those who stayed the course. None of our clients were damaged with us during the crash of 2000. Yet, past performance is not necessarily indicative of future results.
Below is a picture of the DJIA’s largest daily drops and gains. Using today as an example, the DJIA was down ~1,000 points or 3.60%.
If you have any concerns, please reach out to us. Ron would be happy to speak with those who are not clients or ours as well. As always, we welcome the opportunity to discuss our outlook and investments with you.
Please feel free to contact us with anything you would like to discuss. Ron can be reached at [email protected]
Respectfully submitted,
Ronald R. Redfield CPA/PFS
Redfield, Blonsky & Starinsky, LLC
1024 South Avenue W.
PO Box 2069
Westfield, NJ 07091-2069
https://www.rbcpa.com
http://www.twitter.com/rbco
https://www.facebook.com/RedfieldBlonsky
908 276 7226 phone
908 264 7972 fax
Disclaimer
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.