By Mitchell Anthony
There is a reason why Facebook is the first name in the FAANG!
Facebook has become one of the most widely known companies in the world for many reasons. It has led the evolution of social media and its tools for sharing ideas, personal views, political views, pictures, and just about everything else has been widely used by Generation X, the millennials, and now the baby boomers. Facebook has learned how to monetize their products as their clients are highly sought after by anyone with something to sell. Facebook’s revenue for advertising has been growing hyperbolically and the outlook remains fantastic. Facebook has also been monetizing information they gather about what their clients do on their platform, what they share with friends, and what sites they visit. All of this has been done legally and with authorization from the clients. However, what they are doing here has been widely misunderstood by regulatory bodies and the media and anyone seeking to make a story that will sell newspapers.
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By Mitchell Anthony
The equity markets retreated as selling beget more selling and fear beget more fear in the fourth quarter of 2018. This dramatic change of course for the equity markets in 2018 was reminiscent of similar market action in 2014 and 2015 when weakness in global economic conditions emerged. However this correction was sharper with most indices falling 20% or more, compared with 10% or more corrections in 2014 and 2015. Was this just a big bump in the road to much higher levels for US equity markets? Or has the path for equity markets already reached its summit because recession lies on the horizon. Most investors have found themselves asking these questions over and over recently. While none of us know what lies ahead, trends in economic data point to further growth for the US economy as the impact from the trade war becomes more of a distraction to economic conditions than a game changing event. Further this is all occurring while inflation and central-bank policy mostly remains benign. This environment of continued steady growth will ultimately lead to higher equity prices particularly those equities that are insulated from the problems in manufacturing and highly cyclical industries. As the equity market continues on its path of recovery the leadership in the equity market will likely to take on a different twist as investors avoid the US sectors and foreign markets that are directly impacted from the trade war that is likely to persist for the short to intermediate term. This is a difficult time to own deep cyclical industrial names but contrarily a great time to own companies experiencing organic growth occurring with innovation and development of great products.
We have had tremendous alpha for the last few years based upon our ability to identify where investors were going early. We owned the fang long before most people knew what the fang was. The acronym for the market leaders in 2019 will be a different version of fang, but will clearly be areas insulated from global trade and benefiting from organic or secular growth.
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By Mitchell Anthony
The equity markets have continued the correction that began in October as fear of the unknown have motivated equity holders to move to cash and give up their equity positions for minimal returns in cash. The unknown involves all of the disconnect that seems rampant throughout America and the globe. Is the Federal Reserve disconnected from the fragility of our economy and is he recklessly raising rates? Is a highly divided Congress disconnected from the impact their actions may have on consumer confidence. Is the White House disconnected from how much change America can embrace without breaking consumer confidence? Are investors disconnected from the fundamentals that drive our economy and are they recklessly selling equities despite a strong forecast of steady continued growth from our Central Bank? Last and most importantly is Mitch disconnected from the fundamentals that are driving our markets and our economy?
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By Mitchell Anthony
When markets behave with extreme volatility there is opportunity for traders. These trading opportunities can enhance returns, or damage returns, of an investor’s portfolio. Many times investors become traders during periods of high market volatility because of fear or greed. Mitchell Anthony Capital Management (MACM) has not succumbed to the urge to trade during periods of high volatility. This is evidenced by our recent decisions to stay invested rather than move to treasuries or cash to benefit from the fear that entered our marketplace over the last few months.
Some of our clients have questioned the wisdom of staying long equities, noting how better positioned we could be today if we would’ve left equities in September and came back to them now that equities are 10 to 15% lower.
These questions need a reply and the answer is simple and involves the fact that our dynamic growth and asset allocation portfolios are not trading portfolios but rather asset allocation portfolios. My objective in managing both of these portfolios is that of an investor who is positioning his portfolio to benefit from the environment that drives financial assets. This generally involves expectations for central bank policy, inflation, and earnings growth. The outlook for these leading indicators will determine the ideal asset allocation. For example if our economy starts to produce high inflation than investors will seek to ride this inflation and commodity prices will rise as a result. I attempt to forecast where inflation will be for the next few years and get ahead of most investors and buy these asset classes before the inflation is notable. Likewise if we have a low inflationary environment with modest or moderate growth than equities will be sought out by investors. Again, if I can forecast accurately the inflationary environment, and the growth environment, that I can position the portfolio today to be ahead of where investors will go next year.
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By Mitchell Anthony
The volatility in the markets continues to remain high as traders and investors digest the impact of the significant policy changes in play by the Trump administration. This administration has plans for change unlike any other administration in decades. The administration hopes to level the playing field on trade and relieve the burden on America from illegal immigration. Further the administration is not afraid to take bold steps to keep the Federal Reserve tuned in to the fragility of our economy. On the other side of the aisle we have the liberal Democrats who seem willing to sacrifice the strength of America for equality in the world and use whatever tool is at their reach to carry out their obstructive agenda. The FAANG's thus far has been insulated from most of the policy changes at play by Trump. However the Dems have taken aim at the FAANG's despite the liberal agendas of most FAANG companies, and plan to try to obstruct the business plans of these industries once the Dems take control of Congress. These are the problems that investors and traders alike are weighing into their investment posture. As a result our markets are 10% lower today than they were at their highs in September. Traders have left the markets and have taken speculative positions in bonds or safe positions in cash as they await better visibility on these issues. Investors have not yet changed their asset allocation as a result of these problems. Our objective is to create alpha for our clients and we seek to stay ahead of what investors do. We are carefully weighing whether investors next step will be to leave stocks for another asset class. Likewise we are carefully weighing whether traders will return to equities soon and push stock indexes to new highs.
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Markets Fall as Investor’s Hedge the Risks On the Horizon for the Economy.
The equity markets in America have turned downward as result of some storm clouds that have appeared on the horizon that threaten to stall or slow the growth of our economy. Over the last few weeks the S&P 500 has fallen 10% from its September 30 peak and is now up just 1% for the year. All of MACM's growth strategies have fallen from their September 30th peaks. MACM's dynamic growth portfolio has declined 13% but is still up 8% year to date. AAI has given back 10% and is now up 5% year to date. Diversified equity has given up 12% but is still up 11% year to date. While we are unhappy that we have given back almost everything gained in the third quarter we believe that higher prices remain on the horizon for equities and the cycle is not going to end here!Read more
By Mitchel Anthony
The US economy continued on its path of acceleration in the third quarter at the expense of rest of the globe. Virtually all sectors of the US economy reported robust growth and improving demand for their goods and services throughout the third quarter. While the naysayers worried about the impact of tariffs and the trouble in social media, the equity markets notched a terrific quarter with returns exceeding 7% or more across most domestic large-cap indices. MACM’s dynamic growth portfolio advanced 9% in the quarter and its diversified equity portfolio advanced 10.1% in the quarter far exceeding the bogey of the S&P 500 which was up 7.4%. Read more
US Stocks have regained their footing as predicted in our first quarter newsletter. We believed equities would get back on track after first-quarter earnings reports and economic data that we expected to be quite positive. This is exactly what happened in the second quarter. The leadership centered on domestic equities with NASDAQ and small cap stocks at the top of the list. Foreign markets tumbled as expectations for growth in the globe receded given the current environment for trade and impending tariffs. Emerging markets and China suffered the most with Europe closely behind in the freefall. This downturn came and pushed money into the US markets as the US economy stands strong in the trade war. In anticipation of this MACM exited all of its investments in emerging markets in Europe toward the end of Q1 and repositioned the portfolio in domestic equities leveraged to consumption themes present in America.Read more
Equity Markets Delink From Economic Data And Get Distracted With Washington Policy.
Equity markets in America suffered their worst quarter in over two years as 2018 began on a soft note. The softness in equities in Q1 followed an outstanding year for equities in 2017 and was not surprising for many investors but was unwelcome for traders. The S&P 500 fell .76% in the first quarter of 2018. Mitchell Anthony Capital Management (MACM)’s clients enjoyed much better performance in Q1 with almost all strategies posting positive returns. MACM’s diversified equity portfolio advanced 4.8% , DYNAMIC GROWTH advanced 3.5% HIGHLY FOCUSED EQUITIES advanced 5.4%, ASSET ALLOCATION INCOME advanced 3%, and GROWTH advanced 4% in the quarter. MACM’s clients enjoyed 372 - 620 basis points of positive alpha in Q1 of 2018. This outperformance was attributed to the superior group of equity holdings in the portfolios managed by M ACM. Positive alpha was gained from holdings in healthcare, Internet retailing, technology, and financials. Conversely MACM had only modest holdings in areas like telecom, energy, utilities, and consumer staples (which led the equity market lower).Read more
2017 began with optimism from investors, consumers and businesses. The market’s great year began with a great first quarter followed steadily by similar gains in Q2 - Q4. Washington policy took a turn for the better despite unrest amongst the liberal socialists in our country. Trump’s first year was difficult for him and the nation as the country failed to unite; however, progress was made as Trump proved himself worthy of the job and did get one of his initiatives done! The tax cut was a great victory for business and had some modest benefits for most Americans as well. The obstruction to Trump's plans was unfortunate. It continues but shows signs of waning as liberal democrats are losing face, and possibly their will to continue, as meritless attacks failed to distract the White House agenda, but did wear on the American public’s tolerance for dishonesty from their leaders and the media.
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