Solar stocks’ three-month “U-turn” on Wall Street stymied IPO action in Q3 and shows overall deceleration for fiscal 2015, according to a Mercom Capital report. On its face, the fact that five solar companies filed IPOs in 2015 — besting 2014 levels — looks promising, Mercom Capital CEO Raj Prabhu told IBD. But a look behind the scenes tells a different story. At least 10 solar firms have quietly staved off plans for their own IPOs, waiting out
By Seth J. Masters Careful analysis can help investors pre-experience the outcomes they’re likely to see with various allocation decisions. But an investment plan will work only if an investor has the emotional fortitude to stick with it. That’s easier said than done, particularly with a more aggressive portfolio, when market conditions are rough. Let’s look at the growth of $1 million in three portfolios from January 2005 through June 2015, assuming a withdrawal of $50,000 per year. In one case, the investor maintains a portfolio allocation with 80% in global stocks and 20% in municipal bonds. In the second, the investor stays in a much more conservative 30/70 portfolio. And in the third, the investor begins with 80/20, but panics after a 30% loss and switches out of stocks and into cash on November 1, 2008. He remains in cash through March 31, 2012, and returns to 80/20 thereafter. The Display below shows how each of these investors would have fared. With only 30% in stocks, the conservative investor wouldn’t have lost a great deal in the 2008 stock market slump, but neither would he have picked up much in the roaring bull market that followed. Altogether, after spending $50,000 a year, he would have ended up with $940,000 at midyear 2015 – not too bad considering his regular portfolio withdrawals. The steady 80/20 investor would have suffered a wrenching loss of 46% in the stock market slump, but she would have still wound up with the highest final portfolio value: $1,150,000, after spending outlays. The market timer who jumped into cash as the stock market was going south and returned to stocks somewhat late would have been left with only $670,000, far less than both the steady 30/70 investor and the steady 80/20 investor. Indeed, his portfolio’s ending value would have been more than 40% less than the ending value of the 80/20 investor who stuck with her allocation, although his worst drawdown was nearly as large. This illustrative case is – unfortunately – similar to what many investors actually did after 2008. Lots of investors who had flocked to global stocks in the years before the bubble burst stampeded out in 2009, 2010, and 2011, to the tune of $309 billion in outflows. It took until 2013 – by which time the global stock market had already rallied 55% – for fund flows to flip back into stocks. In market cycle after market cycle, most investors sell low and buy high. At Bernstein, we advised clients after the market slump to stick with their long-term strategic asset allocations, including their exposure to equities. One measure of the value of good investment advice, in our view, is the money saved by avoiding big mistakes. The value of that advice can be significant and quantifiable, as this example shows. Even so, there’s a deeper dimension to good investment advice that goes beyond such numbers. Planning carefully and thoroughly can create greater understanding of investment trade-offs, which leads to better life decisions. These benefits are hard to measure precisely, but nonetheless hugely valuable. The views expressed herein do not constitute research, investment advice, or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.
Argentina has been on investors’ radar lately for the much-awaited election results that can make or break its fate for the coming four years. The country’s economy is in dire straits, with cooling growth, higher inflation, declining currency and debt default issues. Naturally, a probable change in political power, which might bring about a shift in economy policies, has drawn investors’ attention. In such a backdrop, a poll was held on October 25. But the election did not led to a clear winner, and thus led to a runoff. Notably, Argentina’s outgoing leftist president, Cristina Fernandez, was constitutionally debarred from fighting for the third successive term , and her party’s candidate shocked with a feeble performance. And Conservative opposition’s pro-business candidate Mauricio Macri’s unexpected strength in the poll box set the stage for a runoff on November 22 . Marci will rival FPV candidate Daniel Scioli, who is, in fact, backed by Cristina Fernandez. The first round of elections was a neck-to-neck competition, with Daniel Scioli getting 36.86% and Macri receiving 34.33% votes. Sergio Massa, a past partner of Cristina Fernandez de Kirchner who shifted allegiance to the opposition, could be the wire-puller after capturing 21.34% of the votes, with analysts suspecting that he might tie up with Macri to form the government, as per NY Times . Since Mauricio Macri is viewed as a proponent of free markets, a runoff lifted the Argentine equities. However, citizens are receiving online warnings that they might lose out on social welfare if Macri wins. Basically, Scioli has a leftist approach. He is, thus, repeatedly referring to the free-market policies of the 1990s that led to the 2002 economic crisis, per Reuters . However, Macri’s political pledge is to revamp investment and curb inflation, while simultaneously maintaining the required social programs. Market Impact As the first round of election went against the opinion poll and Mauricio Macri emerged as a dark horse to capture the close second position, investors started to look for growth prospects in Argentina. Several analysts went long on these stocks. The only ETF targeting the nation – the Global X MSCI Argentina ETF (NYSEARCA: ARGT ) – added about 22.9% in the last one month (as of November 2, 2015), of which 11.7% returns came in the last 10 days. Can it Run Further? The second round of elections will take place on November 22. And with Scioli still maintaining the lead, hopes are still alive for him to win. Sergio Massa’s 21% voters will matter the most now, as they could swing the balance. If Macri wins, the Argentina ETF is sure to see a nice rally. If not, then too the stocks will likely enjoy a decent run on hopes of a political change ahead of the runoff election. Investors should also note that Scioli is apparently more market-friendly than Fernandez, under whose governance the country’s growth slackened. So no matter who wins, the Argentina ETF might see a rebound in the near term. ARGT is still 13.7% down from the 52-week high (as of November 2, 2015), and thus, has room for further advancement if speculations over Macri’s win persist. So, investors with a stomach for risks can take a look at the ETF. The fund presently has a Zacks ETF Rank #5 (Strong Sell), with a High risk outlook. Let’s wait for November 22 to see what lies ahead for ARGT in this uncertain time. ARGT in Focus The ETF tracks the MSCI All Argentina 25/50 Index, which measures the performance of the 30 largest and most liquid companies that are listed in Argentina or perform most of their operations in the country. Holding 30 stocks in its basket, the fund is highly concentrated on the top four firms at 60%, while other firms do not hold more than 5.68% share. The fund has amassed $15.2 million in its asset base, and trades at an average daily trading volume of nearly 12,000 shares. The product charges 74 bps in fees and expenses. Original Post