Tag Archives: stocks
Market Lab Report – Premarket Pulse 11/5/15
Major averages fell mildly on mixed volume. So far the indexes have not shown any tendency to pull back more than a couple of days before pushing to higher highs, and larger-cap names that have issued buy signals over the past few weeks following earnings have continued to act well and move higher. With the Russell 2000 now joining the party as it pushes to higher highs and approaches its 200-day moving average, more smaller- to mid-cap names are starting to participate. With US Fed Chairperson Yellen saying there is a “live possibility” of a rate hike in December, CME FedWatch now places the odds of a rate hike at 56% at that next meeting. A few new actionable names hit our screens yesterday. Keep in mind that while the number of such stocks over the last several days has been sizeable, a number of them are not moving higher despite the uptrending market. This is a yellow flag that warrants caution as not all cylinders are firing as they should. Instead, institutional money is flowing primarily into the risk-off, largest cap names as witnessed by the NASDAQ-100 being the first index to hit new highs. Information technology hardware and software product maker CDW Corp. (CDW) had a pocket pivot yesterday on a strong earnings report. Earnings are accelerating, ROE 49.7%, institutional sponsorship has grown in every quarter since the company went public 10 quarters ago, group rank 5. Web-based and mobile fleet management software maker Fleetmatics Group (FLTX) gapped up yesterday on a strong earnings report, then fell but then returned to its gap up price at which time this report was sent. Pretax margin 21.9%, group rank 21. Cloud-based human capital management software maker Paycom Software (PAYC) had a buyable gap up yesterday on a strong earnings report. ROE 24.1%, Earnings and sales are soaring, institutional sponsorship has grown over the last 3 quarters, group rank 21. Facebook (FB) is gapping up this morning after beating on earnings last night. We will be monitoring this for a possible buyable gap-up, and issue a report as appropriate.
Goal-Oriented Investing
By Seth J. Masters How should investors assess the asset-allocation decisions they or their advisors make? In our view, the key benchmark is the investor’s own goals. The display below assesses the success of three plausible asset allocations for meeting the risk and return goals of three different hypothetical investors. Investor A wanted annualized returns greater than 5%, with no peak-to-trough drawdown deeper than 20%. Investor B targeted annualized returns greater than 7%, with no drawdown deeper than 30%. Investor C cared only about achieving a return greater than 7%, with no drawdown constraint at all. The display shows the share of all rolling 10-year periods from January 1976 to June 2015 in which each investor would have achieved his goals through each of three different mixes of global stocks and municipal bonds. The conservative (30% stock/70% bond) allocation would have most often achieved Investor A’s conservative goals, with his lower return objective and tighter drawdown limit. The moderate and growth-oriented portfolios, by contrast, would have repeatedly exceeded his drawdown constraint. The moderate (60/40) portfolio would have most often met Investor B’s goals. And the growth-oriented (80/20) portfolio would have had the greatest success rate in meeting Investor C’s goals. When risk isn’t an issue, stocks are the asset of choice. This display underscores the importance of matching a portfolio’s asset allocation to the investor’s return and risk objectives. Investors who don’t select an asset allocation that fits their objectives are likely to be disappointed. Of course, this illustration covers only simple return and drawdown goals. In most real-world situations, investors also need to take into account their expected cash flows, their tax situation, prevailing market conditions, and a host of other factors. And real-world investors can choose between more than two asset classes. But no matter how complex the objectives an investor seeks, or how diverse his or her asset allocation, we think one simple standard should apply: The asset allocation has to be designed around the investor’s objectives. If not, the investor is unlikely to be satisfied with the plan and unlikely to stick with it. 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. Seth Masters, Chief Investment Officer – Bernstein