We follow an investment philosophy that we believe, makes sense, reduces downside risk, and incorporates the views of some of the best analysts in the world, based on their track records and their logical, common-sense approach. We incorporate both bulls and bears when selecting analysts, but in each case consistency of record is given a heavy weighting.
Through our own macroeconomic evaluation we apply our analysts’ views as to their relative similarities and dissention. We believe, in most cases, investors will benefit by investing in sectors versus individual companies. By doing so, we reduce the risk that one company’s bad event will negatively effect our investment. Further, there are three important considerations when analyzing the prospects for investment in any market.
First is the consideration as to whether a market, a sector, or an individual stock is too expensive. We consider the P/E ratio (price of the stock compared to its earnings) to be of prime importance. Going back to 1927 (extent of our data), if you had bought stocks when their P/E ratio was above 17, you would have made only 0.3% per year ($100,000 would grow to $106,174 in 20 years). As a whole, the S&P has had an average P/E above 17, a little more than 35% of the time. Had you waited and owned stocks while the P/E was below 17, you would have made over 12.4% per year ($100,000 would grow to $1,035,920 in 20 years). Had you held stocks during both times, you would have averaged about 8% ($100,000 would grow to $468,692 in 20 years). Further utilizing the P/E ratio by comparing it to the Growth of a company and/or sector, the resulting PEG ratio provides a valuable tool for comparing companies and sectors as to their relative value.
Second, we consider whether yields (the interest rates) on U.S. Treasury bonds are rising or falling. Simply stated, if interest rates get high enough, many investors will take money out of the stock market and put it in bank CD’s or corporate bonds. Why take the market’s risk when you can get acceptable returns with less risk? By the same token, as interest rates decline, more and more people will move money from the bank and bonds, to the stock market, seeking higher returns. Another factor which fuels the stock market during declining interest rates is the lower cost of business borrowing. Historically, the market has earned us over 10% per year when interest rates were falling, versus 7.9% for a buy and hold, and 0.7% per year average when rates are rising.
Third, we look at moving averages of the stocks we consider. When stocks are above their 300 day moving average, the market is bullish and has returned over 12% per year, while during the 1/3 of the time that stocks are below their 300 day moving average, the market has lost 2% per year.
We continue to follow many other indicators, such as individual country economies, demographics, money-flows, etc., but all are weighed against the backdrop described above. When you work with Beck Capital Management you get an unbiased, independent recommendation as to how you can best achieve your financial goals. Our senior financial consultants each have more than twenty years experience, are capable of standing on their individual reputation rather than relying on a large company’s name recognition. Leave the big companies behind and leave the conflicts of interest, the biased research, and high fees. Call us today and start enjoying independent advice without the conflict of interest. We do not do investment banking, so we only represent and work for you. And, of course, we are always tax and expense conscious, or as we express it “Tax-Wise, Money-Smart”.
