Archive for category: Commentary

Overall, Shorepoint is constructive on the current investment landscape. Low interest rates, solid corporate margins, significant corporate cash returned to shareholders (dividends and buybacks), low inflation and steady economic growth have driven strong equity returns since the Great Recession. Valuations as measured by price/earnings multiples are in line with historical averages and are not excessive. We continue to invest in a variety of investments across asset classes that potentially offer sound long-term, if not spectacular, returns to patient investors.

As contrarians, we have added and continue to add to international, developed market equities and emerging market equities/bonds, which we feel are still undervalued even with the 2019 rebound. We are employing a “buy the dips” approach by adding to high-quality, attractively-valued companies that have robust cash flow, strong earnings growth prospects and solid balance sheets. We are investing more in the underperforming healthcare sector which has been in the cross hairs of politicians and allocating to selective special situations that offer favorable risk-adjusted return potential. Individual stock price volatility enables us to perform tax harvesting in companies that are temporarily depressed but that we feel are excellent long-term investments such as CVS Health and Kraft Heinz.

The bond side of our portfolios has rebounded strongly with the Fed moving to the sidelines on further interest rate increases in the near-term. The Fed’s policy change has allowed us to reinvest some of our client’s money market balances into higher-yielding bonds. Overall, our clients continue to benefit from our diversified approach to producing income by investing in Emerging Market Bonds, Floating Rate Loans, REITs, Preferred Stocks, etc. instead of investing just in U.S. treasuries.

Shorepoint’s core philosophy is to manage diversified portfolios of quality, reasonably-valued assets based on your investment objectives and risk tolerance. This has been and will continue to be a successful investment strategy over the long-term. We seek to take advantage of opportunities as they arise and generate attractive long-term returns to help our clients reach their financial goals. As always, we are available to discuss your concerns and answer your questions.

While the trade wars and accompanying global tensions that follow such a policy are troubling, we are hopeful that the current administration is being political ahead of the mid-term elections and hoping to activate its base. A little softening in rhetoric and trade policy or better trade deals would go a long way to alleviating the troubling policy ramifications of picking fights with our economic partners. Given the history of the current President, it would seem likely that he would be “transactional” and give the markets what they want.

In addition, we would argue that growth is still growth, although the most significant gains of the cycle may be behind us. That does not mean that we can’t find attractive opportunities for capital in both stocks and bonds and earn patient investors competitive returns in the months and years to come. We do NOT believe the domestic economy is headed for a recession in the near-term. Fiscal stimulus provided by tax reform should continue to fuel economic growth and enable companies to grow earnings in 2019. In addition to the domestic opportunities we see, the poor performance of international and emerging markets may produce long term vindication for those of us who have remained disciplined and diversified, despite the short term drag those positions have had on recent performance. We also remain positive on our outlook for dividend paying companies with defendable business models that are benefiting from secular growth and have the ability to generate strong cash flow.

The bond side of our portfolios was hurt by Fed rate increases but bonds should eventually settle in and provide a higher income level for more moderate and conservative investors. However, our clients continue to benefit from our use of a diversified approach to fixed income instead of investing just in U.S. treasuries. Other bond sectors, such as floating rate leveraged loans, actually produced positive returns and have higher yields than Treasuries with less volatility. Also, with money market yields increasing, we may utilize money market investments as an alternative to some of the bond allocation which will reduce portfolio risk and volatility.

As contrarians, we are adding to attractively valued international developed market equities, and emerging market equities/bonds which have not performed well in 2018. We continue to advocate a “buy the dips” approach and will add to high quality, attractively valued companies that have robust cash flow, strong earnings growth prospects and solid balance sheets.

Overall, Shorepoint’s core philosophy is to manage diversified portfolios of quality, reasonably valued assets based on your investment objectives and risk tolerance. This has and will continue to be a successful investment strategy over the long-term. We seek to take advantage of opportunities as they arise and generate attractive long-term returns to help our clients reach their financial goals. As always, we are available to discuss your concerns and answer your questions.

As contrarians, we are taking advantage of this correction and the positive macro environment to increase equities by 2% to 3% in client accounts (based on your investment objective/risk tolerance) which is a slight overweight from our neutral allocation. We will be funding this allocation by decreasing your bond allocation. If the stock market corrects further (between the 10-20% levels), we will be advocating a “buy the dips” approach. The market volatility is providing Shorepoint with an opportunity to upgrade your portfolios by adding to high quality, attractively valued companies that have robust cash flow and/or dividend growth prospects, strong earnings growth prospects and solid balance sheets. It is likely that you have noticed more trades than normal in your accounts as we reposition portfolios. We are also adding to international stocks in developed and emerging markets. As for non-equity income areas, we still favor a diversified allocation that includes short-term bonds, emerging market bonds, leverage loan funds, energy MLPs, REITs, etc.

Overall, Shorepoint’s core philosophy is to manage diversified portfolio of quality, reasonably valued assets based on your investment objectives and risk tolerance. This has and will prove to be a successful investment strategy over the long-term. We seek to take advantage of opportunities as they arise and generate attractive long-term returns to help our clients reach their financial goals. As always, we are available to discuss your concerns and answer your questions.

We continue to advocate a diversified portfolio of quality, reasonably valued assets based on your investment objectives and risk tolerance. We believe that this has and will prove to be a successful investment strategy over the long-term. That being said, we will continue to make changes as prudent. We have taken profits on outsized positions that have grown during this bull market run to fund more attractive, cheaper looking opportunities. The equity allocation has been reduced – taking some chips off the table – and we have moved to a more neutral, conventional stance in our portfolios. We will continue to take advantage of stock volatility to harvest losses in companies experiencing near-term challenges but that we believe have the potential for attractive long term returns. The tax losses we take now will help offset your 2017 capital gains and/or shelter future gains. Our aggressive use of tax loss harvesting is part of our tax management process that adds significant financial benefit to our clients.

Our longer term commitment to international equities and bonds has paid off in 2017 as they have produced strong returns and significantly outpaced domestic returns. We think international securities will continue to benefit from a combination of a strong economic recovery and cheap valuations. On the home front, the debate on U.S. tax reform is still in the early stages and it’s unclear who the winners or losers will be. However, we expect if tax reform is enacted, it will apply starting in 2018. Any reduction in corporate tax rates should benefit small cap and other stocks that get a significant amount of their revenues domestically.

Although the S&P 500 Index is trading above its 20 year price/earnings average, with low interest rates and inflation, we don’t think it is significantly overvalued. However, domestic equity markets are long overdue for at least a 5-10% correction – we would see this as a buying opportunity.

We continue to diversify our bond exposure outside of U.S. Treasuries to mitigate interest rate risk in this rising rate environment. Overall, Shorepoint expects to stay the course, seeking to take advantage of opportunities as they arise and generating attractive long-term returns to help our clients reach their financial goals.

As of this writing, the gridlock in DC has remained strong. The markets seem to celebrate this fact daily as Republicans have been unable to accomplish much of anything with their majority-on the legislative front – no border wall, little success on immigration laws, no repeal or replacement of the Affordable Care Act, no tax cuts (personal or corporate), no repatriation of dollars abroad, and no signs of an infrastructure spending plan. These are massive, complex goals with myriad of potential results and consequences. While some of these initiatives could prove a boon to the market if enacted (corporate tax reform, repatriation, infrastructure spending) there is no way to know how this might play out.

We do know, however, that owning a diversified portfolio of quality assets at reasonable prices has proven to be a successful investment strategy over the long term. We will use market/stock volatility to add to higher quality stocks – companies that have a durable competitive advantage, solid balance sheet, robust cash flow, strong returns on invested capital and are attractively valuated. In addition, we will continue to have an allocation of the portfolio devoted to contrarian companies (i.e. value stocks) that in most cases have underperformed the general equity market in the short-term. Overall, Shorepoint intends to stay the course, looking for and taking advantage of opportunities as they arise and generating attractive returns to help our clients meet their goals.