Archive for category: Commentary

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.

Where does that lead us? As contrarians, we have added to dividend paying stocks especially the beaten down and vilified healthcare sector.  We are also positive on technology, mid and small cap stocks and international equities.  As for bonds, we continue to have a diversified allocation and think much of the anticipated interest rate hikes are factored into municipals, leverage loan funds, etc. Although a stock market correction (10% pullback) is not out of the question, we will use it, and normal day to day market volatility, to upgrade portfolios into higher quality companies that are attractively valued, with solid balance sheets and that are strong cash flow generators.