In the summer of 2019 the stock market has put in an impressive 10-year run. Since we started Weekly Stock Tip, we have experienced a fabulous run of +1,916%. If you are not familiar with it, it is an artificial intelligence-based method of selecting stocks using business analytics.
At this point in time, the stock market has become quite expensive. Not too expensive to be able to locate good investments, but expensive enough to warrant a future repricing event of significance. We do not mind, though. Corrections, however horrifying they may seem when you are in the midst of one of them, are healthy, positive, and necessary in order to achieve solid forward-looking performance.
Just as we as organisms need to breathe in and breathe out, so does the stock market. Exhaling leads to corrections of exaggerated sentiment, emotion, and price, and brings prices back in line with reality. Most often it overshoots as well, providing us with very attractive bargains that are all but sure things in terms of forward-looking investment performance.
In order to perform well on a relative basis, also during a downturn, Weekly Stock Tip selects its stocks very carefully. However, most pro-cyclical sectors will be affected by a correction. When the markets drop, most stocks drop; the difference lies in how much. So will our portfolios. As a partial antidote, we own counter-cyclical items, most notably gold mining equities which tend to go up when the general stock market goes down, insofar as certain other conditions are met, which is very close to being the case going forward. It is one of the cheapest sectors today after a six-year downturn, and we believe it will turn upwards somewhere between May and December 2019.
