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By Tim Dyer
In the spirit of Valentine’s day, I remember an off Broadway show I saw here in San Diego a few years ago. It was called I Love You, Your Perfect, Now Change. It was a witty and comical view of some of the stereotypical nuances of dating and relationships. The play’s tagline is “Everything you have ever secretly thought about dating, romance, marriage, lovers, husbands, wives and in-laws, but were afraid to admit.” (Wikipedia) If we subtract dating from the above tagline and insert “investing” or “wall street” I think you’d get a similar comedy about what is known but afraid to admit.
I was reading a blog post by Bespoke Investment Group that illustrates this point regarding shares of Ralph Lauren (ticker: RL). The post highlights an unnamed Wall Street analyst, who while looking at the companies fundamental data maintains an Underperform rating on the stock for over two years. During that same two year period the stock of Ralph Lauren appreciated over 175%. It looks like the analyst finally threw in the towel last week, after the company announced earnings, rallying another 8% to reach all-time highs. His recommendation finally changed to “Neutral”. Wow, thanks for that!
Source: Bespoke Investment Group
Just like in relationships things are always more complex than they can appear. We need to make decisions and even in those rare times “admit we are wrong”. Looks like the analyst needed to give a little more love to a stock whose trend was up. I’m sure he could heed the advice of an old Broadway show regarding his recommendation, “I love you, your perfect, now change”.
This weekend will be the much anticipated and hyped Super Bowl 45 between two historic teams, the Pittsburgh Steelers and the Green Bay Packers. Now if you are looking for a full NFL breakdown of the game, head over to ESPN.com, but I think there is an interesting lesson that coincides with successful investing. 
Looking back at numerous preseason NFL polls, the Steelers and Packers were both in the top 10 with a high probability to make it to the Super Bowl. This is in sharp contrast to the Detroit Lions, Carolina Panthers or say, Cleveland Browns who have historically underachieved. Those are just basic assumptions based on recent history.
So if I asked “Who do you think is going to be a better team next season – the Pittsburgh Steelers or the Carolina Panthers?” What would you say? On one hand, the Steelers were 14-2 this season and have won the Super Bowl in two of the last 5 years, while the Panthers finished a woeful 2-14 this year, only making the playoffs in 4 out of the last 15 years. Of course the Steelers. Why? Because they have put together a strong franchise. They have proven game plans, elite players, and savvy coaches.
The funny thing is the way investors typically invest. They look to the “Carolina Panthers” stocks and sectors and bet on those in hopes that they have a miraculous turnaround and are amazed when the turnaround doesn’t happen overnight. Focus on “strong teams” to invest, those that possess the same qualities of the Steelers and Packers, while avoiding teams that are in need of long term rebuilding and overhauls.
Enjoy the game!
-by Tim Dyer
Ohio State football coach Woody Hayes is one of a few who is accredited with saying that when you put the ball in the air, three things can happen and two of them are bad. In the Equity markets three things can happen when you purchase a stock. It can go up, down or sideways. Only one of these outcomes is good. In contrast, with a Covered Call, the same three things can happen to the underlying stock yet two are good.
A covered call is an investment strategy that may help investors manage risk, enhance returns and simply make money during sideways markets. A covered call is one of the most conservative ways to participate in the equity (stock) market and this strategy actually entails less risk than simply being long (owning) a stock outright.
Dow 12,000…Now What? Part II
Friday, June 10th, 2011Yes… the image you see is what Dow 12,000 looks like coming from the other (less desirable) direction. Today marks the sixth time the Dow Jones Industrial Average has crossed the 12,000 level since the first time on October 19th 2006 (no relation to Black Monday, October 19th 1987). We felt this was an opportune time to revisit our post from January 27 of this year entitled ‘Dow 12,000…Now What?’ and to share our sentiments on the current environment for the economy and the financial markets.
The market has declined now for six straight weeks and the decline accelerated recently when a trifecta of negative indicators came in worse than expected. These areas of weakness included housing, employment and consumer confidence. As of this writing, the tech heavy NASDAQ composite has slipped into negative territory for the year as the technology, materials and financial sectors have declined the most over the last month. Utilities, healthcare and consumer staples have held up best over the last several weeks. (more…)
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