Latest Research

In 2009, Main Street investors continued to pull money out of U.S. focus equity mutual funds. There were  some equity funds that they did embrace…specifically Emerging Country funds.

A look at how the market reveals its preference for the top-line growth (revenue growth) vs. the bottom-line growth (EPS growth).

Review of quant strategies shows momentum out of favor in 2009, with value factors working best.

Over this entire period, the S&P has narrowly beaten the Russell 2000, but not by much.

The longer term data does suggest that at current interest rate levels, investors can expect sub-par returns over the next 1, 3, and five year timeframes— and we use the term “sub-par” quite literally.

In this month’s “Of Special Interest”, Eric and Doug put the current market in historical context. They use a variety of factors to assess the potential for further upside.

Climbing the bull market stairs. Our initial upside price target for the S&P 500 is 1300 to 1350. This is based on normalized P/E ratios moving to prior bull market average peak levels, as well as on past market peaks.

Market breadth has weakened considerably, which has historically been a big negative for stocks. However, the lead time between peaks in market breadth and eventual bull market peaks are long and variable.

Current market is closely aligned with the 1973-1974 post bear market recovery. Expect to see series of higher lows before market ultimately makes new high.

There are four key decisions a company’s management has to make: Dividend Policy, External Financing, Capital Expenditure (Capex), and Research & Development (R&D).  We studied how the market rewards each of these management decisions.

With new technology and products rolling out, electronic gadgets may be able to capture a growing share of the rebound in total consumer discretionary spending.

The “easy money”—at least psychologically— may still be ahead for some. Money continues to move out of U.S. equity mutual funds, and there is still skepticism about the stock market.

There is a potential valuation ceiling confronting U.S. stocks. 2002 S&P valuation lows may be the point that this cyclical bull market tops out.

Get out in front of the lemmings. We expect to ultimately see bond funds reverse now that performance has been lagging the stock market. But where will the money go? Our best guess is that it flows to Emerging Country Equities….once again chasing strong performance.

What will be one of the key performance drivers for  the second half of the bull market? The short answer is the same catalyst that brought the stock market down during the latter half of the last bear market: Liquidity.

Return On Equity (ROE) has been performing well as a quality factor on a global basis over the last six to twelve months.

And now our final new analyst introduction (for the time being) of Chun Wang.

There’s an overwhelming consensus that the U.S. economy has slipped into a long-term phase of declining growth in real GDP and chronically higher unemployment. Here’s a dissenting opinion from a client, along with Steve Leuthold’s response.

In late October, the Select Industries Portfolio added new positions in Industrial Conglomerates (6.6% of equity assets).

In late October, the Select Industries Portfolio added new positions in Computer & Electronics Retail (4.1% of assets).