Issues
Consumer cyclicals, perhaps more than any other sector, are at the nexus of what we look for in Cabot Value Investor these days: solid growth, but at value prices. And today we add a high-profile stock from one of the most resilient subsectors of an otherwise sluggish retail space. Its shares were overly beaten down in the weeks since underwhelming May retail sales prompted a flash mini-selloff in all things retail. But this remarkably reliable, steady-as-she-goes growth company didn’t deserve it, and shares are now trading at a rare discount.
Details inside.
Details inside.
Updates
Value stocks are starting to gain traction.
No, they’re still not outperforming growth stocks. But the 10.5% year-to-date gain in the Vanguard Value Index Fund (VTV) puts it on track for its best year since 2021, and potentially its third-best year in the last decade. That’s progress. And much of the progress has come this month, as the previously thin bull market rally has spread to the myriad unloved non-tech sectors. Value stocks are up more than 3% this month, outperforming growth stocks (as measured by the QQQ ETF), which are flat in July.
No, they’re still not outperforming growth stocks. But the 10.5% year-to-date gain in the Vanguard Value Index Fund (VTV) puts it on track for its best year since 2021, and potentially its third-best year in the last decade. That’s progress. And much of the progress has come this month, as the previously thin bull market rally has spread to the myriad unloved non-tech sectors. Value stocks are up more than 3% this month, outperforming growth stocks (as measured by the QQQ ETF), which are flat in July.
Alerts
We are recommending shares of CNH Industrial (CNHI) as a new Buy. The company is a major producer of agriculture (80% of sales) and construction (20% of sales) equipment for customers around the world and is the #2 ag equipment producer in North America (behind Deere). It also provides related supplies, services and financing.
Strategy
I want to point out a problem that I foresee, potentially on the scale of the technology bubble in 2001 and the housing bubble in 2007. I think we’re going to have an “inverse ETF bubble.”
I was talking with an investor recently about the latest stock market downturn. He was puzzled; if General Motors (GM) is supposedly such a great stock and vastly favored among portfolio managers, why would it fall 30% during a market correction?
My stock-picking strategy has been refined over the course of 28 years, and has been quite stable for the last six years. My investment goals are (1) minimize stock market risk, (2) achieve capital gains, with dividends as a welcome addition to total return and (3) outperform the U.S. stock markets.
If professional investment companies are not making their decisions based on the price of the stock, neither should you.