Last week, I suggested taking advantage of an upsurge in cyclical stocks. Today, I propose giving large-cap growth stocks serious consideration. Doug Wood, Director of Research at Bennington Asset Management completed an analysis of equity category performance over the past ten years, and surprisingly, large-cap growth was stuck in the bottom of the basement. So, why recommend a horse that finished in last place for the past decade?
Because equity sector performance, like my dear wife, Marea, is unpredictable and fickle.
Marea celebrated her 39th birthday again on Sunday. As you may know from previous updates, I have around a 30% success rate when it comes to buying gifts for Marea. Batting 300 is great for a leadoff hitter, but bad for my wallet. Thankfully, my achievements in selecting securities are somewhat higher than my ability to choose presents for her and my daughter, Taylor.
Erring on the side of caution, I bought a wide selection of haute couture from Brooks Brothers, including a “skort,” matching top and belt, and a pair of earrings. (For readers who are uninformed, a skort is a pair of shorts that look like a skirt. Let me warn you, if you Google “skort,” spell it correctly or else the FBI may be knocking at your door.) You see: I applied a prudent investment approach to gift buying by diversifying into clothing, jewelry, and a couple of different accessories.
Here are the results. The bag and earnings were not “fun” selections, but the skort (spelled correctly), belt, and top were hits. Three out of five is a pretty solid performance, whether we are referring to buying gifts or choosing investments.
So back to investing. Those big dividend-producers such as First Trust Morningstar Leaders (FDL) now appear to be selling at premium. Thus, I am recommending that you lighten up on dividend producers and rotate into large-cap growth. I have begun purchasing the Vanguard Russell 1000 Index ETF Fund (VONE). Please understand that I’m not suggesting to sell completely out of the big-dividend producers because it is important to stay diversified.
Be aware that the proverbial elephant in the investment room is a potential 5+% pullback as we enter the summer months. However, investment managers have about the same success rate at predicting market dips and surges as I do in shopping for my girls which is why we all recommend diversification. Regardless of a potential pullback, this economy is getting stronger, which should lead to a fourth-quarter/long term surge in equities and an opening for large-cap growth to gain traction in the current bull market.
To quickly recap my wife’s latest 39th birthday, Marea is trading in or as we say in investment speak rotating out of the Brooks Brothers bag for a more costly but “fun” Burberry bag. What a surprise!
On a far more serious note, this past week, HealthView writer Chris Leone’s mother, Joan, suffered a brain aneurysm. The good news is that her prognosis is excellent and she is expected to make a full recovery thanks to the surgeons at Massachusetts General Hospital. The HealthView family hopes that Joan will soon be home enjoying her kids and grandkids.
By the way Joan, if I didn’t mention this last spring when we met, I want you to know that I’ve worked with a large number of writers and without a doubt, your son Chris is the best in the business! I’m sure that comes from your side of the family. Get well soon.
Have a productive week.
No Chris, you cannot have a raise.
The Update is written by Chris Leone and Ron Mastrogiovanni.
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