I’m running above average levels of cash right now, especially in growth oriented portfolios, simply because I’m having a hard time finding decent value. Stocks, in general, are only 1.5% off their highs for the year, and in my opinion are still fairly stretched after what has been a great year to this point. While I wouldn’t be surprised to see the market break out to another new high, I’m fine with not being fully invested for it. I prefer to buy when prices are falling, not near/making new highs for the year.
It’s earnings season and I always listen to the quarterly conference calls of a few companies that I feel offer a gauge on the economy as a whole. Union Pacific Railroad fits the bill since they ship products for so many different industries. Their call this morning confirmed my cautious outlook. They said that shipping volumes were flat in the third quarter and look to be flat again in the fourth. Auto and Chemical shipments were strong, but Agriculture (mainly corn) and coal were down. Looking forward, they see economic uncertainty… They hope higher shipping rates and their business diversification will offset any weakness… doesn’t sound like a strong economic outlook as a whole moving forward.
However, there are always a few bright-spots within certain industries. The two that jumped out were higher shipments associated with drilling/fracking in the US and global demand for soybeans. I’ve been doing a lot of research lately on the North American push for energy independence. The more research I do, the more I like this trend. I’ve even added a few companies in this space to portfolios lately. One area where I am finding some value is commodities – not necessarily the companies in the industry but actual commodity prices, as stated by the continued global demand for soybeans, etc.
Until our typical once per year dip comes around, I’ll be doing more selling than buying.
S&P 500 ETF (SPY) – 1 year
Thanks for checking out my blog!
-Nick