One of the most important lessons I have learned over my investing career is to go back to the basics when I’m unsure about something and see if it all makes sense.
Remember 2007 and the important year it was for the stock market? Investors bought stocks that year without paying much attention to the fundamentals. Then in 2009, the stocks of some of the most well-known companies in the world got punished for no apparent reason; but investors didn’t buy stocks in 2009, because they thought the bottom would fall out of the economy.
Yes, I know the above are two extreme examples of investors being too greedy or too fearful, and thus, they made the wrong investment decisions; but a few years from now, I think we could be looking back at 2014 and making the same comparison.
Here’s what I’m talking about…
These days, no matter where you look, the general census among economists is that the U.S. economy is witnessing economic growth. We hear stock advisors defend their bullish positions with arguments of increasing auto sales in the U.S. economy, jobs creation, and companies posting great profits (all fallacies).
But as I have argued many times in these pages, the U.S. economy is stressed and fragile. Auto sales are strong because we have sub-prime loans for auto buyers coming into play; jobs growth in the U.S. economy has been meek and concentrated in low-paying service jobs; public companies are posting per-share earnings growth because of record stock buybacks; and Americans are increasing their spending by either tapping into their savings or by borrowing money.
Something very important to look at during any economic cycle is consumer income; personal incomes are supposed to increase as an economy improves. But this isn’t happening in the U.S. economy right now! Real disposable income per capita in the U.S. economy dropped to $36,941 in the fourth quarter of 2013 from $37,265 in t… Read More
Lots of companies are still reporting their financial results, and there are a lot of unique stories out there that are worth following.
AAON, Inc. (AAON) reports this week. We’ve looked at this enterprise several times before in this publication. Company management has an impressive track record of generating consistent growth.
It will be interesting to see if the company can keep its operational momentum. (See “Why This Company Should Be a Case Study in Business Schools.”) Over the medium- to long-term, it’s proven unwise to bet against this well-managed business.
Last year in these pages, we briefly highlighted a very interesting medical device company called Globus Medical, Inc. (NASDAQ/GMED). Based out of Audubon, Pennsylvania, the company specializes in the treatment of spinal disorders and is building its business in a very consistent and methodical way.
The stock stumbled in the fourth quarter of 2012 but has been moving solidly higher as management delivers modest but consistent growth in revenues and earnings.
The company’s two-year stock chart is featured below:
Chart courtesy of www.StockCharts.com
Stocks with consistent share price performance are golden, and it comes on the back of consistent operational growth. It doesn’t have to be runaway growth or even double-digit growth; institutional investors love medical device stocks, and they will bid them as long as a company delivers on expectations.
Any stock can break down at any time for a multitude of reasons, but I’ve seen so many consistently returning stocks produce better capital gains (over a longer period of time, of course) than many high-flyers.
It’s not that high-flying trades aren’t worth pursuing; rather, within a portfolio context, a couple of steady growers help with total returns.
Another company that’s been a consistent, steady grower on the stock market is Airga… Read More
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