Strategies

The recovery of the Japanese auto sector should help drive equity markets – Sparrow Capital

by Frank Voisin|Published July 25, 2011

Covestor model: Fundamental Growth and Hard and Soft Commodities

Disclosures: None

In the last three months equity markets stalled in most parts of the world. The markets in Europe, Asia, North and South America remained largely flat after a good first quarter.

The slow patch we are currently experiencing may be remedied by a pick up in auto sales that is expected to occur in the second half of the year when Japanese auto companies fully recover from parts shortages due to recent earthquakes. In addition, second quarter earnings could potentially be the catalyst for the markets to begin to climb again in the second half of July.

I also believe low interest rates and positive expectations by consumers and businesses may continue to move economic growth upward in the coming year.

As a reminder, our investment approach is to buy companies with consistent earning power and high return-on-equity, while employing little or no long-term debt and to purchase at reasonable prices. This strategy helped our Fundamental Growth portfolio increase in value in the second quarter (4/1-6/30/11), even as most major indices have remained flat: the model was up 2.41% vs. a 0.39% drop in the S&P 500, according to Covestor’s calculations.

As always, my family and I have almost all of our equity investments in the stocks that I trade. This does not guarantee a return, but it does focus my attention.