After seeing a strong global equity market performance in 2012, investors poured a record amount of money into equity funds during the first month of 2013, pushing stock indices near or above record high level.
Although the equity risk premium is still at historically favorable ranges, in my opinion investors with cash on the sidelines can wait for pullbacks over the next one or two months, then gradually commit money into the equity market.
We believe all major US equity indices as well as US major real estate markets may make record highs in 2013, as the US equity market shifts into multi-year secular bull market phase.
All our Covestor models did well for the first few weeks of 2013, and the most interesting model is our large cap model Focus Growth. Just like our other Covestor models, the program behind Focus Growth model compares and calculates the valuation of all large cap stocks constantly.
As a result, it determined Apple was too expensive on August 22, 2012 and therefore closed the Apple position at that point. This came as guest analysts on CNBC continued to make bullish calls on AAPL with a $1000 target.
Similar to the fate of the Qualcomm (QCOM) $1000 price target call back in late 1999, Apple has taken a tumble. We saw relentless AAPL selling in the past several months, while many other large cap stocks appreciated significantly during the same period.
The number-crunching program behind Focus Growth model now finds AAPL‘s mispriced valuation appealing. Therefore, we sold our positions in Comcast (CMCSA), Ryan Air (RYAA), and Yahoo (YHOO), then reinvested part of the proceeds to initiate a small AAPL position on February 4, 2013.
We will come back to review the trade after the program closes the position in the future, and readers should not assume this AAPL trade will be profitable as the previous AAPL trades Focus Growth made.
Another interesting investment trend developing in 2013 is investors coming back to dividend stocks in 2013 after investors figure out dividend stocks are not that bad at all even with the tax hike. As a result, we believe our Dividend Model has the potential to perform well.
Of course, with fast changing market conditions, there is no guarantee any of our strategies will outperform tomorrow’s market. It is therefore important for investors to assess personal risk tolerance and to diversify across strategies to reduce risk.
Disclaimer
Opening accounts of Analytic Investment Management LLC’s models through Covestor is not personalized investment advice, and Analytic Investment Management LLC does not take Covestor clients’ personal financial needs into consideration. Investing in the financial markets involves risk, including the risk of principal loss. Don’t invest with money you can’t afford to lose. Information in this report is in no way intended as personalized investment advice and should not be interpreted as such. Past performance is not necessarily indicative of future results. Performance results do not take into account any tax consequences. Focus models are concentrated portfolios with less than 20 positions. Concentrated portfolios carry significantly more risk than diversified portfolios and may not be suitable for every investor.
The investments discussed are held in client accounts as of January 31, 2013. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
