March was a very good month for most Peattie Capital Reasonable Price portfolio, as the last earnings reports came in and shares responded favorably.
ChipMOS (IMOS) announced another buyback program on their March 18 earnings call, and that they expected to be listed on the Taiwan Exchange in the second quarter. Despite the company’s subsequent 30% bounce, I reiterate my buy recommendation.
Macquarie Infrastructure Trust (MIC) continues to post strong results, and disclosed in their conference call that they would be in a position to raise the dividend again after completing a refinancing at their Atlantic Aviation subsidiary (expected by the end of June).
MIC has already raised the payout from $0.80 annually a year ago to $2.75 currently. The market’s anticipation of further increases is probably what is driving the units to new highs, in my opinion, and MIC has returned 104% since November, 2011.
I have stated repeatedly that I believe in a “market of stocks” rather than a “stock market” (or words to that effect).
In other words, reading headlines, interpreting them, and then buying or selling stocks based on them is a very difficult way to grow a portfolio over time, in my opinion. Who thought six months ago, for example, that stocks would be setting record highs before the end of the first quarter of 2013?
That said, I also believe in being aware of the environment. To my way of thinking, the combination of liquidity, reasonable valuations, and lack of investment alternatives are all favorable “big picture” elements.
In addition, I think the extraordinary amount of cash on corporate balance sheets and the reduced number of shares available to trade on the exchanges (as a result of mergers and relatively few IPOs) are helpful.
Finally, I like the continued skepticism of much of the investing public (as seen by the still tepid inflows into equity mutual funds), and from a technical perspective, I like the behavior of the transports, which continue to perform very well.
On balance, I would like to see a bit more fear, as sentiment indicators such as investor polls have fluctuated near excessive optimism, and a correction of 5%-10% would be healthy, based on what I believe today.
How can active portfolio management seek to outperform? Slightly off topic, I know, but this question comes up frequently, so I herewith address it. The best answer I’ve seen is from David Swensen, CIO of Yale’s Endowment, considered to be one of the best managers of this era.
According to him, managers need to know the overall environment, to run concentrated portfolios, to do extensive research on investments so as to know when a selloff has the potential to be a buying opportunity, to have patience, and to be willing to deviate from an index.
The investments discussed are held in client accounts as of March 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.
