Strategy

by Tom Konrad, Ph.D., CFA On February 21st, I was helping an investment advisor I consult with pick stocks for a new client's portfolio.  He lamented that there were not enough stocks at good valuations. This is one of the hardest parts of being an investment advisor: a client expects the advisor to build a portfolio of stocks which should do well, but sometimes, especially in late stage bull markets, most stocks are overvalued.  I reminded him, "The Constitution does not guarantee anyone the right to good stock picks."  He agreed, but he still had to tell his client that...

by Tom Konrad, Ph.D., CFA 2020 ended with a massive spike in clean energy stock prices.  From the end of October, election euphoria drove Invesco WilderHill Clean Energy ETF (PBW) from $63.32 to $136 at the close on February 9th, a 114% gain in 100 days.   Joe Biden is as strong a supporter of clean energy as Donald Trump was a supporter of big fossil fuel companies, but even with control of the presidency and both chambers of congress, there is a limit to what a president can do in a short time.  This is especially true when their top priority...

by Tom Konrad Ph.D., CFA Four weeks ago, I predicted that the 12% market correction we had seen would turn into a true bear market.  Bear markets are often defined as a decline of more than 20% for the major market indexes, but I find it more useful to focus on long term changes in investor sentiment. What I did not predict was just how severe the effect of the coronovirus shutdown would be on the economy.  I thought we would need the combined of the effect of the shutdown and investors re-assessing their risk tolerance to bring us into full...

by Tom Konrad Ph.D., CFA Passive Investing And Modern Agriculture: Parallels Today's stock market is a dynamic and scary place. Once choosing stocks to invest in based on the fundamental value of the companies they represent (called fundamental or value investing) was the dominant paradigm for investors.  No longer.  In 2017, JP Morgan estimated that only 10 percent of trading came from fundamental investors. The vast majority of trading now comes from computer based algorithmic trading, and passive investors following pre-defined rules, such as index investors.  According to Morningstar, nearly 45 percent of all stocks are owned by passive investors.  These should...

by Tom Konrad, Ph.D., CFA Since my 10 Clean Energy Stocks for 2021 list contains 5 foreign stocks this year, a reader asked about the relative merits of buying a foreign stock compared to a US ADR.  Here is a summary of the relative merits (for US investors) of buying a foreign stock directly compared to buying the American Depository Receipt (ADR). First, let’s look at the tickers for the five foreign stocks in the list.  There are four types of ticker in the list this year: The stock on its home exchange in the local currency.  These have the form...

For readers in the Hudson Valley, I will be giving a free talk next Monday night.  I will speak about applying permaculture design principles to your investment strategy.  While I developed my own strategy over the last two decades without any reference to these design principles, now that I'm familiar with them, I realize that I have been thinking along these lines for a long time.  The design principles are remarkably robust and intuitive. I used to think Permaculture was just about redesigning our food systems, but it's much much more than that. The talk is sponsored by the Rondout Valley...