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DoctoRx
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Over 30 years of investing in individual stocks. Extensive business experience with small to mid-size companies, including as CEO. Many hundreds of blog posts on financial and economic matters since 2008. Focus on value with catalysts for upside price action. Background as a physician and... More
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  • Going Beyond A Robust Portfolio To An Antifragile One 0 comments
    Feb 25, 2013 6:05 PM | about stocks: TLT, IWM

    A couple of weeks ago, I submitted an article to the editors for a bearish article on the Russell 2000 tracker ETF, IWM. This needed revision, and I got busy. IWM sells for about 28X TTM earnings, as the sponsor, the iShares people (Blackrock) measure P/E. Trailing 5 year earnings growth is only 5%. I think the IWM is like the NAZ of the late '90s. I can't call the peak, but I think it's way overvalued.

    If you review my published Seeking Alpha articles, two themes emerge. One is caution, with not one but two articles praising TLT (the long T-bond) and one on gold, which I view as along w T-bonds, the ultimate conservative investment (also along with cash).

    Then there are special situations, including Russia (which call I largely reversed last week, as I locked in profits on at least half my Russian ETFs), plus some special situation stocks.

    My guess, and it's just a guess, is that investors have been desperately seeking alpha by bidding up small stocks. Most of those guesses will fail. But the theme makes sense. There are many small-cap stocks that I think have a good story, and I have written on two-- SKX and AMRN. But they are risky. And the large-cap one I've written on, CVS, is boring. It certainly has downside price risk in a correction; I wrote about from a multi-year perspective.

    Basically, any SA author who begins his SA writing "career" with two articles on TLT may be inferred to be cautious on the valuation of the stock market as a whole. BUt as with AMZN, AAPL last fall, etc., it's a tough market to short. It definitely can go higher. But I've been around long enough to know that if I actually have some conclusions on valuation, I can't play the mo-mo game I played very well in the late '90s and played well, though less ardently, last decade. I just don't want to tempt fate a third time. Thus, one of the contributions I'm trying to make to the SA community is that, since I don't short anything except in unusual circumstances, I'd like to lay out individual investment choices that collectively comprise a portfolio that is, as "my man" Nassim Taleb likes, antifragile.

    We live in very strange times, at least from a financial markets perspective. Many of the old rules are dead. Anything can happen.

    More to come.

    Disclosure: I am long RSXJ, TLT, GLD.

    Additional disclosure: Not investment advice.

    Themes: IWM Stocks: TLT, IWM
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