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Wal Mart, Bond Yields Temper Investor Enthusiasm!

Feb. 20, 2021 3:43 PM ET
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Yale Bock's Blog
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Long Only, Growth, Value

Seeking Alpha Analyst Since 2008

I am the President of Y H & C Investments, a Registered Investment Adviser based in Las Vegas, NV. My educational background is a B.A. in Economics from UC-Irvine, a MBA from UC-Irvine, and have earned the right to use the Chartered Financial Analyst designation.


  • Wal Mart Beats On Top Misses on Bottom.
  • Bond Yields Continue Higher.
  • Bitcoin Breaks 50K.

One thing on psychology, which we've always known, is that every investor says they're long-term - and they are until the market takes a hit. Steve Forbes

As someone who grew up in Las Vegas, warm weather is the climate I am accustomed to. After experiencing college on the beaches of Southern California and then moving back to the big V, well, let’s just say I can handle the sun. Snow, rain, fog, wind, and freezing temperatures, uh, no. Not. For. Me. With seventy five percent of the country enduring a snowstorm this week, clearly weather was a big obstacle for many people. We were spared the problem here in Las Vegas, so knock on wood for that, and I am sure the same thing applies to most of the West Coast, including the paradise that is the Golden State. The good people in Texas had the privilege of trying to navigate a once in a century storm without power. Infrastructure reliability has long been an issue across our fair land, and the lack of investment and a comprehensive approach to handle transmission of power reared its head during the storms. Roads, bridges, airports, power lines, storage facilities, and port capacity are all areas which require a long term approach and unique ideas to creatively fund projects. There is definitely a need to think in terms of decades versus years with these big expenditures, and corporate leaders and politicians have not bit the bullet to address the problem. The short term priority versus a long term mindset is one investors have long adopted. How might we benefit from a different perspective?

First, make no mistake, the largest institutions on Wall Street put a big emphasis on quarterly earnings. As most of you may have experienced, owning the stock of a company that badly misses an earnings number (or maybe pre-announces) results in a dropping stock price. Depending on the magnitude of the miss, losses of 20-40% in a single trading session are quite common. If you extend your time frame past a three a six month period, quite frequently the stock price recovers, as long as business results improve. Obviously, the important consideration is whether or not the situation is temporary, or permanent. Taking the time to learn and understand what are the important drivers causing the poor results and why those factors will improve is the highest priority task. In fact, taking the time to digest the circumstances might lead you to conclude you are staring at a huge opportunity. One only has to look back a year when the equity market was down 35% in two weeks at the start of the Covid pandemic. Wise investors, long veterans of the ups and downs of a manic market, clearly understood there were bargains to be had if you could get past the fear which dominated investor sentiment. Second, a long term historical and factual approach allows you to sidestep the overwhelming speed which dominates the market, one laden with emotion. Equity prices swing dramatically and can do so very quickly. Look at the most obvious example, our friends at Gamestop. A few weeks ago, it was all the rage, with the stock sitting at nearly $450 per share. Today? A touch over $40. If you were a Redditt follower and top ticked the buy order, you are staring at a 90% loss of capital. Making sure you look at the history of a company, where it is today versus where it was a year, two, or three years prior, and considering the price you are paying gives you context. Throwing in a comparison with the major competitors of the industry gives you a relative basis of the multiples of the industry. If you then go to the ownership structure and board of directors composition, you will get a good understanding of who has the most financial risk in owning the stock. Investigate the balance sheet and understand the debt profile, and now you can begin to understand potential liquidity issues. Nowadays, being a long term investor is difficult, but if you take actions to become very rigorous in analyzing companies, you will help yourself avoid short term thinking which can cause financial losses.

In the markets this week, earnings reports dominated with the big one a bottom line miss from Wal-Mart. In tech, high fliers Spotify, Fastly, and Dropbox all exceeded estimates but the stocks suffer from huge multiples. In addition, and maybe far more important, all of the high profile companies with big stock prices face the problem of surging bond yields. The ten year treasury bond now sits at a touch over 1.30%, up dramatically over the last year from the lows of .60%. Some believe it is headed to 2% by the end of the year. Clearly, financial’s are the big beneficiary from this potential move, and many have already seen improvements in their stocks. Elsewhere, Bitcoin blew past 50K, which is quite a gain from the lows of 4k about a year ago. A blast from the past, Nouriel Roubini has a word of caution for you Bitcoin believers. Finally, next week will be a big week in the markets as earnings continue to roll in. Headliners include Nvidia, Costar, Churchill Downs, and Beyond Meat, and plenty more. With all the numbers rolling in, I’m sure you will keep in mind a long term perspective.

Thank you for reading the blog this week, and if you have any questions about investing, please email me at information@y-hc.com.

Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog, Investing in securities involves risk and the potential loss of ones principal. Past performance is no guarantee of future results. All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one's overall financial situation. The fact that Yale Bock has earned the right to use the CFA designation does not mean Y H & C Investments will outperform broad market indexes.

Analyst's Disclosure: I am/we are long NVDA.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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