In May, the shares of two stocks in the Peattie Capital
portfolio performed well: Make My Trip
Both these names are not well-known and MMYT is particularly speculative, so they can be volatile. However they are both worth holding in my opinion, especially in growth-oriented portfolios.
Other holdings that performed well included SBA Communications
, Macquarie Infrastructure
, As I mentioned last month, QCOR
is being purchased by Mallinckrodt
, and I have closed that position. It should be noted here that past performance isn't always indicative of future returns.
Shifting to the broader market dynamics, in my opinion at some point the current
buy and hold
environment for stocks will change and I watch a number of indicators for insight into when that might happen.
Generally speaking, hedge funds tend to be much more active traders, which may explain their ongoing performance problems. A Financial Times
posted on May 20 pointed out how the choppy markets had hit hedge fund returns hard. As the article noted: "The average hedge fund is suffering the worst start to the year since the financial crisis, making just 1.2%." When my hedge fund friends tell me they are “buying and holding” that will be a sign to me that this phase of the market may be nearing an end.
Another factor to watch: Midterm election years are bumpy, so I wouldn’t be surprised to see a 5% to 10% correction somewhere along the way, which would be normal and healthy.
Ned Davis Research
recently published a note stating that when May’s return is over 2%, then the subsequent June – October period averages a 3.9% return, compared to 2.7% otherwise. I don’t invest based on seasonal tendencies, but it’s helpful to know they exist.
The recent downwardly
revised GDP number
is largely attributable to the weather and a late Easter, as far as I’m concerned. In my opinion, investors should expect economic activity to accelerate going forward. In addition, the weak GDP number was widely expected, and had little or no impact on the markets.
Inventories were light, but that suggests to me re-stocking will begin, which I view as a net positive. Consumer spending was up
and final demand grew at +0.6%. The latest
showed improvement for the 13th consecutive month. Bottom line: I don’t see a recession on the horizon.
Unlike many of my peers, I don’t pursue any one investment style over another, or limit myself to stocks of a specific size. I believe in being flexible and opportunistic and will go anywhere in equities if I believe the opportunity is there.