Sunday, February 26, 2017

TLH Market Review - 2/26/17

Very embarrassing but this article was never published a few weeks ago.  Either way I wrote it so I might as well put it out there. My apologies to all readers for the oversight.  

We just have to decide if we are willing to put our money where our faith is - The Long Haul Investor

It was close for a bit there at one point during the week when it seemed the market was going to log it's first down week in over a month.  Nevertheless the S&P 500 managed to eke out another 0.7% gain for the week.  Add in the fact that we haven't seen the S&P 500 close down by 1% in over 90 days(10/11/16 to be exact), plus over 10 days of new highs in the Dow, and it seems this bull market will never end!!!

Of course we know better here at The Long Haul.  Eventually we'll see this market trend sideways or down for a bit. When is any one's best guess.  I'd prefer sooner than later so I can buy more awesome companies at better than today's price.


Besides the relative calm the market also shook off comments from the Fed that another rate hike is in line sooner than we might be thinking.  Of course the Fed wasn't entirely clear on when that would be. If the markets sell off right after the next rate hike that won't mean it's "bad" for the economy and markets.  It's just traders and other big money locking in their gains. Have you ever heard of "buy the rumor and sell the news?"

You need to pay attention to the longer term correlation of rising and falling rates, and the stock market. It's shown that when rates rise, equities rise. And when rates fall, equities usually fall too. A few days or weeks movement is not always indicative of the overall trend.

Portfolio

We received earnings from two of our holdings.  Boston Beer(SAM) and Wabtech(WAB) posted results and gave 2017 guidance that was less than sanguine. The market gods were not pleased and responded accordingly. I won't recap it again but you can read my thoughts here

You can see from their respective performance the last couple years have been tough for shareholders.  SAM is down -27% over the last 30 months while WAB is basically flat at -1.31%
 Visit StockCharts.com to see more great charts.

However if we dial the chart's back a bit we can see they were once star performers. Both stocks crushed the S&P 500's performance for a long time. Between February 2007 and September 2015 SAM logged a 503% gain, while WAB followed up with a respectable 445% gain. Those numbers easily out shined the S&P's 32% appreciation. So this brings us to a question we should be asking ourselves. Did we buy yesterday's performance, or is this just a soft spot after an already impressive run?

Visit StockCharts.com to see more great charts.
Every stock takes a breather to consolidate gains before heading higher. If the company is extremely well run the stock will eventually resume it's path to riches for shareholders. Unfortunately you need a long time horizon to find that out.  Whether we are in that temporary soft patch, or in the middle of the turn towards no man's land we just have to find out for ourselves.

This is where faith has to come in.  I'm a long term believer in both industries. Rail cars will still need to be built and fixed 20 years from now. People will still be swilling their favorite beer at sports games, weddings, and birthdays for years to come.

We just have to decide if we are willing to put our money where our faith is. 

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