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Q2 2015
Greetings.
My wife just retired from her 34 year career in teaching. So that the retirement feels legit, we are taking a trip to Istanbul and Greece in September – Caryl’s first ever September vacation. Unfortunately, we’re not too confident in our decision to travel to Greece at the moment, as we watch the country implode. However, once we get there, I’m certain that my wife will provide welcome economic aid.
Which brings me to my first relevant point. GCM is currently sitting on more than $20 million in cash, a record for the firm. YTD, the S&P 500 is up 0% while GCM has produced double digit returns. For the last 3 ½ years (with the exception of one client – sorry), we have handily beat the stock averages. The major reason? Several of our stocks increased 2-7X (QRVO, HILL). This has afforded us the opportunity to sell stock at the long-term capital gains rate (only matters for non-retirement accounts) and park the monies for future investments. It NEVER hurts to take a breather, and I believe we are deserving of one now.
GCM avoids buying a company when the stock price has been on a tear. Rather, we typically wait for the price to soften, letting the stock come to us. Another way to put this – We try to buy smart. To be a successful investor, one also has to be lucky when timing the purchase and/or sale. I truly believe that there are seldom bad investments, rather there is bad timing. Recently, our timing has been good with our purchase and sale prices but having done this for many years, it never continues in a straight line. For instance, GCM sold a one-third position in Dot Hill (first purchased in 2009 with a cost basis average = $1.05) at $7.37 three weeks ago, and the stock dropped below $6/share last week. That’s the kind of investment/event that feels good. Granted, the stock could go to $8+, but we still own 600,000+ shares to take advantage if this were to happen.
We’ve raised the cash, so what should we do now? Personally, I think it’s a great time to sit back and watch things unfold before making the next move. The Greece-like scenarios of the world–although not critical–can upset the mindset of many investors. They can also have a crippling effect on certain financial sectors (bonds) and certain geographic regions (Euro/Germany). Being cautious at certain times can provide relief and reduce anxiety.
I never tell a client what to think; however, I’m not averse to suggesting what a client should not think. Here is my suggested list of things that are not worth thinking about. (Of course, human nature will likely force you to immediately think about them!
- … you’re sitting on too much cash
- … you’re paying Goldberg to sit on cash
- … we may be missing out on opportunities by not putting the cash to work
- … you might have to pay taxes on the sale of stock (taxable account)
- … pulling cash out of the account because it’s not currently invested
- … discussion about a great stock by friends at the neighborhood barbecue
GCM manages your wealth. It is our decision to decide when to pull in and when to let out the reigns. I must admit, ALL of my clients are very cooperative regarding this critical issue. Sometimes the best thing you can do when investing is absolutely nothing. You cannot believe how much money you DID NOT lose because of the investments that were NOT made. Think of Ted William’s hitting prowess– He waited for the pitches that he could do something with.
My recommendation is to remain patient with the understanding that, although we may miss plenty of opportunities, the ones we connect with just might be knocked out-of-the park!
OF MEDICAL NOTE
Don’t Short-Circuit Your Brain – Think before you google. Relying too heavily on search engines could mess with your mind. In a Canadian study, people who spent 20 minutes or more per day looking up information, performed up to 19% worse on cognitive tests than those who used their devices less. Offloading tasks from your brain instead of solving a problem on your own may make you think less creatively and analytically. A bat and a ball cost $1.10 total. The bat costs a dollar more than the ball. How much does the ball cost? (Hint: It’s not 10 cents) Good luck telling your kids to ditch their smartphone and to use their brains instead!
Here’s to continued gains in 2015 and my best for a healthy and enjoyable summer season.
Len
Goldberg Capital Management is an investment adviser registered with the State of CT Department of Banking. This Newsletter and its contents are for informational and educational purposes only. You alone will need to evaluate the merits and risks associated with the use of the information provided herein. Although this Newsletter may provide information relating to approaches to investing or types of securities and other investments you might wish to buy or sell, no information provided in this Newsletter is intended or should be construed as an investment recommendation or endorsement from Goldberg Capital Management. Please remember that past performance is no guarantee of future results.