“What the wise man does in the beginning, the fool does in the end.”
Leon Cooperman, Chairman & CEO, Omega Advisors

Happy Monday!

Overall, the Dow, S&P 500, and Nasdaq all declined in October. After locking in their best August in more than 30 years the Dow slipped 6.8%, the S&P lost 2.8% and the Nasdaq declined 7.3%. This is certainly evidence of the expected “pause” that we mentioned in our last market update and is certainly a response to the market’s overly optimistic reaction to the recovery from Covid-19 earlier in Q2 ‘20.

The Presidential election season is coming to an end and as predicted the two camps are in the middle of a bruising campaign. It certainly looks like Biden will carry not only the popular vote, but also many of the key battleground states. As I mentioned last month, reasonable men and women seem to agree that Biden is a man of decent character and exemplary leadership, which can’t be said about Trump.

The Dow slipped 6.8% in October, as the markets continued the rotation into lower PE value investments, especially industrial and consumer staples.
The S&P lost 2.8% in October, as the markets focused more on value investments and the fading hope of additional fiscal stimulus in the near-term.
The Nasdaq declined 7.3% in October, as Tech stocks were under considerable pressure all month. After massive run-ups in the past few months, it was time for value stocks to rotate back into the limelight.

In October, the growing number of coronavirus cases in the world, and specifically in the US, along with the associated constraint on full-scale business re-opening in the US continued to stress investors’ minds. In addition, the Presidential election was a major concern.

Countering this negative news, M&A transaction volume increased and the Fed continued its unprecedented support of the economy. In addition, progress on the Covid-19 vaccine has been very positive and the Housing sector has been a bright spot with strong consumer demand thanks to low interest rates.

In November we believe the public markets will continue the rotation to lower PE industrial stocks and returns will move higher. We believe that out-of-favor lower-PE Dow companies represent a continued buying opportunity during the rest of Q4 ‘20. I especially like the Industrial sector where PE ratios are very reasonable, and growth in this sector should increase as the country opens back up for business. Verizon, Morgan Stanley, P&G, Walmart & Amazon all continue to be top selections as we view them as stronger and more nimble competitors in their respective sectors.

In our public portfolio in November, we plan to continue migrating our cash position (now standing at 25%) into more quality equity investments at superior values. Take a look at our TOP 10 investments list for the latest.

Thanks again for your consideration & for sharing your thoughts and ideas with us.

Have a wonderful November and rest of 2020 ahead!

Best regards,

Vinnie

Vincent M. Oddo
Managing Partner
PointFour Capital, LLC
vincent.oddo@pointfourcapital.com