April 1, 2022

"Investing isn’t about beating others at their game. It’s about controlling yourself at your own game."
- Benjamin Graham, Economist, professor, and father of “Value Investing”

Happy Friday

The S&P, Dow, and Nasdaq were all up in March. That followed a down February when the recent market pull-back started. In March, the S&P was up 3.6%, the Dow was up 2.3% and the Nasdaq increased by 3.4%.

In our view, the market is being driven by two divergent realities. On the one hand, the Covid-19 recovery and government support payments are pointing the economy in a positive direction and there is a generally optimistic feeling regarding the re-opening of the economy. On the other hand, the markets are reacting to near-term inflation spikes in the U.S. (caused in part by the government support payments) and the war in Ukraine. These two competing realities have upset the markets, but we are in this for the long-term, so we need to keep a steady hand and look to add value investments in the near term.

That said, March was a nice comeback month in a rocky 1Q ’22. We believe the markets will remain a bit uncertain, with pullbacks becoming a regular event in 1H ’22. Our public equities portfolio, which includes a significant amount of hedging, is still up more than 13% on a one-year basis, and up more than 11% on a ten-year basis.

The S&P went up 3.6% to 4,532 in March, as the markets continued the rotation into only the best value investments, especially those that are profitable and have reasonable valuations.
The Dow was up 2.3% to 34,688 in March, as the markets continued the rotation into only the best value investments, especially those that are profitable and have reasonable valuations.
Nasdaq increased by 3.4% to 14,224 in March, as Tech and Growth stocks continue to be restrained by their already-high valuations.

In March, Covid-19 infections, hospitalizations, and deaths in the U.S. trended downward to the extreme, and most public health professionals believe we have passed the Omicron peak. In addition, the Fed announced the prospects of 3-7 rate hikes in 2022 to control inflation which has cooled economic expansion expectations.

In April, we believe the public markets will continue rotating to value stocks with real earnings and low PE ratios compared to their growth prospects. Back in early January 2022 we increased the cash/bond part of our public equities portfolio to 60% and expect to keep at least 30% liquidity in H1 ’22 so we can periodically take advantage of any market corrections.

We especially like the Financial, Industrial, Energy and Utility sectors where values are more reasonable, and profitable growth stocks which should increase as the country opens back up for business. Morgan Stanley, B. Riley, Berkshire, Google, AT&T (5% dividend and Warner Media / Discovery spinout), and Verizon (5% dividend) all continue to be top value selections as we view them as stronger and more nimble competitors in their respective sectors, and they do not have much exposure to Russia. Please visit our website for our latest Top 10 investments.

Thanks again for your consideration and ideas. Have a wonderful April 2022!

Best Regards,

Marlene Oddo
Partner
PointFour Capital, LLC