Hello all:
Jack Rothstein, one of the personal money managers that I follow will be on CNBC tomorrow. Like many on this thread he takes a longer term approach and many of his Rothstein 25 look like some of the favorites on this thread. This is a guy from the buy side of the street. The more money his clients make, the more money he makes. It's about total returns not trades and he probably beats 95%+ of active money managers. This is his first time on CNBC. He just added EBAY, yesterday, as one of his picks for the long term.
If you have the time tune in. Jack's on CNNfn tomorrow at 2:10 EST
Here is his last market commentary. He has a punchy prose style ;-)
Jack's Thoughts, May 19, 1999
Darth Vader and the Fed: May the Profits Be with You!
As any Jedi knows, nothing is as simple as it seems in this world--well,
in any world that you inhabit. Take Darth Vader. He was not always a
seven footer and into masks, raspy rants, intergalactic villainy, and
heavy breathing; no, he was once a kindhearted slave boy named Anakin
Skywalker who could play hero on occasion. Oh, the complexities of the
cosmos; even Darth has not been fully evil at all times.
So it is with interest-rates hikes if you think of them as Darth &
friends. Like Darth, they can have a little good--past or
present--tucked away in the old cranium.
Remember this in the wake of the decision by Alan Greenspan and
colleagues yesterday to be open to the possibility of higher rates. Here
on earth, life won't end just because the Federal Reserve wants to laser
away the slightest smidgen of inflation. As with Darth's life when
reviewed in full, at least some positives show up.
First, the announced bias in favor of a hike telegraphs a strong belief
that the Asian Flu has been held off, good news for U.S.,
multinationals. Second, even though rate creep probably would not be
catnip for growth stocks in the short run, the end results just may be
worth the sacrifices along the way. The AOLs, the Ciscos, the eBays, the
high P/E companies, could suffer mightily if inflation returns. Stocks
would be less competitive against bonds, and borrowing costs would be
higher. So, while I'm not thrilled to see the inflation hawks showing
more influence within the Federal Open Market Committee, I can find at
least some plusses. If nothing else, remember that the Fed did not
actually raise rates; it merely announced a propensity to do so if the
cost of living went up too quickly. And, in the most recent past, a bias
in favor of higher rates hasn't necessarily led to action. In fact,
normally it hasn't, especially in the past several years.
Bottom line? Ultimately the short-term, bank-to-bank rates controlled by
Fed won't matter as much by themselves as you might think. Into the
equation, for example, you must also plug the ups and downs of the
30-year bond as determined by the market itself. Bonds will likely
remain in a tight trading range, and the equity market can easily digest
a six percent long bond. In the end it's the companies--and the extent
of the sustainability of their stories--that matter to long-term
investors.
I myself remain keen on classic Rothstein 25 stocks such as Dell, AOL
and Cisco.
Dell did met earnings expectations--even if some on the Street wanted
still better results. AOL might enjoy a pop from a broadband-related
announcements at meeting today with analysts. Cisco Systems appears
strong, and even if the increase is temporary, the story remains
powerful over the long run. Cisco has a history of breaking down late
winter or early spring, but this year it's actually accelerating. That
reality is reflected both top and bottom line. The shares are a delight
to owners who have the gumption to hold on. Everyone owns Cisco. It is
not yet full. There are just a few examples of growth companies to
watch.
So don't let anyone use the interest-rate excuse to talk you out of good
investments.
As in the case of Darth Vader, you can't oversimplify; this market
befuddles even pros. Can you honestly say that you have a handle on it?
One day the cyclicals have a rally and appear destined to climb greater
heights, but the next day they fall flat. NASDAQ soars while the Dow
succumbs to profit-taking. And then the opposite happens! What is
possible is the ability to control the look of your portfolio; focus on
the blend and quality of names that you carry. Stay concentrated. Own
more shares and fewer names. And, with so many stocks priced so richly,
try to carry a cash position. Today we are 70 percent invested; that is
a bullish stand, but we were fully invested through the middle of March.
We lightened up a tad, selling underachievers and taking some profits. A
cash position enables you to benefit from the dips; view them as
opportunity. Never let the shifting winds shake you from the equity
tree. Weaker hands shake loose and lose. Stronger hands hold on and win.
They know that prices are ultimately destined to rise to higher levels.
Leaders--names that can maintain a dominant position in their market
environments--will continue to deliver better-than-average performance.
All you need to do to beat the market is pay attention to the trend. Be
in front of the trend and ride a wave. Be flexible and objective. Do not
be attached to results. Focus on the names you own and be willing to
dispose of under achievers. Sell losers and keep winners and stay cool
and calm. We live in the best of times. The ability to capture a fortune
over time stares right at you; may the profits be with you!
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