Commentary: Summer Fun
With everyone from carmakers to travel agencies calling on the notion of summer fun, it seems like advertisers are falling in line with the usual mid-year, summer getaway theme. The stock market’s recent surges and hesitations resemble a badly conceived theme park ride and may be leaving some investors a bit nauseous, but they are really just part of an age-old pattern. That pattern often includes a lull in activity during the summer, when volume, if not volatility, tends to die down. In the past, very affluent investors were said to “sell in May and go away,” returning around Labor Day to resume their moneymaking activities. Nowadays, the market is not swayed by rich folk as it once may have been, but the pattern continues as an accumulation of small investors harkens to the call of vacation time. The theme park ride may lurch into action once again around the middle of July as second-quarter earnings results begin to flood out of corporate media outlets. As always, those earnings results will be received in a variety of ways, depending on how high or low were the expectations of analysts. All of this will take place against the backdrop of a market that has moderated considerably from its spring resurgence, as investors look for reasons to continue their stock buying. Their actions show that they recognized that prices at the March lows were too low, but now they wonder just how high they should be. The proper answer depends on perspective, of course. To those with a short-term focus, minor differences in quarterly results, along with analysts’ expressions of either positive or negative surprise, mean everything. To those with a long-term focus, though, there is always opportunity to accumulate good stocks at a variety of prices. Psychology, therefor, is a major factor, in a negative way for the traders, but in a positive way for the true investors
Our High Growth model portfolio on page 5 is a good example of how well the market bounced back from the March lows. A gain of $28,118 on March 27 turned into a profit of $43,940 on June 26. All 10 stocks regained some lost ground, but all still offer plenty of room for future growth, so continuing to accumulate these fine companies on a regular basis is still a good strategy
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