mark ballard

Mark's Investment Blog

This blog is intended to keep clients and friends current on my investment management activities. In no way is this intended to be investment advice that anyone reading this blog should act upon in their personal investment accounts. There are other significant factors involved in my investment management activities that may not be written about in this blog that are equally as important as the things that are written about that materially impact investment results. Neither is this blog to be construed in any way to be an offer to buy or sell securities. To be notified via e-mail when new posts are made, CLICK HERE TO SUBSCRIBE

Resistance Is Not Futile


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Following up yesterday’s post about the strength of the 20 day moving average line as resistance against the stock market moving higher, yesterday I noted that 3429 was the reading for the 20 dma and today we managed to move up to 3428.92 before the market fell back to close below yesterday’s low.

So far, I am sticking with the original reading of this market – that we have a date with the 200 day moving average line around 3100 (its not shown on this graph), or roughly 10% lower than current readings.  But first the 50 day moving average line will act as support and may allow the market to bounce higher.  We have plenty of cash ready to put to work when the market bottoms.

I have been reviewing a number of companies as purchase candidates, but we need to determine if growth companies with little debt and growing earnings will continue to lead the market in spite of their record high P/E ratios, or will deep value companies rotate back into focus, with huge discounts to book value and shareholder friendly dividends take over.

There is no way to know the answer to that question right now, but at some point the high growth companies stock prices will start to follow the path Walmart took as it transitioned from high growth company to mature sustainable growth company:

2020-09-16 2

This graph is the stock price of Walmart from 1980 to today.  You can see the box I drew where the stock price flattened out after the long period of strong growth.  That box represents over 13 years with no increase in stock price!  It took work for Walmart to shift to a sustainable growth mode (it added groceries and became THE shopping destination for a huge swath of the country) and it is now a mature company with a respectable and sustainable growth rate.

Another example?  Microsoft with 15 years of flat stock price:

2020-09-16 3

Looks pretty similar, right?  Microsoft also found a way to shift to a sustainable growth mode (it added cloud computing and is the go to source for companies who want to outsource their data to the cloud, second only to Amazon and its Amazon Web Services subsidiary).

What are the new growth stocks that we can catch on that long trajectory higher to capture their early stock price growth?  What companies  do we own now that we should be selling prior to their settling  into a flat stock price for a decade?   What stocks have had flat stock price performance over the past several years that now have a catalyst to move them to a sustainable growth mode that we should consider adding to portfolios?  Even if we find those high growth stocks and sustainable growth stocks, will they be the stock price performance leaders like they have been the past few years or will the deep value stocks take the lead as they have in many prior time periods?

These are all questions I am working on so that clients have the best possible holdings in their portfolios.  The market will tell us what is going to be the top performer and what is going to lag; it’s our job to listen and act accordingly.  Just keep checking here on the blog to find out what we are doing in this crazy market and why!


PS – thanks to reader Nan for the heads up on adding some Patsy Cline to our music video presentation – very good call!

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