Not So High On Skyworks (SWKS)

There’s an elephant in the room, so I’m just going to talk about it.

The market has been pretty wild lately. The S&P has fallen 1.66% since our last weekly nuggets two weeks ago (last week was a monthly nugget), with two daily drops in excess of 2%, but that overall decline is being erased today (Tuesday) as I write this. (Of course, by the time I finished writing, the Tuesday gains had all been given back!)

I woke up to a New York Times news alert and lead story Monday, “Wall St. Ignored Signs of Trouble for Months. Now It Sees Risks Everywhere.” Trade wars, the Fed, new Trump allegations, the Huawei CFO arrest, the business cycle, Oh My! If there were one piece that tried to pull in as many narratives as possible to explain the recent volatility, this was it. (I linked to it, but I don’t actually recommend reading it.)

These factors may or may not be causal, so when journalists start doing this, I call it “Story Time.” Actually, I got this from Kaiser Fung, a data scientist. It’s when people shift from an evidence-based examination of facts to a speculative explanation. It’s human nature to want to understand things, but we have to be careful about how we extrapolate from data.

Listen, I’m not denying that Trump’s comments casting doubt on having reached a China trade deal probably caused at least one of the bad days. But let’s not work ourselves into a lather by overly reading into the news cycle and convincing ourselves the market is set for a tumble. Or a rally. Or whatever. The market will do what it will, and we fundamental investors will do what we do: find great companies at great values.

Prices are off their highs, and for some companies, by a lot (NFLX and AAPL, I’m looking at you). There are great buys in this market. (Not necessarily these two, of course.) The market is still overall expensive, though, so don’t buy just anything.

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Disclosure: I hold no position in SWKS.

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