Stocks Drop 4 Weeks In A Row; Mired In Losing Streak?
“Pain is temporary. It may last a minute, or an hour, or a day, or a year, but eventually it will subside and something else will take its place. If I quit, however, it lasts forever. That surrender, even the smallest act of giving up, stays with me. So when I feel like quitting, I ask myself, which would I rather live with?” ― Lance Armstrong
When you are in high school, students must take physical education. As part of this course, teachers usually require some form of running. When you run distances, it helps your cardiovascular system. You may be required to run a half mile, or a mile, or a certain number of laps around a track, or maybe circling a large field. In many cases, it is timed. There are many people in the world who enjoy this form of exercise, and there are others who detest it. If you are trying to do the best you can and get the quickest time possible, sprinting at the finish is advisable.
When you do push yourself, there is going to be physical pain involved. Mr. Armstrong, a controversial ex athlete who won quite a few Tours de France, was once considered the greatest cyclist of all time. While his steroid use may minimize his stature, the observation about the temporary nature of physical pain versus quitting seems quite fitting, especially if we apply it to our neck of the woods, which is the investment universe.
As we all know, things constantly change. The outlook for specific industries, and the companies that populate them, is dynamic. For example, in the last decade, sports betting was viewed as a staid area of the gambling market. Up until two years ago, illegal gambling had a huge share of the sports betting market. Once the Supreme Court allowed sports betting to be determined by the individual states, it changed the perspective of investors towards this endeavor. Mobile sports betting now dominates the sports betting landscape, and there is a great deal of excitement about its future prospects. A great deal of capital has been raised to compete for customers in the states which allow sports betting. Not every company will be successful, but the industry's future is seen as bright.
Conversely, a few years ago, we saw a similar circumstance in the marijuana industry, both in medical and recreational marijuana. Canadian companies dominated the conversation because the government in Canada passed countrywide approval. Investors poured their dollars into stocks which they thought would have plenty of success. If one looks at the current status of the marijuana companies, their valuations have been dramatically reduced. Is there an opportunity now? Maybe, maybe not. Investing is a long slog, and not everything you allocate capital to is going to have success. Interestingly, because things constantly change, segments which are out of favor may offer the most opportunity, especially when they are absolutely detested. Like the person who suffers pain when they go on a run, it may very well be the case the condition is temporary. The difference is that with investing, ultimately, if there is a rebound, you may be able to benefit for quite a long time.
In the markets this week, it was a relatively light week on the earnings front. The headline reports came from Nike, Costco, Darden Restaurants, and KB Homes. All exceeded market expectations. Two areas of the market to consider, especially if you are looking for places which should offer stability for the near future, are housing and pharmaceuticals. The country suffers from a dearth of available housing, both in new and existing homes. The lack of supply and available financing at rock bottom rates bode well for those seeking calm and less volatile areas of the market. With pharmaceuticals, it is an industry which has great profitability metrics and demand which is constant. At a time when most investors are gearing up for a tough few months, these are areas to consider.
Disclaimer: Thanks for reading the blog this week and if you have any questions or comments, please email me at information@y-hc.com. Y H & C Investments, Yale Bock, and the family of Yale Bock ...
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