by Leif Eriksen
The third quarter was a relatively quiet quarter for me. Most of my positions have remained unchanged and both of my models continue to hold cash. I did add three new names which have been on my watch list for some time – Coach (COH), Deckers Outdoors (DECK), and Starbucks (SBUX).
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In my opinion, Deckers and Coach had been oversold and are great brands and Starbucks is on a trajectory to becoming a global consumer products company as opposed to just a seller of pricey coffee from its own storefronts.
In addition, I added a small position in the ProShares UltraShort Lehman 20-Plus Year Treasury Fund (TBT) to the Performance with Protection model and trimmed my positions in Apple (AAPL) and ProShares UltraShort Euro (EUO).
My view of the markets has not changed. I believe we’re in a period of time where informed stock selection is the name of the game. Attempting to gauge the mood of the market and its short term trajectory is a fool’s errand – or so it appears to me.
I’m an investor and continue to focus on companies which I feel will outperform the market in the long run because they are in a good business and are well run. Easier said than done so it’s important to have both a strong grasp of macro trends and an understanding of how a particular company/brand will fare in that environment.
I’m a long term investor but I’m not a “buy and damn the torpedoes” investor. I continue to monitor the names I own for changes in direction and strategy. I continue to hold some cash in each model. And I continue to monitor market conditions for signs that a bear market (not simply a correction) is on the horizon. I want to protect capital because it’s my capital even if it means sacrificing some near term returns.
I’m not concerned about a market meltdown in the near term because there is still too much fear, uncertainty, and doubt out there. (Caveat: I don’t own a crystal ball.) I don’t believe the outcome of the election will have a major impact on the market primarily because the government’s hands are tied by its own past profligacy (both parties).
I am a bit concerned about the “fiscal cliff” but I suspect there is too much on the line for the two parties to allow us to go over it. So, I fully expect the market to continue to muddle along, reacting to each bit of news – both good and bad – as if the world is going to change overnight. And I will continue to look for companies which will prosper in both a slow growth and – we can only hope – a more robust growth global economy.
The investments discussed are held in client accounts as of September 30, 2012. These investments may or may not be currently held in client accounts.The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or that investment decisions we make in the future will be profitable.
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