Vailshire Clients Quarterly Memo Apr 4, 2016

Vailshire Clients Quarterly Memo Apr 4, 2016

2 years ago
Print Friendly

Dear clients of Vailshire-

The first three months of 2016 have once again felt like a rollercoaster ride.

Through mid-February, fear was rampant and the equities market descended into what felt like the land of no return. Bears (pessimists) took to CNBC, newspapers and newsletters around the world and triumphantly explained why this was not just going to be 2008 all over again, it was going to be worse… much worse:

China’s slowing economy will experience a hard landing; the strengthening dollar will crush America’s exports; OPEC is destroying the sensational, but fragile U.S. fracking companies; bankrupt oil exploration and production companies will trigger a wide-spread wave of defaults in the high-yield bond market; a crashing bond market will trigger a massive stock market crash; etc., etc., etc.

I could go on ad nauseam, but you get the picture. Reading those recent predictions may even evoke a little anxiety in you. That’s normal.

But stocks did a funny thing starting in mid-February… they started going up.

You see, a cliche that was popularized in the 1950’s states:

Stocks climb a wall of worries.

And, as it turns out, professional investors still quote this cliche, because it’s generally true.

In yet another small triumph of optimism, the stock market reversed course and finished February about where it started, then made some significant gains in March. All of this happened while the nay-sayers continued to publicly explain why this could not, and would not, happen.

That’s because when stocks climb the proverbial worry wall, they usually do so in stealth mode. Few people, other than the faithful investors who remained steadfastly invested in great companies for the long-haul, even noticed the trend reversal until the results came in at the close of Q1 a few days ago.

More exciting is my hunch that the best biotech stocks on the planet appear to have finally found their bottom (low stock price) after a relatively painful nine months, and are now “acting well.” That is, bad news doesn’t move their share prices down much, while good news gives them a healthy bump to the upside. This results in a technical phenomenon of “higher highs and higher lows,” a bullish indicator for a given stock. Two recent examples of this are Regeneron Pharmaceuticals (NASDAQ: REGN) and Gilead Sciences (NASDAQ: GILD).

Given my enthusiasm for biotech stocks in general, and our resultant heavy weighting of such stocks in the majority of Vailshire client portfolios, this is welcome news indeed. After several lackluster months, brighter days (and years) may be just around the corner.

In conclusion…

Thank you again for your partnership with Vailshire Capital Management. I truly treasure our long-term relationship and the opportunity to make a living helping people live well and invest wisely. Undoubtedly, I have the best job in the world.