Thoughts
on the Direction of the Market
There
is evidence that a rising tide lifts all boats ... but does this
apply in today's market? Tobias Carlisle's blog (see below) has a fascinating piece by
Vitaliy Katsenelson which, among other things, would suggest not to
invest in broad market indices. Here is a synopsis of Katsenelson's
thesis.
I share his view; however, I do not think that the generalized buy and sell stance applies to all sectors. Clearly, the in/out approach is quite appropriate for the mining sector and other cyclical industries. On the basis of my personal experience, I do not find that his approach is all that profitable for companies such as the North West Company which enjoy a competitive moat and supply markets where demand does not change all that appreciably over time.
The
man's work is well worth reading. Among other things, he has penned
The
Little Book of Sideways Markets.
It is on my reading list. When I first encountered Katsenelson's work several years ago, I was a bit sceptical about his thesis, but I have
changed my view over the past year. As a result, I have pared down
the portfolio somewhat and have increasingly favoured dividend-paying
stocks. Although I have invested in a few smaller, riskier
propositions recently, I have limited my stakes and have made an
effort to reduce the element of risk by buying only those companies with sound financials and good management.
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