We feature an episode from The Razor's Edge for this week's Marketplace Roundtable, featuring Marketplace author Akram's Razor as well as Seeking Alpha's Daniel Shvartsman.
The market has seemed to be on an up and to the right path, but underneath there's been a surprising amount of churn. Large-cap growth stocks especially have moved suddenly on unclear reasoning, moves that seem skittish amidst a bull market. This may just be a sign of late-cycle behavior, or it may be a source of opportunity for the nimbly patient investor. We discuss several tech stocks and provide examples of what is going on.
Topics Covered

2:30 minute mark - Setting the scene on this market

11:15 - The whiplash effect and how this affects relative valuation

13:45 - Is long term investing in trouble?

18:00 - ZOOM, WORK, DBX as long-term examples of this phenomenon

28:30 - Finding the right pair trade... harder in this market?

35:30 - The general risk climate in the market

49:30 - Apple (AAPL) and 5G

54:45 - Given the issues, how are you going to trade for the year?

1:00:30 - Streaming vs. SaaS in terms of valuation

1:09:30 - Will there be a rush back into growth stocks in 2020?


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This week’s episode features a discussion with Michael Gayed, author of the Lead-Lag Report on the Seeking Alpha Marketplace. Michael has been writing on Seeking Alpha since 2007 – a full-cycle contributor, you can say – and has been a regular on CNBC, Real Vision, and other outlets for a long time.
Inflation expectations have bottomed out, argues Gayed, and if reflation is the theme going forward, that means good things for some lagging equity sectors - notably financials (XLF), emerging markets ([[EEM]], [[VWO]]), and commodities like energy (XLE). On the flip side, reflation would mean just the opposite not just for bonds (TLT), but for anything yield sensitive - REITs ([[IYR]],[[VNQ]]) come to mind.
The government needs inflation, says Gayed, to ease the burden of the many trillions in debt it owes. The Federal Reserve needs it as well, he contends, to allow it the room to raise interest rates from still-extreme low levels that it might have the space to ease during the next downturn.
When reading economic tea leaves, sometimes simple is best. The average home contains massive amounts of lumber, says Gayed. Thus lumber prices can be fairly directly connected to expectations for the future of construction and housing. And if you can figure what's going to happen with construction and housing, you've probably got a pretty good idea of what's going to happen with the economy. For the moment, the action in lumber (up big over the last few months) is giving Gayed confidence in his reflation theme.
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Michael Gettings joins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in his The Easy Vix research service.
Gettings developed an algorithm that uses the shape of the VIX futures curve, and the rate of change in the curve, to assess the level of risk in equities markets. The algorithm aims to produce warning signals when risk is emerging, rather than after it has already arrived.
The last four months the model has been giving a clear buy signal. More recently, however, "the metrics are tapering down" to right above the bullish threshold, says Gettings. "If I were to see much more deterioration, I would probably call a sell, but it hasn't happened yet."
Topics Covered

2:15 - Investing strategy

3:30 - How did you develop your algorithm?

9:00 - What do your models tell us about the present day?

12:40 - A lesson you've learned over time

14:45 - January sell single.. how bad and when will it turn around?

16:45 - What scares you about the market?

18:45 - Something that gives you confidence

21:15 - Leveraged ETFs... more or less risk?

25:00 - Portfolio warning signs/stock picks. (GE) (EW)

27:30 - Suggestions for risk protection


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William "Travis" Koldus of KCI Research rejoins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in his The Contrarian research service.
An investor's formative years tend to have an impact on their investing strategy and Koldus is no different in this regard. He "came up in a value background, when most of the well-known investors were value guys." Value has been out of favor for 12 years and counting, and while Koldus has adapted his approach as markets dictate, he still maintains a value bias -- as well as a natural contrarian streak. "It's always more fun to win as the underdog," he says. "I firmly believe there's a lot of contrarian biases that go into the investing market."
Recently, growth and long-duration assets have outperformed, buoyed by the chase for yield that has accompanied record low interest rates. As a contrarian, Koldus maintains an interest "in all the other stuff that haven't gone along with the market." One of these is energy.
"If you look at the S&P 500, energy is near its 20-year low in terms of weighting." The sector has underperformed since 2011 and this became more pronounced starting in 2014. Oil prices bottomed in 2016 but equities have not followed. "There's a lot of major energy producers that are outside the major indices...that are down 70 or 80% the last couple of years."
There is a "rationalization of supply that is going on in the market right now" leaving many energy stocks in a near-perfect position to outperform. "Low prices are the cure for low prices," says Koldus. "If you look below the surface, the realized prices that some of the companies are receiving, particularly for the natural gas liquids...it's forcing a fast rationalization and you seeing that now."
Indexing is not the best way to benefit from this dichotomy. "You want to be an active stock picker," says Koldus. "That's where the real opportunity is." Nobody likes natural gas now. Investors could buy a natural gas ETF, but these rarely contain the leading companies in the index. Koldus discusses his ideas for natural gas companies at length in the back end of the podcast.
Topics Covered

2:00 - Investing strategy

3:15 - In what areas of the market are you seeing biases now?

5:30 - Is energy ripe for outperformance?

7:30 - Divergence between oil prices and energy

12:30 - Key lesson learned in general

19:00 - Lesson learned this past year

20:45 - What's an investor to do now?

26:30 - What to look as turning points for the market

31:00 - Stock picks... index vs. individual stocks (AR) (AM)

40:00 - Environment, natural gas and alternative energy


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Robert Hauver joins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in the Hidden Dividend Stocks Plus service.
Hauver looks for "under-valued, under-covered dividend stocks," mainly by pursuing ideas through macroeconomic or lifestyle trends. This may include "sub sectors or niche industries, such as -- believe it or not -- salmon farming."
Indeed, one of his core portfolio positions is Marine Harvest (OTCPK:MHGVY), the world's biggest salmon farmer. "The ongoing healthy eating trend is a boon to salmon farmers," says Hauver. "We're all going to keep eating more fish. That industry has been expanding for years."
Patience is a virtue for income investors. It is no longer a game of buying and selling for capital gains, but producing income, which requires a different perspective -- and different rules for success.
Topics Covered

2:00 - Investing strategy

3:15 - How do you research investing ideas?

4:00 - Key lesson learned

5:00 - Anything specific you learned this year in the markets?

6:30 - Sector advice, alternative means to gain income from non-dividend paying companies

10:00 - Exciting sectors

13:45 - What scares you about the markets right now?

16:00 - Something that gives you confidence in your approach

17:50 - What data made you look into the salmon thing? (OTCPK:MHGVY)

21:45 - Additional favorite ideas? (BANX)


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Richard Berger joins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in the Engineered Income Investing service. Berger's goal is to produce "a nice, healthy high yield with as low a risk as possible." To do that he first identifies high-quality companies to invest in, such as dividend aristocrats. In the next step he appraises fair value through a variety of tools. Then it's a simple matter of looking at the current market price to determine whether it presents an opportunity to invest. Options strategies provide further boosts to income.
The biggest lesson Berger has learned in his investing career is "it is absolutely impossible for anybody to predict the future." The key is to make sure one is paid for taking on risk and can monitor the holdings on an ongoing basis. "Avoid trying to seek out home runs," he says. "They're few and far between and for every home run you do hit, you'll have far too many failures."
For the immediate future, Berger expects interest rates to remain low, which should help risk assets. Investors should take advantage of this to allocate to securities that offer income and the possibility of capital gains. Berger likes consumer staples such as General Mills (GIS), Clorox (CLX), Procter & Gamble (PG). Some industrials companies should also do well and an options strategy can hedge out a lot of the risk. The options strategy has come in particular use where the merger between Sprint (S) and T-Mobile US (TMUS) merger is concerned. Berger explains this on the podcast.
Topics Covered

2:30 minute mark - Investing strategy

5:15 - What type of screening do you do?

7:45 - Something you've learned from investing

9:15 - What is something you learned over the past year?

12:30 - Prediction for coming months

16:00 - How did you get into investing given your background?

22:15 - Can lower interest rates help oil prices?

26:00 - What sectors do you like right now?

29:30 - Cash secured put strategy


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We spoke with J Mintzmyer about the shipping sector in June, when sentiment was at a low. There's been quite a turn since then, and after another Marine Money event we speak with him about what's changed and where investors' focus is. ESG (Environmental, Social, and Corporate Governance) investing was a major topic, but as a positive driver for the sector in the way that IMO 2020 has been, rather than as a problem. You can read J's full write-up of the conference here.
Topics Covered

2:00 minute mark - The turnaround in shipping sector sentiment and optimism over pending regulations

5:00 - Shipping companies role in innovation

8:00 - Divestment pressure and the Poseidon Principles

14:00 - IMO 2020's impact and what it means for future regulations

20:00 - Consolidation in the sector

25:30 - LNG as a bridge fuel - yea or nay?

29:00 - Names that stood out - Star Bulk Carriers (SBLK), Dorian LPG (LPG), and Scorpio Tankers (STNG)


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Eric Basmajian rejoins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in the EPB Macro Research service.
Basmajian's approach is to separate the economy into two main phases: periods where growth is accelerating versus periods where growth is decelerating. "What's nice about that approach is it's pretty objective," says Eric. "There's no opinion in an acceleration or a deceleration; it's more of a fact-based characterization."
During periods when growth is decelerating, his approach is to adopt a defensive investment posture characterized by an overweight allocation to fixed income and defensive stocks such as utilities, health care, and consumer staples. When growth accelerates, Eric over-allocates to more cyclical, risk-sensitive stocks and away from fixed income.
How to correctly identify the inflection points in the economic cycle? EPB uses a process of leading indicators and then adopts its investment approach based on these metrics. Right now, "the market is starting to try to shift to a stage of acceleration," marked by an outperformance of cyclical assets.
But the leading indicators do not corroborate this sentiment. "We still have an industrial slowdown," which carries its own sets of risks, specifically employment. Here, leading indicators "are actually moving to the lowest growth rate since 2009." The loss of jobs, particularly in manufacturing, is preventing EPB from assigning the "all clear" signal for buying risk assets.
To navigate these risks, investors should allocate to the short-end of the yield curve. There are several short-term Treasury ETFs that can accomplish this. Industrial and material stocks should best be avoided, as should shares of cyclical companies.
Contents:

2:15 - Discuss your approach to investing

4:00 - What's our status in the current cycle?

6:45 - What about the argument that manufacturing is not as important anymore?

9:45 - Is there any hope for a resurgence in manufacturing?

11:30 - Important leading indicators

17:00 - Outlook for interest rates and global growth

24:15 - Concerns about the market/portfolio

29:45 - Recommended investments


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Joe Albano rejoins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in his Tech Cache service.
Albano's strategy is a hybrid of fundamental and technical methods. He focuses mostly on technology stocks, an industry he knows well from his life pre-Seeking Alpha. Albano has a university degree in computer and electrical engineering but says he is mostly self-taught when it comes to understanding chips and software.
Favorite ideas include Nvidia (NVDA) and other semiconductors, as well as Snapchat (SNAP).
Topics Covered

2:15 - Investing strategy

5:30 - What did you do before you started writing for SA?

7:15 - How did you get into investing?

9:00 - Key lesson learned

10:00 - Something new learned this year

11:45 - Technology forecast

14:00 - AI discussion

16:30 - Something that worrisome about the market right now

17:45 - What give you confidence in your approach?

19:00 - View on GoPro (GPRO)

20:15 - Favorite ideas - Nvidia (NVDA) and Snap Inc. (SNAP)


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Michael Wiggins de Oliveira rejoins the Marketplace Roundtable Podcast to discuss his investing experience as reflected in his Deep Value Returns service.
As the name of his research service suggests, Wiggins de Oliveira specializes in deep value, focusing on companies that generate strong free cash flow. His model is Warren Buffett's run from 1956 to 1969 when Buffett generated 30% annual returns for his partnership. The idea is to buy companies that are out of favor and cheap.
This is difficult to accomplish today when most equity markets are richly valued. This requires investors to even more selective than usual. It is important to scrutinize a company's balance sheet carefully and think about the business' long term prospects. "You need to know that the business itself, the enterprise, should have a huge staying power, three, five, 10 years down the road," Wiggins de Oliveira says.
The boom in passive investing funds is one item of concern at present. The result of the proliferation of passive funds is that a lot of companies' shares get purchased by virtue of inclusion in an ETF or index, and not because of the underlying value of its business. "At some point when this bubble pops and a lot of retail investors come out of passive funds it's going to be a difficult environment with mass selling," Wiggins de Oliveira says. While passive funds are certainly important in many ways, "I'm not sure retail investors are going to be able to withstand the downturn when it comes. And it will come."
For his part, Wiggins de Oliveira, has "stuck to my guns" and doing his utmost to be very careful with capital deployment. Even cheap value stocks can go down in price but at some point they do hit a bottom. 
Topics Covered
2:00 minute mark - Investing strategy

3:45 - Important lesson learned about investing

7:00 - View of the current market and outlook

11:00 - Are there many companies that don't pay dividends and also don't repurchase shares?

14:45 - Concerns about the market/portfolio

18:00 - What gives you confidence in your approach?

21:30 - Favorite ideas (BBBY) (IPI)


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