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Under no circumstances should any of the content discussed on this podcast be considered investment advice.
We’re just talking…about your money, your 401k account and the markets!
There are two primary topics to the podcast this week:
1. The John Dorfman column this week.
In this week’s syndicated column (found here), Dorfman discusses his “Balance Sheet Powerhouses.” These are companies that have met certain characteristics, particularly strong balance sheets. Our questions is: does having a strong balance sheet imply good stock performance? We’re skeptical.
After all, Netflix did not make Dorfman’s list, yet the stock did very well in 2010.
Does that make Netflix bad?
There were plenty of well-known names that did make the list…names like Google, Qualcomm and Forest Labs.
Incidentally, should we tell him all three of these stocks under-performed the S&P500 in 2010?
2. The increased volatility seen lately in the market, and what that should mean to us.
We have seen many of the point and figure charts we are following for our clients move straight up, without a break, over the last few months. This makes us a little nervous…but the nervousness keeps us humble. We have a little more cash on the sidelines than others. This level of cash does not terribly concern us. As we mentioned in this week’s email, we have cash because we have taken some money off the table recently (good), having more cash than usual helps reduce “the noise” or volatility in your account (also good), and this cash gives us some buying power when we spot an opportunity (good).
We could really use a pullback on many charts. One of the stronger patterns we look for are charts that have gone straight up…like 16, 18 or 20 X’s for example. When these stocks finally reverse into O’s, that is our time to start watching. Many times these strong charts will often return to climbing after a short break. We are looking for these situations right now.
The current volatility seen in February 2011 is actually not a terrible thing — especially for the charts we are following. We need this pull back to correct the over-bought condition we started seeing in January 2011.
We spend a fair amount of time in the podcast discussing how charts move up and down based on information. This information may consist of good information, bad information, rumors and even inside information. Whatever type the information is irrelevant. What decisions people make based on that news (or non-news) is what matters. When you get right down to the brass tacks, price is the ultimate indicator. If a company has a great new product, a great earnings story, great growth story …whatever…people will take action, either buying or selling. So what we want to track is the PRICE. The day-to-day fluctuations get smoothed out with point and figure charts, showing us the bigger picture (the trend). This is what makes Apple a terrific looking chart and Blockbuster Video a terrible looking chart.
The Mullooly Asset Management Podcast can be found below. The Podcast can also be found on iTunes. Go to the iTunes Store and simply search for “mullooly.” Under no circumstances should the information contained in this blog or podcast be considered investment advice
Thank you for listening. We welcome your comments and questions.
Companies mentioned in this podcast:
Forest Labs (FRX)