NASDAQ Breaks 6K As 1st French Election Results Bolster Markets

Intellectuals solve problems. Geniuses prevent them. -Albert Einstein

When you are an active money manager, it is probable you own the equities of individual companies. During quarterly reporting periods, it is mandatory you make yourself familiar with what takes place on the conference calls for the entities your organization owns. Also, many companies frequently make presentations at investment conferences which detail the future plans of the respective enterprise. These are also events where you get a treasure trove of useful information.

In both of these situations, management teams typically will get a softball question around the lines of they think their stock is attractive. What executive doesn’t right, I mean their stock is always a buy. Taking it to an extreme, if every stock is always undervalued for some reason, how does one separate the different levels of attractiveness between the stocks you are looking at? In essence, you are trying to separate, shall we say, gold from fool’s gold, you being the fool.

One of the most discouraging things you can have happen is to invest in a company you believe in because of a fabulous sales pitch by a slick CEO, only to find out six months later the business is in the toilet with no prospects for draino. Not only is it disheartening, it can cost you a lot of money. Lovely. Anyway, the best companies earn their returns either through operational execution, or some kind of structural transaction which the market approves of, maybe a spin off, buying another company, a big buyback, or a merger.

Investors look at what is taking place and not only believe in the existing results, but how the future will look much brighter. If what you own does not have these elements, usually the market is not interested, and it probably shouldn’t be. Mr. Einstein’s quote is applicable because the best management teams find ways to be intellectuals, whereas many investors are more interested in being geniuses.

It was a very eventful week in the market as it began with the results from the first French election improving market sentiment. In error last week, I referred to Marine Le Pen as left wing, when her party, the National Front, is extreme right. In fact, her father was an extremist, especially stringent, and Mrs. Le Pen has used similar language, but recently has softened her approach. I know, hard to believe, especially when she is right on verge of the French presidency. The reason why this is important to markets is because Le Pen believes in getting out of the European Union, essentially wiping out the euro currency.

As most investment banks and analysts believe the first election results are quite promising for Mr. Macron, the euro currency soared against the dollar, and risk on carried the day early in the week. The middle and latter portions of the week were all about earnings reports as Caterpillar (NYSE:CAT), McDonald's (NYSE:MCD), Comcast (NASDAQ:CMCSA), Google (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), and Exxon (NYSE:XOM) all reported results which were in excess of estimates. The most significant of these was Caterpillar because it has long disappointed and is perhaps the biggest harbinger of the commodity complex fortunes. With that area in better shape, the attitude towards owning equities became much more constructive. Next week, big oil and the media complex will fess up, along with plenty of others. Stay tuned.

Speaking of big oil, last week Seeking Alpha published an interview by yours truly about my thoughts on a specific company I am high on. Let’s be clear, this particular company has been a poor performer for a long time, but I hold it in high regard. I would imagine many readers are self directed invesors, so I should warn you, your risk tolerance and time horizon is far different that mine or the clients who I invest for Right now, this management team and company is regarded more as genius than intellectual, but my feeling is that will change.

One of the drawbacks of participating in these kind of interviews are the disparaging remarks by readers who don’t take the time to look at the analysis. If the analysis is substandard, I certainly welcome a different conclusion, it is what makes markets. I have never mentioned these articles in prior blogs, but I thought readers (and my investors) might be interested in the kind of research I do when coming up with investment ideas. If you have any thoughts about the interview, just email me. Be gentle as I am trying to be classified an intellectual.

Y H & C Investments, Yale Bock, and the family of Yale Bock own positions in securities mentioned in the blog post. Investing in stocks can lead to the complete loss of your capital. As always, on any company mentioned here, past performance is not a guarantee of future returns. Investing involves risk of losses on invested capital. One should research any investment and make sure it is suitable with your objectives, risk tolerance, risk profile liquidity considerations, tax situation, and anything else pertinent to your financial situation. Also, the CFA credential in no way implies investment returns will be superior for any charter holder.