The honest answer is that you never know. You can build what you think is the best strategy and it doesn't work or it can be executed perfectly and you get the results that you were expecting. This is where it pays to know your strategy and have levers to pull if the markets start going one way or another.
We address this issue at DWCM by having a core set of holdings that we typically invest around. We may have a higher allocation to certain positions at one point and lower at another. It really depends upon what our long-term strategy is and then making decisions to deal with the short-term noise.
As we have stated all year we are believers in the following:
- Agriculture companies
- Dividend paying companies with solid balance sheets
- Tech companies that can grow profitably
As far as our outlook on the economy, we highlight our ideas and beliefs in our soon to be released quarterly newsletter. For example, we identified the "wall of worry" that surrounds us right now which includes the following:
- Fiscal Cliff
- US Presidential Election
- Slowing Earnings Growth
We also highlight the fact that the European Union is in recession and faces an extreme debt crisis while China is dealing with a slowing economy. With such an integrated global economy you should not expect the US not to feel any of this pain.
So what to do?
We are managing the DWCM Fund and advising clients to hold onto those core long-term holdings and add to those positions when pullbacks arise. Clients should be pulling back on speculative names and bolstering their cash reserve positions which we advise having 30% to 50% sitting on the sidelines depending upon your own unique risk/reward profile.
We have stated previously that you shouldn't be all in the market just like you shouldn't be all out of the market. There is a balance to this risk/reward allocation and it really depends upon your investment strategies and the goals that you are trying to accomplish.
The DWCM Fund has now been down for three straight weeks. While no one likes to be on a losing streak, we believe that we are well positioned to ride out this correction and see what opportunities may lie ahead. Our cash position, near 43%, is positioned relatively where we would like it, while our short position in the home builder stock was the big winner this week, up some 8% vs. the previous week.
The Week Ahead
Earning seasons really begins in earnest this week while many quarterly reports begin to roll in. There is a decent amount of economic data that will make its way to the markets with housing being the leading indicator. It could be a very volatile ride for our short home builder position.
- Mon - Retail Sales, Empire State Mfg Survey, Business Inventories
- Tue - Consumer Price Index, Redbook, Industrial Production, Housing Market Index
- Wed - Housing Starts
- Thu - Jobless Claims, Philadelphia Fed Survey, Leading Indicators
- Fri - Existing Home Sales
Have a great week!
DreamWorks Capital Management
If you are currently trying to develop your own investment plan or are seeking the help of a professional investment advisor we urge you to give us the opportunity to show you what DWCM can do for you. No matter what stage in life you are currently at, DWCM can help you plan for your ever changing needs.
DWCM can you help you with any of the steps in your wealth management journey including;
- Addressing emergency fund needs
- Developing a retirement plan
- Sending a child to college
- Looking at various investment options
- Determining how to involve philanthropic passions as apart of your planning process
With our "SMART Principles", we can help you develop your unique goals and create a focused customized plan to achieve your financial and lifestyle goals.
Contact us at pfenner@dwcmllc.com.
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