Apple continued its slide lower down another 3.9% this week alone. For the year it is down just over 6%. This has definitely impacted our performance with the TAMMA fund as Apple is our largest holding representing about 5.1% of our total portfolio value. This can largely sum up our under performance thus far this year but we are not alone. The strong rally this month has caught many fund managers off guard and the questions now becomes will there be a pullback and when?
The railroad companies CSX and Norfolk Southern both report earning after the close on Tuesday this week. The rails can be a good indicator of the overall health of the economy. We have had these two names on our watchlist for sometime now just waiting for the right entry point.
Living in Detroit there has been a buzz about the city surrounding the international auto show this week. As noted there were over 50 new vehicles launches and while some were just cosmetic in nature other vehicles received a complete overhaul. So far traffic is up for all of the shows events including opening day to the public which occurred on Saturday. Some estimates have total vehicle volumes over 15M units this year which would put us back on pace to where we were pre-Great Recession. The big difference this time around is the automakers have right sized their businesses to really take advantage of this increase in demand. Currently we own Ford in the portfolio have have previously owned BMW.
Things in Washington have were once again on the quiet side this week. It appears as though politicians are preparing to kick the debt ceiling and deficit cuts down the road a few more months. Although it shouldn't come to a surprise for any of us, it is baffling on how this group of people cannot come together to do what is right for the country. When do we ever see clarity again?
Credit the equity markets and their resilient nature for having the ability to look beyond this set of current uncertainties and rally strong as they have done basically all month long. Sooner or later fund managers are likely to capitulate and start buying in order to not be left behind which could in the short term drive markets even higher. It takes a balanced approach, one that we are looking at every day in order to decide how to enter the markets and at what price level on specific positions.
You can never predict the markets so you use the best data available to drive decisions that affect when and what to buy. Having conviction in whatever strategy you choose is a must have requirement which we certainly have at TAMMA. However, you have to have a level of flexibility to change with market conditions A bend but don't break mentality if you will.
As we noted the portfolio trailed the benchmarks this week and we are working on various ways we can enter this market with some degree of confidence and most importantly a margin of safety.
The Week Ahead
There is a rich amount of housing and manufacturing data of this week. Markets are closed on for the Martin Luther King holiday. Monday is also the public Presidential swearing in ceremony. The President was actually sworn in on Sunday the 20th.
Look for earnings reports to come fast and furious this week. In addition to CSX and NSC, we will be watching the following names; F5, McDonald's, and Microsoft.
- Mon - Markets closed
- Tue - Chicago Fed National Activity Index, Existing Home Sales, Richmond Fed Manufacturing Index
- Wed - FHFA House Price Index
- Thu - Jobless Claims, PMI Manufacturing Index Flash, Leading Indicators, Kansas City Fed Manufacturing Index
- Fri - New Home Sales
Have a great week!
TAMMA Capital Management
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