This Last Week of July 2022 Thoughts: Think "Companies" not "Stocks."
Updated: Sep 23, 2022
There are companies that touch your everyday life: they are household names and we
understand how they make money. They are not going to disappear anytime soon.
Think “Companies”…not “Stocks”
We are all paying more for everyday items and shelves are emptier than I’ve ever seen,
but now is the time to look at smart buys for your portfolio. Magnifi and Ethos are two of
the pieces of software I’ve invested in this year and it has been worth the learning curve.
We can see EVERY company in EVERY fund we are considering: we can screen out
Meta (Facebook); we can verify that Microsoft is not in every portfolio; we can buy
dividend paying stocks so we are “paid to wait,” until stock prices to go up.
Here are 11 areas where you might say, “Yes, costs are rising: I can feel that pain in my
wallet” but these sectors might be able to “take it.”
1. Automobiles. Visit a new car dealership: you might be surprised. They are out of cars!
2. Health insurance. Health-care costs, and premiums, have risen faster than inflation for
years. Owing health care companies lets you own a provider.
3. Brand name groceries. Even though prices are rising, buying high quality, brand
names means that the “Whole Foods visit” costs more, but mealtime makes it worth it.
4. Warehouse stores. The last time you went to Costco or Target, did you have difficulty
finding parking? Food and household items have not gone out of style.
5. Power utilities. Utilities are regulated: let’s see what your power company pays.
6. Cable companies. Cable companies have gone into the content production and phone
service business: the monthly subscriptions go up every year. Make some of that back!
7. Pharmaceuticals. Turn on your TV: who are the advertisers? Drug companies come to
mind. There are plenty of “ask your doctor about” ads.
8. Wireless providers. Everyone has a cellphone and the service to keep them going
isn’t cheap: expand your thinking from “phone company” to wireless providers.
9. Gasoline. People will buy gas as long as internal combustion engines are produced.
10. Credit card companies. You know that banks issue credit cards and charge a lot.
You also know what they pay us on money fund balances. Not a lot.
11. Logistics companies. It used to be mail order meant long waits but today it could be
two days for delivery. Buying online and “free shipping’' is the new normal.
Read more here, about the market rally this week! The Fed votes to crush inflation with higher rates: the market rallies.
Why does this Matter to you? Stair steps, rock drops and elevator up! Each cycle is different. Goal? 3.5%
Backed by the full faith and credit of the U.S. Government, both the dollar and our monetary policy is managed by the Federal Reserve: they can print as many dollars as they need to keep our economy humming. Look above at rates we’ve had for a decade! Conservative investors earned almost 0% and had to buy stocks…taking the higher risk…just to earn a higher yield. Covid stalled the last round of rate increases, and Wall Street counted on the Fed to make money: companies with no earnings came to market. Investors kept buying, all the way up, but now the Fed is reducing the debt that had been built up.
Treasury bond auctions happen every Monday and foreign investors buy up whatever comes to the auction block but here is the rub. If there is light turnout, foreign investors can hold off and force rates higher, which increases what we own on current debt…leaving us with higher debt payments. Why does this matter to you? The FED began raising the Fed Fund rate earlier this year but other countries have just started their round if higher rates. The dollar is at its strongest level in years: great if you are traveling abroad, but not good for US companies doing business overseas as they have to convert sales revenue back to the dollar. IBM reported the strong dollar could reduce its revenues by $3.5 billion this year; Johnson & Johnson could lose $4 billion in sale and Netflix said its sales were reduce by $339 million. The strong dollar does work both ways, though: UK luxury goods maker Burberry said this month that the strong dollar will add
$200 million to its revenue this year. This might be the time to increase our exposure to international stocks. Read, or listen to, this MarketWatch article. Why the Dollar Matters to YOU!!
Required Disclosures: Always read the fine print! This content reflects the opinions of Julie Skye and is subject to change without notice and is informational and entertainment purposes. It is not a recommendation regarding the purchase or sale of any security. There is no guarantee that any statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Securities investing involves risk, including the potential for loss of principal. There is no assurance any investment plan or strategy will be successful.
Julie is an Investment Advisor Representative of Sustainable Advisors Alliance, LLC (SAA, LLC): Advisory services are provided by SAA, LLC.
Registration with the SEC does not imply a certain level of skill or training.