The Dow is 50 points shy of breaching 30,000. When I entered the business, the Dow was crossing 10,000 for the first time and they handed out hats on the floor of the exchange. Hats! The mood was euphoric, the dot com bubble was raging and people couldn’t get enough stocks. It took us 12 years to truly say goodbye to Dow 10,000 for good. When we crossed 20,000 in 2016, many people didn’t believe it was sustainable as it came on the heels of a Trump victory and now that we’re about to cross 30,000, ha, forget it. You can’t talk to most people about stocks as they want nothing to do with the market. Despite the incredible rise in markets this year and over the last 10, the mood towards stocks is one of the most pessimistic I have seen in my career. While all eyes are focused on the lofty tech names, forgetting the countless companies underneath, let me share a few highlights from my vantage point.
Pfizer, the company that recently announced the first potentially viable Covid vaccination, hasn’t seen its stock price advance in more than 20 years, yet has grown their earnings over the past 5 years at 15% and pays nearly a 4% dividend. Ah, probably a hoax I’m sure…pffft.
Verizon, leading the way in the 5G rollout for mobile, is trading around $60 per share. Nearly the same level it was in 2000 or basically stagnant for 20 years. The company boasts 60% gross margins, has seen earnings increase 24% this year and also pays a 4% dividend. Can you hear me now?
While everyone has been focused on big cap tech, there is a widening bull market happening under the surface that so many seem to be missing. At the same time headlines and the media continue to tell you how terrible things are in the world, entrepreneurs just keep chugging right along, attempting to find solutions to the ever-changing landscape of challenges we are navigating.
The Dow will cross 30,000 sometime soon and my guess is it will be the most uncelebrated achievement in the Dow’s history and that makes me smile, as it confirms for me once again just how little enthusiasm is out there for this market and for stocks. When that changes, and folks are clamoring to get in and ‘play catch up’ we’ll have to step up and take notice, until then we’ll continue to hold steady and enjoy the run.
On another note, Tesla is being added to the S&P 500 and making for some interesting subject matter around the dinner table at the Tatro household. Over the years, my boys have held Tesla shares and they have become quite familiar with the company. They’re not too pleased with their financial adviser for booking profits rather than letting shares run! Hopefully they don’t go looking elsewhere.
The subject matter at the table however is the significance of the Tesla index add and confirmation of why the index will always go higher over the longer term. You see, while different companies come and go, the index will always be rebalanced to remove the bad and replace them with the good. People seem to miss this incredibly important fact. In 1893, the Dow began with 12 stocks. Not a single one is in the Dow today, yet we’re approaching 30,000. How is this possible? It’s quite simple really, over the years as companies have come and gone, they are removed and replaced within the Dow just as they are in the S&P. This ensures that over time, only the best will be added and will basically ensure a higher index value over a long enough time period. If, in the future, space exploration is the predominant industry, you can rest assured industry players will find their way into the S&P 500. We once again educated my boys on just how important it is to buy solid index funds and let them work. I think they’re catching on.
Finally, it’s that time of year again when we’ll be pursuing portfolio rebalancing into year-end. It’s already been a wild ride in this volatile year, however we want to make sure we capitalize on any tax anomalies into year-end, so we’ll be actively looking to make some changes to tighten up portfolios and maximize tax strategies when and where necessary. It’s been a great year and we want to make sure we’re fully prepared for 2021. If you have any questions, please don’t hesitate to let us know.
Yesterday marked the first day for our newest employee and Junior Adviser, Logan Gilland. Earlier in the year we added Abby McKay to work directly with Linda. She has done a fantastic job and continues to amaze me daily. Prior to joining our firm, Logan was a student of mine at UK and, as one of the best and brightest, spent his post-college days at GE Aviation before realizing he would much prefer working directly with individuals and seeing the fruit of his labor first hand. After an exhaustive search for someone to help me directly, I can’t tell you how pleased I am to have found Logan and that he accepted a position within Joule. This rounds out our team and I couldn’t be more excited for what the future holds.
At the time of this writing certain portfolio strategies held positions in PFE and VZ