Trends Watch: October 18, 2018
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with David Sharek, Stock Portfolio Manager, Shareks Stock Portfolios.
What is your outlook for alternatives?
I'm a fan of alternative assets going forward as the market has had two good years with Trump as President. S&P 500 returns are around 6% long-term and the market's been doing better than that, thus there could be a return to the norm. With valuations higher, there are quite a few overvalued stocks thus this is a better time to go short than two years ago. I'm hesitant on cryptocurrencies for a few reasons. First, they don't "have babies." What I mean is if you have a retail stock, like kid toy store Five Below (FIVE) or close-out store Ollie's Bargain Basement (OLLI) for instance, the company can use profits from current locations to double the number of stores over time. Theoretically, that would double profits in three-to-five years, and perhaps the stock would follow suit. Cryptocurrencies don't multiply naturally like that. Second, there is still risk your coins could get stolen at a crypto-broker. Third, there needs to be a trusted name backing the security. Satoshi Nakamoto is the name of the unknown person who created Bitcoin. Who is this person? We don't know. So if he (they) were that intelligent to create this in the first place, could they also take it all away in an instant? Poof, gone. I would feel secure if a Goldman Sachs or JP Morgan started a coin.
What is your outlook for the economy?
The Trump Train is rolling down the tracks. As long as the economy is good the stock market will fare well. All dips should be bought unless there's a recession coming. Two of the main causes of a recession are high oil prices (which hurt most company profits) and too many interest rate hikes.
What keeps you up at night?
I sleep pretty well. I don't get caught up in all the market behavior like I used to, but instead just try to own (what I believe are) the best stocks and over time these can hopefully double portfolios every five years or so.
A few years back my growth portfolio had 15-20 growth stocks in it -- and when the market got volatile the accounts would fluctuate. Sometimes a lot. So to have more piece of mind I added some core stocks that maybe don't grow as fast but provide more stability. I basically sacrificed returns for stability, and now hold around 40 stocks in my growth portfolio.
Now I get most upset when I don't buy a stock I was researching and it doubles or triples in price over a short period, say 2-3 years (which happens often). Then I'm trying to wait for it to come down a bit so I can get in, and get stressed when it continues higher without me in it.