.png)
Markets Continue Enthusiasm for AI-
Bye Bye Winter, Welcome to Springtime!
Return figures in this section come from the January 30, 2024, edition of the Wall St. Journal. Y H & C Investments may have positions in companies mentioned in this newsletter. It is the responsibility of each investor to research the investments mentioned so they can decide on the appropriateness and suitability of the investments consistent with their risk tolerance, risk constraints, and return objectives)
One of the great things about the world is the changing of the seasons. Currently, North America is transitioning from the cold winter months to the warmer spring and summer period. The planting of flowers, gardens, and yards during the winter is just starting to see some blooms. People who have been bundled up and dealing with dreary cold and bitter weather are starting to peel all those layers off. They actually get to see the sun when they visit a climate where that yellow sphere peeks out from the sky. March Madness is ending, and spring has arrived. It means hoops season is culminating, baseball begins, and spring break is celebrated by Canadians looking to thaw out on the West Coast or Florida. In the financial markets, the first quarter ended, which is usually a period with the most difficult economic results, although that would be the wrong conclusion if you came to it just by looking at the results in the equity markets.
Turning to the madness of the capital markets, from my perspective, if you aren’t blinded by the unlimited potential of artificial intelligence, there are plenty of interesting situations to investigate. Notice I did not say throw down your hard earned capital and back up the truck. Let’s begin with the artificial intelligence enthusiasm. The current market performance continues the movement of capital moving into areas where the growth potential is as far as the eye can see. Similar to the boom of the internet in late 1990 and 2000, housing craze from early 2000 all the way to 2008, the cannabis explosion in whenever, the Miley Cyrus phenomenon, oops, sorry. In the markets, there is always a flavor of the month which captures investors attention. Three years later, well, uh, what was that again? Meanwhile, there are interesting companies with great assets out there that the investment world is essentially taking a bowel movement on. Cheap assets which are good, hmmm, that is where the opportunity always lies in my mind. The key question is are you right in your evaluation of the circumstances?
Another important event of April is everybody’s pleasure and joy, yes, your favorite and mine, tax obligations. The annual rite of passage of paying our ‘fair share’ to the Federal and State governments is on us in a few short weeks. I am sure most readers have been working on being tax efficient all year, so let’s not beat a dead horse. I would note you can still make contributions to your IRA’s, but remember the Roth contribution is not deductible while the traditional IRA is. The limit for 2023 is $6,500 and you can add another thousand to that if you are over 50.
A few noteworthy things I always pay attention to begins with the currency market. In this area, Japan made a big policy shift in that the Bank of Japan changed their official stance from an era of negative interest rates to a target range of 0%-.1%. Positive interest rates isn’t what most people consider an eye opening consideration, but after thirty years of interest rates stuck at or below zero, moving on up is the direction of interest rates in Japan. The currency markets seem unconvinced as the yen continues to weaken, now trading at over 150 yen for one dollar. The yen has typically been a funding currency, meaning investors borrow in yen because of the low interest rate, and invest the capital in some other asset which yields considerably more. Sticking with the currency area, the rumblings out of Europe is the ECB is looking at potentially lowering interest rates starting in June. Hmm, that seems awfully similar to what is happening here in the United States with the Federal Reserve. I wonder if that is a coincidence? Ya think.
Y H & C In March: Seeing Our Holdings Deliver
Over the last month, many of the holdings of Y H & C Investments reported their financial results and updated their activities. I have previously talked about owning companies which are taking actions to force the financial markets to recognize a higher value for the equity of the enterprise. Many are not happy with the stock price, which is probably the case for the vast majority of listed companies, other than the magnificent 7-10. With respect to our holdings, all are reinvesting in the business for growth and/or future improvement in margins. In nearly all the holdings, there have been announcements of stock buybacks and confirmation of the reduction of shares outstanding with the earning release. The amount of the buyback varies, but as a stockholder, unless there is offsetting dilution through the issuance of options or restricted stock units, you will own more of the company as a result of the buybacks. Bernie Sanders, Elizabeth Warren and the left may not like buybacks, but as Buffett says, they are economic illiterates. You want to own more of good companies, and as these companies grow, the value of your equity gains over time. As part of this approach, I often add to positions when the stocks are unloved. Over time it has served clients well and you can expect me to continue this approach. I know, many of you are stunned.
Y H & C Industry & Holdings Update- Monitoring Earnings, Annual Meeting Trip and LD Micro In NY! (YH & C Investments may have positions in companies mentioned in this newsletter. It is the responsibility of each investor to research the investments mentioned so they can decide on the appropriateness and suitability of the investments consistent with their risk tolerance, risk constraints, and return objectives)
Over the last month, I spent a great deal of time reading earnings releases and listening to conference calls of our holdings. It is always interesting to digest the information across the economic landscape to find common themes. One emerging pattern is very much consistent with prior periods. Each industry has its own circumstance. The car and auto area is different from health care. Alternative energy (solar, wind, biofuel, and nuclear) has a different dynamic than oil and gas. Travel is not in the same boat as high end retail. Quick service restaurants offer a set of conditions vastly different versus gaming or sports betting. In general, consumer spending is holding up well, but much of this is buttressed by massive government spending. The private sector is the area to watch for potential weakness.
I traveled to Toronto to attend an annual meeting of a company we have been investing in for a long time. It was well worth the trip and only reinforced the belief that the future remains bright with this holding. Next week I will be traveling to NY for the LD Micro event. Normally it is held in June, but for the first time it is now in New York City. It is run by Chris Lahiji and the LD team always does a great job. I am meeting with quite a few of our existing holdings and a few others I have had on my radar for a while. At the end of the month Planet Microcap is here in Las Vegas and I’m looking forward to that as well. Finally, I have been more active by creating some more investing videos and articles so there are links to those if you have an interest. I appreciate your interest and if you have any questions or comments, please say hello at information@y-hc.com. Thanks for your continued support!
(Y H & C Investments may have positions in companies mentioned in this newsletter. It is the responsibility of each investor to research the investments mentioned so they can decide on the appropriateness and suitability of the investments consistent with their risk tolerance, risk constraints, and return objectives. Past performance is not an indication of future results, and you may lose your principal by investing in stocks.
.png)