Closed Enough for Government Work

McClure Investment Management, LLC,
3rd Q Market Commentary

With the government shutdown in our present and the debt ceiling showdown in our immediate future we’re experiencing one of the most exciting Octobers on record.  But with all the volatility of the past two weeks the S&P 500 has yet to make a sustained move away, up or down, from its current level of 1,700.

So, what do I do now?

With the broader market reasonably valued, we are more comfortable than ever holding individual stocks instead of broadly based funds.  The Fed isn’t pulling back on stimulus (QE3) just yet but any further market advances will probably be very selective. In fact you could say this is a time where being selective will pay dividends. (Get it?)  Rather than own all stocks or no stocks, I’m happy holding our current portfolio of 19 well-run, profitable companies rather than a wide cross section of the economy.

Hasta la vista

In early September we bid a fond (maybe not) farewell to Dell.  The stock had been stuck around the $13.85 buyout price Michael Dell’s group had proposed and there didn’t seem to be any point waiting for further developments.  Following my lead, Carl Icahn sold his stake a few days later.

Welcome to the family

We added shares of DaVita HealthCare Partners (DVA) in September.  DaVita is the 2nd largest provider of kidney dialysis services in the U.S. with a 30% market share.  The largest outside shareholder is Warren Buffett with a 14% stake.  The long-term picture on this company is quite favorable and we hope to hold on to it for years.

New Federal Reserve Chair(wo)man?

And speaking of Warren Buffett, his stated wish to have Ben Bernanke continue on as Chair of the Fed (“Why take your .400 hitter out of the line-up in the 7th inning?”) will apparently not come true.  President Obama has nominated Janet Yellen to be the first woman chair in the Fed’s 100-year history.  She’ll likely continue to make Bernanke’s low interest rate policy a focal part of her agenda as she’s been a vocal supporter of QE1, QE2 and QE3.

My concern with Yellen’s nomination is her allegiance to Keynesian economics.  In a nutshell, Keynesians feel government stimulus (spending) is the most effective tool in supporting the economy.  While that stimulus was a necessity over the last few years, it really shouldn’t be a part of the long-term policy at the Fed.  You can read a somewhat strident comparison of Bernanke vs. Yellen from the Wall Street Journal here.

Do You Tweet?

Like Facebook, Zynga, Groupon, LinkedIn and many of its social media brethren, Twitter has filed to go public.  Like many of the aforementioned, Twitter has never made a profit.  Ever.  Regardless, Wall Street seems to think there will be buyers for the stock valuing it between $10 and $15 billion.  Until the company has a price that is at least in some remote way related to its earnings, revenue and cash flow, I won’t even consider looking at it.  However, I recently set up a Twitter account to share both brief and extended market comments on a more regular basis.  So follow us @McClure_Invest

Miscellaneous

 

 

As always, I thank you for your business, your patience, your referrals, and, most of all, your trust in me to manage you’re your hard earned wealth.

Thank you,

Bob

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