Date: March 15, 2024

Successful Investors Do Not Sit On Their Hands

Thursday was a day to punish some bulls. Lots of the sexy and glamorous stuff got hit. My readers weren’t surprised as I have been writing about it for weeks and longer. I have spoken about good portfolio management of pruning and planting, cutting exposure and risk and in favor of the boring, stodgy and unloved. I lost count how many times I have written about booking gains in the high flyers, like Nvidia, Facebook, Marvel, Broadcom, Apple, Microsoft and Google. The same investors who shunned selling any Digitial Equipment in the 1980s, IBM in the 90s, GE and Apple after that are the same one who now say they would never sell any Nvidia (see chart below). That’s just not how successful investors manage portfolios.

What I don’t know is if Nvidia will first correct by going sideways followed by a last gasp rally above $950 or go down from here. If it got to $1000 before any weakness, I think that would be a bell-ringing sell and I would contemplate unloading our entire position. The best thing for the bulls would be some sideways to 10-15% lower over a few months. That would cause me to consider adding to our position.

People ask all the time if they should do anything with their somewhat static 401K allocation in light of my overall view on the markets. First, my belief which is supported by data is that all investors should at least rebalance their 401K, 403b, 401A, 457, etc. accounts on a quarterly basis. Stocks go up and down. So do bonds. Please, restore your allocation to what you originally set it at. X% in equities and X% in bonds.

Aside from that which requires only minimal work, I do believe in tweaking allocations based on intermediate to long-term market views. In late 2021, there was a keen opportunity to reign in on the most aggressive vehicles. In 2022 I pounded the table so often and so hard that a new bull market was beginning in Q4 that I broke my table. That was a golden and some what generational opportunity to increase risk, buy equities, do something. Just don’t sit on your hands through all market cycles.

As always, please feel free to reach out to me to have a conversation about your situation.

Spring is here in New England, at least for now. I have a feeling we will go from the 60s to 40s in short order. It’s also prime time for college basketball and there is no better school in March and April than UCONN. The women decimated the competition in the Big East tourney last weekend at Mohegan Sun. Celebrations like this never, ever get old.

The men’s Big East is taking place right now at MSG in NYC and day two had four straight games which is a lot to watch. UCONN played first and after a very slow start, they rolled over Xavier. Tonight won’t be as easy. It was great fun to have my wife and friends join me. I am still scarred from food and beverage prices at MSG.

On Wednesday we bought SSO. We sold some TSLA, some TUR, some COIN and some levered NDX. On Thursday we bought more levered NDX. We sold PCY and EMB.


Paul Schatz, President, Heritage Capital