• Bluemound Asset Management
    Bluemound Asset Management A Kirk Spano company

A Better Way…

Kirk SpanoAccording to Warren Buffett, the top 2 investing rules are…

Rule No. 1: Never lose money. Rule No. 2: Never forget rule No. 1.  

The most important aspect of financial planning is having an investment approach that protects you from large permanent losses and still gives you an opportunity to make money over the long-term.  I founded Bluemound Asset Management after seeing that most of the sales driven financial industry comes up lacking.

My name is Kirk Spano. I am visible and easy to follow in the media. Please take some time to read about the advice I have given. Then, if you are ready to find a better way to secure your lifestyle and create a legacy, contact me so that we can talk about what is important to you.

Some of the places I’ve been published, syndicated and broadcast… 

Avoiding the Next Crash & Investing in the Next Boom

In January 2012 I told people on MarketWatch not to miss the upside coming in American stocks, especially energy stocks, most of which doubled and tripled within two-and-a-half years. By June of 2014, again on MarketWatch, I told people to sell their oil and gas stocks, most of which were cut in half by December 2014.

Buffett Indicator

Today, I am telling people that the next few years are lining up for some very negative events in parts of the world that will effect your portfolio. In my special report “The Two Most Important Trades You’ll Ever Make — Avoiding the Next Crash & Investing in the Next Boom” I discuss how to protect yourself and how to preserve your lifestyle. 

Request your free report today.

Small Company Stock Investing

Q2 2012

Small Company Stock Investing

This quarter’s letter will be a little shorter as I have been writing quite a bit for MarketWatch of the Wall Street Journal network and Motley Fool.  As clients know, for several (not all) of our investment strategies, I prefer to carry a higher percentage of our asset allocation in small company stocks than what many other advisors do. This is so for one simple reason, in general, smaller companies have historically provided more growth than larger companies. 

There is a perception that investing in smaller companies is more risky than investing in larger companies.  While in the case of start-ups that applies, once a company has reached a certain critical mass, the risk difference mostly disappears.  I point out regularly that companies such as General Electric, Microsoft, Pfizer, AT&T, among other large well known companies have been trading 50% to 70% below their historical share price highs for years now. 

Since 1982, small company stocks have outperformed large company stocks by about 1% per year.  This is a smaller margin of difference than the prior sixty years when small company stocks outperformed larger company stocks by about 2% per year.  Further, over virtually every rolling ten year time frame, smaller company stocks have outperformed larger company stocks.  

As I pointed out above, over the past thirty years the difference between small and large company stock performance has contracted.  Why has this happened?  In my opinion, due to two words, globalization and politics.  During the past three decades, multinational companies have gained primacy among the corporate universe.  This happened as larger companies have often been better equiped to deal with global trade than small companies.  It also occured though because politicians helped unlevel the playing field in favor of the larger companies.  Why would they do this?  One need do more than follow the campaign contribution money. 

It is interesting that at a time when we are inundated by politicians with the fact that small companies are responsible for most hiring, that larger companies have been given more advantages via politics than small companies.  Right now, we are at a cross-roads.  Small companies are already at a disadvantage in the market place versus large companies from the standpoint of regulation.  Will that continue?  It is a coin flip from what I can tell.  While unpopular, the health care reform favors small companies over large companies.  We will see what happens with that.  If small companies continue to get the short end of the regulatory stick, then it might indeed be time to rethink asset allocation strategy.  

From a current investment standpoint, there does appear to be an opportunity for certain small company stocks to outperform.  With less small company competition surviving, those that do survive can make very large returns on their share prices.  The trick of course is finding the survivors.

Small companies that make it past the non-profitable, in danger of failing stage, are those companies which we can look to for winning stocks.  Below is a chart I use to describe what I am looking for.

 

If we can identify a company after it has made it past its “start up” or “birth stage” identified on the left hand side of the “S” chart and invest as it has achieved a measure of stability buoyed by positive business developments, then we have the makings for a fine longer term investment.  Right now, many of those companies are involved with oil shale exploration and production.  I have written extensively about these companies at MarketWatch.com and encourage you to browse those articles which talk about some of our specific holdings.

Now, to be sure, from time to time, the market treats small companies, profitable or not, as potential “failure” candidates.  In those cases, it is up to us to make a decision as to whether or not we agree with the market.  More often than not, if a company is making money, or has been making money, and nothing material to its long-term survival has changed much, then short-term price swings are an opportunity to buy, not sell.

Emotionally, the volatility of small company investing can be disconcerting on a stock by stock basis.  But, with adequate diversification, an overweight in small company stocks offers the greatest growth potential for a long-term investor.

Your looking for long-term growth adviser, 

Kirk Spano

 

This letter contains forward looking statements that may not come true.  Past performance does not guarantee future results.  This letter is intended for informational purposes only, and reflects only my thoughts and opinions in general, and do not constitute individual advice.  Opinions expressed may change without prior notice.

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Find Worthy Causes

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Bluemound will match any donations that clients make to qualifying charities and causes up to 10% of the fees that we bill to a client.

Kirk on MarketWatch

Bluemound Asset Management founder, Kirk Spano, was tabbed “The World’s Next Great Investing Columnist” by MarketWatch.com of the Wall Street Journal network in 2011. He has been published and syndicated extensively, as well as, appeared on television and as a regular radio guest, for his views on the economy and markets. Find Kirk’s list of MarketWatch columns here.

Investment Programs

  • Punch Card Stocks

    Based on Warren Buffett’s idea that if we limit how many companies we invest in, that our portfolio will be less risky and offer better performance.

  • Retirement Income Options

    A flexible income strategy designed to handle any interest rate environment and provide enough growth for a long life.

  • Global Trends ETF

    A low cost exchange traded fund (ETF) strategy for dealing with an uncertain global economy and financial markets. Growth or Retirement Income available.

  • Resource Investor

    An add-on strategy for those seeking to hedge looming scarcity issues for natural resources and inevitable inflation.

  • Mutual Fund Selector

    A flat-fee program for traditional investors who need a better way to manage a mutual fund portfolio with no new commissions.

  • 401(k) Monitor

    Fund selection, contribution strategy and ongoing asset allocation recommendations for your at-work retirement plan. 

  • Annuity Rescue

    Learn how to reduce expenses, increase net returns and avoid the nasty tax surprise awaiting many annuity owners. 

  • Self-directed Investors

    An option for experienced self-directed investors looking to add Kirk Spano’s analysis, investment research, risk management and trading techniques.

Important Updates

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