Last Friday, the newsletter from the Wall Street Journal hit my inbox. It immediately raised my attention as the core topic read Why This Isn’t a ‘Stock Picker’s Market’. Being a passionate stock picker myself, having little left for both, mainstream stocks and passive investing, I cannot let this statement left untouched for obvious reasons.
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I must admit I am surprised how angry people can become when their widows and orphans stocks, mainly consumer staples with reliable dividends, are attacked. It is no secret that I‘ve been writing and commenting negatively about them for some time. And I was right in most cases, as these “safe bets“, which according to the fan base belong in every defensive portfolio, have performed very poorly. I stick to my view that the dividends won’t be safe over time. Once and for all, I am now unveiling why my pessimism likely is warranted.
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This question pops up frequently. Some people ask it more often, others less so. The ongoing bull market started in 2009 and was only briefly interrupted a few times. Every dip gets bought, and on we go. We haven’t seen a recession with an enduring and nasty bear market. Many investors nowadays do not even know what that is – the last one is simply too far away. This Weekly is not about market timing, but about bringing some thoughts in order, cleaning up with a few misbeliefs, and challenging the composition of one’s stock portfolio.
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It is no secret that AI as a topic, its various applications, and in consequence stocks related to AI are receiving much attention. More and more challenge the sustainability of this rapid rise over the last few years, especially as the question of profitability remains unanswered. While everyone is aware of stocks like Nvidia, Oracle or critical suppliers like Micron, as well as multiple AI chatbots, the AI mania has pulled up an otherwise boring sub-segment: storage stocks. Is this justified? All my paid-members receive my latest stock idea: a growing franchise that’s set to dominate the eye care market.
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Investing in stocks of companies that went bankrupt, seriously? Seriously! What at first sounds like a recipe for disaster, indeed can be a lucrative endeavor. A bankrupt company is not the same as the ceasing of operations. Indeed, often it is even the case that companies go into bankruptcy restructuring while everyday operations continue. This area can be a great treasure trove to fish for potential multi-baggers where others don’t bother due to negative associations. A premier on Financial Engineering: My Premium PLUS members receive my latest stock idea – a pick that recently emerged from bankruptcy – with the potential to multi-bag.
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Some investors tend to put too much weight on a stock’s all-time high when fishing for bargains. Only because a stock has been (much) higher in the past, does not automatically mean the current setup is attractive or even dirt-cheap. Unfortunately, often this reference point – the all-time high – is used as a justification for why a stock must be cheap now. I am raising my finger. It is not enough to just look at the former high. The entire setup must be attractive, otherwise the risk to grab a value trap is high. All my paid-members will receive my latest stock idea – a barely known, profitable growth company with an excellent market position where the all-time high should be taken out soon.
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I already discussed the stock of Capri Holdings twice last year, prior to and after the failed takeover attempt by Tapestry. Capri’s stock fell even below my lower target of 20 USD from initially 35 USD. Now, sitting around 15 USD and having announced the sale of troubled Versace, many things have changed, requiring a reassessment of the case. If the sale goes through, the balance sheet flips from net debt to net cash at current figures. Also, loss-making Versace will stop to be a burden for the group. Is the third time now finally the charm?
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Like I hinted in my outlook for 2025, this year indeed so far has proved to be rather volatile. Sentiment can change almost on a day-to-day basis, depending on political announcements. Even wild swings of 7–10% in just one day are not impossible. Under these circumstances, it makes sense to think about more defensive stocks, assuming the tariff circus continues and / or a recession hits soon. There are the usual suspects which can do the job. But I wouldn’t expect too much upside. My members have already received my next stock idea – one of the most defensive, recession- and tariff-unaffected businesses available – paired with decent upside.
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As irony and destiny wanted it, with the publication of my last Weekly, markets crashed down hard, effectively erasing much of the gains of the last twelve months. Of course, it wasn’t my publication that ignited the fireworks. I had written my Weekly shortly prior to the tariff announcement which was the catalyst that sent markets worldwide lower in fear of a major economic contraction. Big calls for another 1929 depression and 1987 Black Monday crash evaporated, at least for now. Then yesterday, one of the best days on Wall Street EVER. What to make out of this?
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Depending on your personal portfolio composition, the just closed first quarter 2025 might show an entirely different performance. While scrolling through twitter it reads almost like a hefty crash with big losses is behind us, the reality is on an aggregate level not much has happened so far. Even more contradictory, the current correction only involved certain sectors and individual stocks. This is the sector rotation I have written about in the past several times. What to draw out from it for our portfolios?
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