Investment Commentary & Outlook - October 30, 2017

Our growth portfolios in the third quarter posted their strongest relative performance in several years and our international portfolios remain exceptionally strong. Our friends at Bespoke pointed out that through the third quarter this year, the top 10% of stocks in the S&P 500 with the most international revenues rose a stunning 28.41%! Additionally, the flow of funds into international stocks, especially ADRs, remains relentless. A weaker U.S. dollar for most of 2017 as well as strong global GDP growth is helping to boost the parade into international stocks. We expect that Chinese ADRs will remain especially strong, simply because the flagship Chinese stocks are being added to the MSCI indices in June and September of 2018, so the institutional buying pressure is expected to remain relentless for the next several months, especially since indexing is very popular via the MSCI indices.

We do have to add that China remains a country of many contradictions, where there are many negative macro factors but also many fast-growing companies to buy. So we plan to remain vigilant in 2018 as to how the top-down and the bottom-up approaches square themselves out.

The second most import factor to selecting stocks this year according to Bespoke is positive analyst earnings revisions. Fortunately, our growth portfolios are characterized by extremely strong analyst earnings revisions, which typically precede big earnings surprises. Here is a link to our website that shows our most recent earnings surprises:

Earnings Scoreboard

Here is another link to our website that shows analyst consensus forecasted sales and earnings estimates:

Sales and Earnings Projections

As always, we are especially excited about the third-quarter announcement season, since we expect better than expected sales, earnings and positive guidance to propel our respective stocks higher. That is the good news. The bad news is that three months ago, the analyst community expected that the S&P 500 would post 8.6% annual third-quarter earnings growth, . . . read more

Download the Market Outlook Letter — October 30, 2017