Following a month and a half of misfortunes in values, many are searching for safe ground. Robert Frazier, one of my directors, raised his money level to 10% toward the finish of Q3 and is currently beginning to purchase Apple, Facebook and Netflix at a rebate.
Ken Kam: Robert, you were on the whole correct to hold such a great amount of money toward the finish of last quarter. Since the market has given back the majority of its 2018 additions, what is your viewpoint for the following a year?
Robert Frazier: I have been stating for some time now that the market would be blended in 2018 and we are gazing despite a financial log jam in 2019.
Some of this is the natural force of gravity in the markets. Much of it is bone-headed economic policy from our executive branch including a tax cut that did not show up in buying power for the middle class and a perplexing foreign trade game that will cut into the profits of many countries across the economy.
I am expecting more of the same for 2019. Earnings and expectations will get a hit as the second and third phases of Trump’s tariffs take effect.
The bigger concern is an economic slowdown. The market is always looking 6 months out, and the market is telling us to expect some big bumps.
I don’t think we are looking at a significant loss in GDP. I don’t think we will see tragic financial systemic economic risks, but I do think we will have a slow down of growth, closer to 1.5-2% GDP growth in 2019, maybe less. It will make for a slower hiring market and a softer real estate market and this will have a broader effect on buying power.
Kam: Where do you see opportunity over the next year?
Frazier: I’ve been in a defensive position over the last 8 months with 10% of assets in cash so I could take advantage of a correction like the one we are experiencing this fall.
This week I have increased my positions in Facebook, Apple and Netflix. All three are underpriced after significant losses the last month.
Kam: Where do you think these stocks are going?
Frazier: My target for Facebook is still over $200, Apple at $215 and Netflix at $300. All three have competitive advantages that will not go away with temporary challenges for all 3 (FB PR, Apple rumors, Netflix development costs.
Kam: How long before we see these stocks turn around?
Frazier: As a value investor, my philosophy says, buy good stocks, especially when they are at a discount and keep them long term. Now is a good time to get some deals.
My Take: Everyone likes the results a good value investor like Robert Frazier can achieve over the long-term. What keeps many would-be value investors from getting good results is that you have to buy stocks when they are cheap , which almost always means when they are not popular.
Robert’s Medium Term Value Fund has a 13+ year track record at Marketocracy. Over that period, Robert’s model averaged 11.41% a year which compares well to the S&P 500’s 8.22% return for the same period.