September 2020 Stock Picks
CONSTANTINE LYCOS, FOUNDER AND CEO AT LYCOS ASSET MANAGEMENT
Last month, I shared my thoughts on the markets, some stock recommendations, asset allocations, and other important issues for investors. That was mid-August, more or less, and it’s been about a month since. I thought I would do an update since you guys especially liked the stock picks.
Latest Stock Picks
I’ve got three new stock picks for this month, starting with Nova Measuring Systems (NASDAQ: NVMI). Tech company. Good balance sheet, good profitability, good prospects for the future, decent valuation, doing well right now. Looks like it should be a good hold for the next year or so.
The next pick I have is Pet Med Express (NASDAQ: PETS). It’s an online pharmacy for pets. And the third one is Expeditors International of Washington (NASDAQ: EXPD). Same reasons why I like that one, too, as was the case for my stock picks last month. We’re gonna review how these things do at some point. Likely a year from now, but maybe six months from now, as well. They’re meant to be for a 6-12 month hold, at least, prior to reevaluation.
Thoughts on the Markets
Since mid-August, the market took a little bit of a dive. Volatility picked up a little bit, especially with the technology sector. That had been doing extremely well. But the market seems to have come back, even since then. So the S&P is roughly flat since about a month ago. NASDAQ, and other markets, are a little bit different.
Long-term, nothing has changed since about a month ago. We still like real assets, commodities, precious metals. Equities, private equities, private debt are also good. Infrastructure and other such long-term assets are ideal. What we don’t like as much, unfortunately, is cash and other short-term investments and government bonds. The rates and yields are extremely low. And we expect inflation as soon as the economy picks up, after the COVID restrictions are lifted and the resumption of economic activity and when a return to, somewhat, “normal” economic activity resumes later this year or sometime next year. At some point, it’s going to happen.
Asset Allocation, Portfolio Diversification, and Professional Consultation
At this point, the asset allocation decision is extremely important. I suspect a lot of people hold a lot of cash. We expect the value of cash to be eroded over the next 10-20 years by, perhaps, more than 2%. 2% is the official inflation target by the central banks. It seems that it’s in western nations’ best interests to inflate economies by more than 2% so that they are able to repay the huge amount of debt that they’ve undertaken for COVID and other reasons with money that’s worth way less than its worth 20-30 years out. There seems to be no choice, at this point, but this course of action for governments around the world. So even though for some point, when there’s extreme volatility in the markets it may look good. But 10, 20, 30 years out, it will not be very good.