Our founder earned clients a 23% average annual return over five years as a stock analyst on Wall Street. "The Greek" has written for institutional newsletters, Businessweek, Real Money, Seeking Alpha and others, while also appearing across TV and radio. While writing for Wall Street Greek, Mr. Kaminis presciently warned of the financial crisis.
Giants Versus Cowboys
At the end of an economic cycle, large cap stocks (or giants) outperform small cap names, and value stocks outperform growth names (or cowboys). If we can agree that the economic cycle is aging, and that our Ibbotson data resource has history correct, then we can agree on the investment style for the day. It doesn’t matter if you are from New York or Dallas, but if you are from Philadelphia or Chicago, well that’s another story. You see, that would make you an eagle or a bear, ready to rise on Fed stimulus or as a contrarian market play.
Stocks that might be giants could include names like Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG), Pfizer (NYSE: PFE), Verizon (NYSE: VZ), Coca-Cola (NYSE: KO) and Wal-Mart (NYSE: WMT). However, the trend holds for the group, better than it might for all individual ideas. Clearly, large cap cyclical stocks are not going to necessarily add value to the game plan. Therefore, we might want to keep players like Caterpillar (NYSE: CAT), Bank of America (NYSE: BAC) and Alcoa (NYSE: AA) off the roster. Also, industry specific issues might cause a bad idea to have a good day, like say Exxon Mobil (NYSE: XOM) might on an Iran scare; or a good idea to have a bad day, like Kraft Foods (NYSE: KFT) might on higher agricultural prices due to drought.
The trend might not hold on the downside for all the “cowboy” stocks either, but if we were to choose some all-star failures, we might include high-beta growth ideas trading at valuations hard to justify when growth gets reconsidered. A lot of the types of names we would put on the cowboy squad have already seen share decline, like for instance Netflix (Nasdaq: NFLX), Facebook (NYSE: FB), Chipotle Mexican Grill (NYSE: CMG), lululemon (Nasdaq: LULU) and priceline.com (Nasdaq: PCLN). The cowboys would definitely include small cap rookies, which are notorious for fumbling on rainy days, say for instance names like Vivus (Nasdaq: VVUS), First Solar (Nasdaq: FSLR) and Zynga (Nasdaq: ZNGA).
I hope you enjoyed the game, whether your team won or lost. The season is long, and will be full of trials and triumphs, but until the season changes, I think you’ll do better with the giants than the cowboys. This article was easy for me to write, being a Philadelphia Eagles fan, and having enjoyed great victories over the Giants while always loving to hate the Cowboys.
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