Rotation From Growth To Value Continues

Today investors are continuing their exodus out of growth stocks and into less risky value plays. Starting around the beginning of March, companies like Amazon, Netflix, Google, Facebook, Pandora, Yelp, Twitter, Tesla, LinkedIn, 3D Systems, and many other stocks that seemed to defy gravity have fallen back. Fallen back considerably I might add as many of these stocks are down 25% to 50% from their highs.

Market sell off

Clearly much of the money has been going into stocks like Apple and Microsoft as they are up to or near 52 week highs. Apple has been beaten down for so long and now it is finally getting some respect after unexpected great earnings combined with an announced stock split, dividend hike, and additional money being put toward stock buybacks. All that comes with new products promised for later in the year which might include an iWatch and should definitely include an iPhone 6 with a bigger screen. Investors obviously are seeing great potential down the road for Apple.

High growth coupled minimal earnings can only get investors excited for so long. In Amazon’s case, the stock has gone up for years with meager earnings as investors have kept piling their dollars into it. Blind devotion to growth may work for awhile but when the herd turns, you better know when to get out of your high P/E stocks. There is a lot of pain going on right now for people who insist on continuing to hold many of the stocks listed above.

The economy is in much worse shape than the Obama Administration wants you to believe. The high national debt level is an astounding 17 trillion dollars and is expected to reach 19 billion before a new President is elected. This has to eventually be felt on the stock market and it will. Just as investors are now selling out of their high growth holdings, eventually they might decide it is time to get out of stocks completely.

When holding stock positions, you need to track them on a continuous basis. The era of buy and forget for years is gone as industries and market conditions change more quickly than ever before. When buying the old guard staple stocks, you might be able to forget about them longer than these newer industries but it still is in your interest to pay attention on a regular basis. Investments you make are your responsibility and they are comprised of your money: there is no better reason to pay attention to what is happening with the economy and particularly the companies you have your money invested in.