WealthTrust: 30% Cash, Tech Will Underperform

(WealthTrust) Our investment philosophy has always been based on actual earnings plus research analysts' expectations of future earnings. It is important to note that analysts are finally adjusting their estimates and often reducing them to account for the current state of the economy. This is one of the causes for the current volatility in the market. Obviously, inflation is another problem that the market is dealing with, mostly relating to energy prices and supply chain issues.

Our major concern right now is preservation of capital. Below are some highlights on how we've adjusted our portfolios.

In the first quarter we moved significantly from growth to value.  Early this quarter we sold a portion of our technology companies and built a 20% cash allocation. Technology historically suffers during interest rate increases and we are now underweight technology in our portfolios.

In the second quarter, our trend analysis indicated a need to add to the cash positions and are currently holding approximately 30% in cash. We've also added gold, silver, and companies that typically hold up during sell offs such as healthcare.

Every day we look at great companies that are reaching an oversold position. We believe soon analysts will complete their estimate revisions. We are also beginning to see the economy starting to cool particularly with large capital goods such as autos and the housing market. Maybe your next car you buy you'll pay below sticker price; wouldn't that be nice?

This year is somewhat like 2020 when the market was reacting to Covid. The there was a fear of a recession and great companies sold off significantly.  Early on, we sold all of our companies in sectors such as travel, leisure, restaurants, energy, and financials resulting in 25% cash. Shortly after that we were able to buy companies that had strong cash positions plus great valuations knowing they had a strong possibility of outperforming.

The market looks out six months and we believe by then the supply chains issues should be reduced if not eliminated. The consumer is currently holding a significant amount of cash plus current employment rates are positives.

We are well positioned to begin buying oversold companies at a significant discount to their historical valuations.

I hope this gives some clarity to our current and future position on the market and our portfolios.

Take care and stay safe.


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