market folly

Raymond James market strategist Jeff Saut is out with his latest commentary entitled, "Being Wrong and Still Making Money."  It's been a while since we checked in with Saut, so here's what he's saying these days.

He has been cautious over the past month or so and admits his stance has been 'too cautious.'  Saut then dove into the concept of being wrong and still making money.  He quotes Peter Bernstein, who wrote:

"The trick is to survive!  Performing that trick requires a strong stomach for being wrong because we are all going to be wrong more often then we expect. The future is not ours to know. But it helps to know that being wrong is inevitable and normal, not some terrible tragedy, not some awful failing in reasoning, not even bad luck in most instances. Being wrong comes with the franchise of an activity whose outcome depends on an unknown future (maybe the real trick is persuading clients of that inexorable truth)."

Saut then goes on to reference a piece that divides investors into three categories: Rabbits, Hunters, and Assassins, based on how they act in the market.  Written by Lee Freeman-Shor, it states:

"My findings suggest the odds are that an investor's great ideas will lose money. As such, before you invest a cent into an investment idea, it is imperative to have a plan of action as to what you will do if you find yourself in a losing position. When losing, the successful investors I worked with planned to become either Assassins or Hunters. Assassins sold losing investments that fell by a certain percentage or that declined by any amount and showed no signs of recovery after a certain period of time. Hunters invested a lesser amount at the outset and with a plan of buying significantly more shares if the price fell. Hunters were also unafraid to sell if it became clear that they had made a mistake. The bad investors didn't have a plan and consequently turned into Rabbits. When losing money, Rabbits neither bought more shares nor sold their holdings. Once forming an initial perception, Rabbits were achingly slow to change their opinion of a stock. Which tribe will you become a member of?"

As to where Saut is looking to put any money to work on pullbacks, he recommended Hilton (HLT), Flexion Therapeutics (FLXN), Nvidia (NVDA), Iridium (IRDM), and Texas Capital Bancshares (TCBI). 

Embedded below is Jeff Saut's latest market commentary: Being Wrong and Still Making Money



You can download a .pdf copy here.