|
|
| Home | Portfolio | Watch List | Newsletter | About | Contact Me | Stock Advisor |
The month that was:
September was the worst month of the year so far. The S&P 500 went down by about 4.9% and the Nasdaq went down by about 5.8%. The S&P 500 also had its first losing quarter in a year.
On September 20th, the Fed decided not to raise interest rates. However, the Fed also said that it might raise rates one more time this year, and that it expects to keep rates high for a long time. Investors call this "higher for longer." After the meeting, bond yields went up a lot. By the end of the month, the yield on the 10-year Treasury note was about 4.6%, its highest level since 2007. Oil prices also went up to about $90 a barrel, which makes it harder for inflation to come down.
In a previous newsletter, I explained how Treasury notes work. When you buy a Treasury note, you are lending money to the government, and the government pays you interest. Why do rising yields hurt stocks? There are three main reasons.
First, investors have more choices. If you can earn 4.6% a year from the government, which is almost risk free, then a risky stock has to work much harder to convince you to buy it.
Second, higher yields make borrowing more expensive for everyone. Companies pay more interest on their loans, and families pay more for mortgages and car loans. That leaves less money for companies to grow and less money for people to spend.
Third, growth companies get punished the most. A lot of the value of a fast-growing company comes from profits it expects to make many years from now. When interest rates are high, money in the future is worth less compared to money today. That is why the Nasdaq went down more than the S&P 500 this month.
The yield curve that I wrote about in April of last year is also still inverted. At the end of September, the 2-year Treasury yield was about 5.05%, which is higher than the 10-year yield of about 4.57%. This is still a warning sign for the economy, so I am staying focused on high quality companies.
Sells -
Sold 9 DG at $130.20
In my last newsletter, I explained that Dollar General lowered its forecast on August 31st. This was the second time DG lowered its forecast in three months. DG's customers are struggling with high prices, there is more theft in its stores, and some of its problems, like messy stores and poorly managed inventory, are its own fault. I sold all of my shares for a loss of about 18%. I bought DG because the price looked cheap, but I learned that a low price alone is not a good reason to buy a stock. When a company keeps lowering its forecast, it can be a sign that its problems are bigger than they look.
Sold 11 TGT at $123.00
Discount retailers like Target and Dollar General are being hurt as people spend less on things they don't need. After what happened with DG, I decided to sell my Target shares as well.
Bought 4 HSY at $212.39
Sold 4 HSY at $208.13
Hershey makes some of the most popular candy in America, like Reese's and Kit Kat, and it has a growing dividend. I bought a few shares in the middle of the month. After the Fed meeting, the price kept falling with the rest of the market, so I sold my shares a week later for a small loss.
Buys -
Bought 25 ONON at $29.22
Bought 20 ONON at $27.17
On Holding is a Swiss company that makes running shoes with a special cushioning technology. You may have seen their shoes, because they are becoming very popular. In its last report, On's sales grew more than 50% compared to last year, and it was the sixth record quarter in a row. Even Iga Swiatek won the French Open wearing On shoes! However, the stock went down after the report because investors thought it was too expensive. On does not pay a dividend yet, but it is profitable and growing very fast, and I think it is a good example of growth at a reasonable price. I started a new position and added more at the end of the month.
Bought 1 ASML at $627.40
ASML is the only company in the world that makes the machines needed to produce the most advanced computer chips. Without ASML, companies like Nvidia could not make their AI chips. The price had come down, so I added one more share to my position.
Bought 3 LHX at $172.97
In June, I sold my L3Harris shares at about $189. The price has gone down since then, so I bought shares back at a lower price.
Bought 2 EL at $142.32
Bought 1 EL at $144.82
Estee Lauder's stock kept going down in September, so I added a few more shares at a lower price.
Thanks for reading my newsletter!