Investor Education
Earnings Per Share (EPS) is calculated as the company’s profit divided by the current outstanding shares of stock. This is considered to be the “bottom line” when a company reports earnings and shows how profitable (or unprofitable) the company was able to perform over the reporting period.
Read our overview of EPS Here!
When September Ends
As my memory rests
But never forgets what I lost
Wake me up when September ends
—Green Day (“Wake Me Up When September Ends”)
For most investors, Friday marked the end of a brutal September. The S&P 500 had its worst monthly loss since March 2020. It was down 9.3% during the month and is now down over 24% this year. The Nasdaq continues to lead the major indices in year-to-date losses, with a 32% drop in 2022.
The end of September also marks three quarters in a row of stock market declines. In the 2008-2009 Financial Crisis, we saw six straight quarters of stock market losses. But 2022 is the first time we’ve seen stocks and bonds experience losses together for three consecutive quarters.
There haven’t been many places to hide. Things that helped in the past—like traditional 60/40 portfolios—haven’t been much help this year. A significant cash position would have been helpful. But whether that’s a good idea today is hard to tell in the present. If only we could visit the future and know for sure—or visit the past and whisper a few suggestions to ourselves.
For those not counting on time travel, we must make decisions today. Markets don’t fall by 25-30% often. When they do, they are often great places to allocate your money. Except for those times when they lose another 25-30% after the initial 25-30% drop.
Like in 2008. The S&P 500 was down a little over 19% for the year at the end of September 2008. Lehman had gone down, and the authorities had stepped in to keep things afloat. All was clear, right?
Not quite. The index lost about another 41% from October 1, 2008, until the lows on March 6, 2009.
We aren’t predicting that it will happen again. We aren’t making any predictions. We’re just observing the past for clues to the future—as messy and imprecise as that might be.
But here’s another observation. During that 41% drop that occurred after the first leg of the drawdown in 2008, there were some of the all-time great bargains to be had if one had the gumption to invest.
Forecasting and listening to those that make macroeconomic forecasts are activities that we think tend to lead to errors and fuzzy thinking. But buying value, even in environments where further market losses are highly possible, is a risk management process we think endures through the past, present, and future.
“The point of investing, after all, is not to have a great story to tell; the point of investing is to make money with limited risk. At some point, investors will drop their Pulitzer prize winning story stocks and revisit their attention on the old classics, stocks that make you money because their undervaluation creates a compelling imbalance between risk and return.” —Seth Klarman (December 6, 2000)
Tweets of the Week
In Case You Missed It…
Stan Druckenmiller transcript from CNBC’s Delivering Alpha Conference
Engaging With History - by Morgan Housel
The Business Brew Podcast: Kyle Mowery - Uncovering Hidden Growth Engines
If you have not already upgraded your membership…
Avenel Financial Group, a merchant banking and advisory firm located in Charlotte, NC, launched a new business venture called the Co/Investor Club. The Co/Investor Club is a community of value-oriented investors that collaborate on investment opportunities and ideas. You are receiving this newsletter because you are a Free or Premium Member of the Co/Investor Club!
Chat with Mike
Whether you’re an executive with investment opportunities or a college student looking to network, we would love to chat with you! Email our Founder, Mike Pruitt, at mp@coinvestorclub.com with questions and ideas or schedule a meeting.
Don’t forget to follow us on social media too!
Twitter: @coinvestorclub1
LinkedIn: Co/Investor Club
For our disclaimer, please visit our website.
Have friends that want to join? The Co/Report is public, so feel free to share!
Thank you for reading. Co/Report grows through word of mouth. Please consider sharing this post with someone who might appreciate it.