The narrow market underscores why it makes sense to index a portion of your portfolio; The opportunity in small-cap stocks; Four travel tips for a better seat on a long flight
1) The market just keeps grinding higher... But not all stocks are seeing the same gains.
Through yesterday's close, the S&P 500 Index is up nearly 15% this year. It has closed at a record high 30 times this year.
However, unless you own an index fund or a handful of large tech stocks, you might not be seeing anything like these results.
The so-called "Magnificent Seven" companies – led by Nvidia (NVDA) – are up an average of more than 36% this year... accounting for the lion's share of the index's gains.
To see what's going on in the rest of the market, consider that the Russell 2000 Index, which consists of the 2,000 smallest companies in the Russell 3000 Index, is actually down slightly this year.
This underscores why it makes sense to index a significant portion of your portfolio. With the rest, look for smaller, value-oriented, beaten-down, and/or off-the-beaten-path stocks that can significantly outperform.
2) I think it's a particularly good time to buy small-cap stocks, especially value ones.
In last Wednesday's e-mail, I shared two charts showing that the relative valuations of large-cap stocks over small-cap ones and large-cap growth over large-cap value recently reached highs not seen since 2000 – almost a quarter century ago.
Here are two more charts I came across from a Wellington Management report earlier this year, A turning point for US small caps, showing the same:
However, I'm wary of small-cap growth stocks. Many of these are unprofitable, as this chart from the same Wellington report shows:
3) Moving on, Creative Planning's Charlie Bilello recently posted two interesting charts that highlight another historical outlier...
These charts come from his latest Week in Charts blog post. The first one shows the massive outperformance of U.S. stocks (measured by the S&P 500) compared with international stocks (measured by the MSCI World Index excluding the U.S.), especially emerging markets, since the global financial crisis. And this trend has only accelerated since the pandemic. Take a look...
As a result, the valuation ratio between the two indexes recently reached an all-time high. Here's Bilello's chart on this:
My thoughts here are more nuanced...
I would be hesitant to run out and buy a bunch of international stocks because that requires knowledge and experience of each country's markets, laws, business culture, etc. Simply put, most international markets are personally outside of my circle of competence.
So why not buy an international index instead of the S&P 500?
I wouldn't argue with someone who wanted to own both... but I would stick with the latter. As regular readers know, I remain bullish on America and think both our economy and our stock markets will continue to outperform.
And here at Stansberry Research, my team and I are on the hunt for individual stocks poised to outperform – even amid a strong market...
Each month in our flagship Stansberry's Investment Advisory newsletter, we share our favorite stock ideas. And earlier this month, we identified our latest opportunity – a pandemic winner that's priced like COVID never happened.
It's not the hypergrowth company it was back during the pandemic, but it's still growing... and it generates gobs of real cash flow. It's also a household name and the dominant player in its market niche.
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4) As I said, when it comes to investing, international markets might be outside of my circle of competence... but I still love to travel overseas. So to wrap up today, I'll share four travel tips to get a better seat for the long flight.
First, sign up for services like the ones I use, Going and Thrifty Traveler. Every day, these sites send me airfare deals they find, for cash or miles – many of which are for flat-bed business-class seats on long flights overseas.
In my April 24 e-mail, I detailed how I used miles to get a business-class seat on a 17-hour nonstop flight from New York to Auckland, New Zealand for a trip my wife and I are taking in November.
Second, keep an eye out for e-mails from the airline in the days before a flight offering a fixed price or an auction for an upgrade (this is more common among second-tier carriers).
On a number of occasions, I've been able to pay $1,000 to get a flat-bed business-class seat on Kenya Airways' 14-hour flight from New York to Nairobi, Kenya.
Third, even if I'm not checking any bags, I go to the check-in area (before I go through security) and ask if there are any paid upgrades to premium or business class.
Often the answer is yes (the earlier you get there, the better the chances). And, if the price is reasonable, I grab it.
If not, I ask if any seats are available with an adjacent empty seat. Many times the answer is yes.
And sometimes, the agent gives me valuable information. On my recent Virgin Atlantic flight from London to New York two weeks ago, when I asked about a paid upgrade, the agent said, "Don't bother, the flight is almost empty."
Sure enough, I got an entire row of four seats to myself... so was able to lie down and take a nice nap!
Finally, I try to be the last person to board the plane so, if I see any seat (or, ideally, two or more empty seats), I just sit there and hope not to get bumped.
Best regards,
Whitney
P.S. Our offices and the markets are closed tomorrow for Juneteenth. Look for my next daily e-mail on Thursday, June 20. Enjoy the holiday!
P.P.S. I welcome your feedback – send me an e-mail by clicking here.