Manley on the Street

“… what mighty contests spring from trivial things …” —Alexander Pope
“There’s many a slip ‘twixt the cup and the lip.”
—English proverb

I’d like to make a few observations on two things I noticed last week.

First, bottom-up consensus forward earnings expectations slipped last week, and that is not a good thing. However, it’s not exactly bad either. The number declined only about $0.07 per share. Still, the movement is in the wrong direction, and most of the decline was caused by reductions in 2016 expectations. There are still no blatant signs of an economic meltdown, so I remain skeptical of a violent slowdown but vigilant for its early indicators.

Second, the biotech group was hard-hit during the week. The most given reason and the probable cause were comments by Hillary Clinton about a steep price increase in the cost of a certain HIV drug. Given the very high valuations placed on many companies in the biotech space, the decline was not unreasonable, in my opinion. Very little is needed to knock extended equities down.

Globe

Investors are missing significant opportunity if they limit themselves only to U.S. equities. Dr. Brian Jacobsen, CFA, CFP®, explains why in this edition of the On the Trading DeskSM podcast from Tuesday, September 22, 2015.

As we continue our series discussing myths of international investing, this week we tackle the myth that the best equities are in the United States. Really? Dr. Brian Jacobsen is here to talk about the reality of that. Brian, welcome.
Thanks for having me back.

Brian, are the equity opportunities in the United States the best companies?
You know, that’s a good question. I don’t want to make it sound like I’m bad-mouthing American companies, but successful investing is really about identifying where companies can beat expectations or where investors will change their expectations, and on the basis of those two perspectives I actually think where the expectations are likely to change or companies are able to beat expectations are more outside of the United States.