Steven Kiel participated in a Roundtable discussion featuring the managers from four Willow Oak Asset Management platform funds. The participants shared their thoughts on the current investing environment, as well as a few stock ideas that have them excited for 2019.
The full discussion can be viewed here: Willow Oak Roundtable Discussion.
On the volatility in the fourth quarter:
We’ve seen a pretty dramatic snap back. In December, Ben Carlson on his “A Wealth of Common Sense” blog discussed forward performance for certain indices after sharp downturns. Prior to last quarter, there had been ten instances where the Russell 2000 was down at least 13%. The average decline in those ten instances was 21%. It always proved to be a great buying opportunity. Over the next year, the average gain was 32% with a positive return nine out of the ten times. For the next three and five years, the index was always up significantly.
There is never any guarantee, but the odds are very much in favor of investors in the short and intermediate term. If history holds up, the first few months of this year is just the start of it.
A stock idea:
MMAC has attracted a group of smart investors. It trades for 20% below its book value. The company continues to buy back 10% of outstanding shares each year. They have simplified their business tremendously and are recycling proceeds from their bond portfolio into the solar lending fund they manage. This has been a great business for them. And oh, by the way, even with the current cheap valuation, the stock has still returned 35% annually over the past five years.