And as this bull market has risen since ’09, one of the longest cycles, it is no longer a bargain, trading in line with our estimate of fair market value. Bonds could once again create competition for stocks, although money has recently been pulled out of Government bonds at a record pace, and into stocks. Rates have likely moved too far too fast. So it wouldn’t surprise us to see rates actually fall temporarily, though Trump’s plans, once implemented, will likely increase the federal debt from an already extended $20 trillion, ultimately causing inflation and interest rates to rise more rapidly.
…Our TRIM™ stock market indicators, which warned earlier in the year, are back on buy in most regions. Though, after the recent market run-up, we are on the lookout for a market correction, which in a bull market has averaged about 6%. While a correction could start at any time, we continue to scour for bargains. Our own screens, where we look for stocks trading for 85 cents-on-the-dollar or less, are providing the least number of potential investment opportunities in some time—another reason a correction could be close.
Meanwhile, with an earnings yield of 6%, even with 10-year Treasuries up to 2.4%, stocks are relatively more attractive than bonds. Albeit, should rates rise much above 3%, without a meaningful boost in corporate earnings, the relative attractiveness of stocks would dissipate. While a stock market correction could occur at any time, we still believe any decline in the near term will likely be modest and that growth and equity prices should continue higher, although likely at a below average pace.”
Trapeze Asset Management isn’t very enthusiastic about the stock market right now and actually expect a small correction. One of the stocks it still finds attractively priced is Apple Inc (AAPL). Here is what they have to say about Apple Inc:
“We have grown accustomed to how quickly market sentiment shifts for Apple. Despite its continued dominance of high-end smart phones, envious margins, and incredible successes achieved in new markets (its 1½ year-old watch business is now the second-largest watch brand in the world, behind only Rolex), investors once again aren’t paying the business the respect we feel it deserves. Its lowly 10x forward earnings multiple, excluding net cash, reflects this as does its discount to our $135 FMV estimate. A potential tax hiatus may allow a repatriation of a large portion of the company’s overall cash balances—now over 25% of the company’s market cap. With a large percentage of users still using the iPhone 5 and 6, we see huge pent-up demand for the iPhone 8 which we expect to be a totally new design in ’17.”
Can you guess which of these three stocks -Alibaba Group Holding Limited (NYSE:BABA) Amazon.com, Inc. (NASDAQ:AMZN), and Facebook Inc. (NASDAQ:FB)- Trapeze Asset Management likes? We will reveal the answer next: