Home Portfolio Management Sharek’s Take — 2011 Q3

Sharek’s Take — 2011 Q3


Stocks took a dive during July, August and September, wiping away some if not all of our 2011 gains.

Portfolio Returns

Through the third quarter of 2011, the Growth Portfolio was even, compared to a -10% return of the S&P 500 (the market). I was disappointed by this return because this portfolio was up 17% through the first quarter of this year, only to give back all those gains.

The Aggressive Growth Portfolio has performed better this year, its up 8% through the third quarter, beating the market by 17% year to date. This portfolio was up 24% after the first quarter of 2011.

Cruel Summer

But honestly, there was some weird stuff going on this summer from Ghadafi and the European crisis to fears we would go into a slight recession in early 2012. This news took stocks down further than they should have gone.

Stocks are Oversold and Undervalued

In fact, at the end of September, stocks were not only oversold but also undervalued, as the two charts to the right show. The Value Line chart shows P/E’s haven’t been this low since before 8/1/09.

P/Es hit a low of 13.3 at the end of August, then rebounded to 13.5 during September. We went into October with an oversold market and low P/Es — a perfect storm for stock market potential. For historical purposes, the P/E was 10.8 during the market crash/recession three years ago (11/21/2008).


Stocks are ready to go higher. We just have to get past the European financial crisis and we’ll be ready to roll. Stocks go into the 4th cheap, oversold, and ready to rally. 2013 will be the year P/Es expand.

David Sharek David Sharek is stock portfolio manager and CEO of DavidSharek.com. David believes a company's profits ultimately drive the price of its stock. His book The School of Hard Stocks can be found on Amazon.com.