Click here for a printer-friendly PDF of the Memorandum.

Refer to the SMA All-Cap Value Fact Sheet for the Top 20 Holdings and performance data as of the most recent quarter-end.

In this Muhlenkamp Memorandum:
Quarterly Letter
From a market perspective, this has been a quiet summer. As of 9/30/2017, the S&P 500 was up 6.63% over the last six months with hardly a dip. Low economic growth continues on a global basis, none of the major central banks have altered course in any fashion, inflation remains low, second quarter earnings came in nicely, etc. We won’t bore you (this time!) by enumerating the things we’re watching that haven’t changed since we wrote about them in June….

Reflecting over 40 Years—Lessons Learned and Changes Observed
To celebrate the anniversary of Muhlenkamp & Company, I was asked to put on paper what I have learned over the last 40+ years in the industry and comment on any changes I’ve seen over that period. This essay is my attempt at meeting this request…

Register for our Upcoming Webcast
On Thurstday, November 30, 2017 from 4:00 p.m. – 5:00 p.m. ET, join Tony Muhlenkamp as he hosts a chat with Portfolio Managers Ron and Jeff Muhlenkamp. You will have the opportunity to submit questions to the portfolio managers.

Archive Available – August 22, 2017 Webcast
During the webcast on August 22, 2017, Jeff Muhlenkamp, Portfolio Manager, summarized the economy using his 10-point checklist. Also, to celebrate our 40th anniversary, we asked Ron Muhlenkamp, Portfolio Manager, to reflect on lessons he has learned and changes he has seen since he founded Muhlenkamp & Company in 1977. Ron’s insights and observations are included.

Don’t Be Left Out On Important Notices and Invitations
Muhlenkamp & Company regularly publishes information that gets distributed by email only. If you don’t want to be left out, join our email list by clicking HERE or call us at (877) 935-5520 extension 4. Your contact information will not be released to any third party.

No File Found

By Ron Muhlenkamp and Jeff Muhlenkamp, Portfolio Managers

From a market perspective, this has been a quiet summer. As of 9/30/2017, the S&P 500* was up 6.63% over the last six months with hardly a dip. Low economic growth continues on a global basis, none of the major central banks have altered course in any fashion, inflation remains low, second quarter earnings came in nicely, etc. We won’t bore you (this time!) by enumerating the things we’re watching that haven’t changed since we wrote about them in June. There have been a couple of surprises: three destructive hurricanes and escalating tensions with North Korea (which the markets have mostly ignored). We believe that while the hurricanes have had a massive impact on the affected areas, their impact on the national economy will be fairly small and temporary. We believe war with North Korea is unlikely. We’ll keep an eye on developments and update our assessment as events unfold.

In March, we highlighted the increase in small business optimism that accompanied the election results. Looking at the latest numbers, business optimism remains at a high level in spite of (because of?) paralysis in Washington. A decline in business optimism would be of concern, but it is holding up nicely. Speaking of Washington, the broad outlines of the proposed tax reform were released in late September and, based on what we saw, it looks like an improvement on the existing situation. We have no idea, however, how much of it will actually be enacted or when.

The markets remain on the expensive side and that’s making a lot of investors of all stripes nervous. In an odd way investor nervousness is itself a bit reassuring. It could prevent some of the risky behavior we tend to see when investors are wildly optimistic and convinced they can’t lose (recall the internet bubble, the housing bubble, and currently the enthusiasm around Bitcoin and its siblings). If the market is making you nervous, you might consider reviewing your expectations of the market and your financial plans and make sure that you are prepared for the inevitable downturn. Using the four seasons as an analogy, we estimate we’re in late summer and while we don’t know exactly when winter will arrive, we know it’s coming, so it’s appropriate to prepare for it. Give us a call if you’d like to discuss these topics in more detail, we’d love to hear from you.

Until next quarter…

The comments made in this commentary are opinions and are not intended to be investment advice or a forecast of future events.

Refer to the SMA All-Cap Value Fact Sheet for the Top 20 Holdings and performance data as of the most recent quarter-end.

*S&P 500 Index is a widely recognized, unmanaged index of common stock prices. The S&P 500 Index is weighted by market value and its performance is thought to be representative of the stock market as a whole. You cannot invest directly in an index.

No File Found

Join Tony Muhlenkamp as he hosts a chat with portfolio managers Ron and Jeff Muhlenkamp. As we come to the end of a year with unusually low market volatility, record-high market levels, and expensive equity valuations, Ron and Jeff will share their outlook. They will also give their overview of U.S. and foreign economies, central banks, and politics. Don’t miss your opportunity to hear their discussion and ask questions.

Date: Thursday, November 30, 2017

Time: 4:00 p.m. – 5:00 p.m. ET

Registration is required, so CLICK HERE TO REGISTER

After registering, you will receive a confirmation email containing information about joining the webcast.

No File Found

Visit our webcast archive to hear Jeff Muhlenkamp, Portfolio Manager, summarize the economy using his 10-point checklist. Also, to celebrate our 40th anniversary, we asked Ron Muhlenkamp, Portfolio Manager, to reflect on lessons he has learned and changes he has seen since he founded Muhlenkamp & Company in 1977. Don’t miss Ron’s insights and observations.

Watch the video archive or read the amended transcription (including slides).


Click here for the amended transcription (including slides).

Click here for slides only (no audio or transcription).

If you have questions or comments about the content of the webcast, don’t hesitate to send us a message or call us at (877)935-5520 extension 4.

For the Top 20 Holdings and performance data as of the most recent quarter-end, refer to the SMA All-Cap Value Fact Sheet.

The opinions expressed are those of Muhlenkamp and Company and are not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

No File Found

Click here for a printer-friendly PDF of the Memorandum.

Refer to the SMA All-Cap Value Fact Sheet for the Top 20 Holdings and performance data as of the most recent quarter-end.

In this Muhlenkamp Memorandum:
Quarterly Letter
As June comes to a close, we find that most of the things we talked about in March haven’t changed much. Starting at the international level, both the European and Japanese Central banks continue to buy bonds (Japan also buys equities) in order to manage interest rates and support their economies. The European Central Bank hinted during a speech in late June that it may be appropriate to think about ending their program, but the Bank of Japan isn’t even discussing ending theirs. We’ll have to see how things develop…

Muhlenkamp & Company’s 40th Anniversary
This year marks the 40th anniversary of the founding of Muhlenkamp and Company, Inc. We are pleased, proud, and grateful that we have been able to serve our clients and the community for the last forty years…

Creating a Budget
A budget is a written plan of how you will spend your money for a specified time period (usually monthly). Typically in the form of a spreadsheet, this tool can help you manage your future spending in an attempt to keep your expenses aligned with your income and your financial goals. Budgeting is planning and looking forward, not backward…

Register for our Upcoming Webcast
On Tuesday, August 22, 2017 from 4:00 p.m. – 5:00 p.m. ET, join Tony Muhlenkamp as he hosts a chat with Portfolio Managers Ron and Jeff Muhlenkamp. You will have the opportunity to submit questions during the second half of our webcast.

Archive Available – May 11, 2017 Webcast
When it comes to building our portfolios, we say we build them from the bottom up and then we edit them from the top down. During our webcast Portfolio Manager Jeff Muhlenkamp along with President Tony Muhlenkamp shared our process. Jeff also talked about some of the key indicators that we are following to give investors an insight into what we are doing and why.

Don’t Be Left Out On Important Notices and Invitations
Muhlenkamp & Company regularly publishes information that gets distributed by email only. If you don’t want to be left out, join our email list by clicking HERE or call us at (877) 935-5520 extension 4. Your contact information will not be released to any third party.

No File Found

By Ron Muhlenkamp and Jeff Muhlenkamp, Portfolio Managers

As June comes to a close, we find that most of the things we talked about in March haven’t changed much. Starting at the international level, both the European and Japanese Central banks continue to buy bonds (Japan also buys equities) in order to manage interest rates and support their economies. The European Central Bank hinted during a speech in late June that it may be appropriate to think about ending their program, but the Bank of Japan isn’t even discussing ending theirs. We’ll have to see how things develop. French elections, which had the potential to be disruptive, turned out to be a non-event. We’ll see what Macron does now that he’s in power. He may manage to make some changes that will free up the French economy and get it moving again.

International trade has not been disrupted by a U.S./China trade war which some feared based on statements made by President Trump. Chinese economic growth continues to meet their government-set goals of about 6.5% and the renminbi has been fairly stable against the dollar. Interestingly, the organization that governs what countries are included in global stock indices decided in mid-June to start including Chinese shares in the global index (MSCI EAFE Index*) for the first time. Lastly, the war in Syria hasn’t created any economic problems either.

Domestically, the economy continues to grow at about 2% when adjusted for inflation. Inflation remains below 2%, aided by declining oil prices which have dropped from about $50 per barrel at the start of the year to close to $40 per barrel currently. Unemployment remains low but wages haven’t grown much. The Federal Reserve raised the Federal Funds rate (short-term interest rate they charge banks that sets short-term rates in the U.S.) by another .25% to 1.25% as expected and they detailed how they intend to reduce the size of their balance sheet in the near future, but not when they would start. While short-term interest rates have risen, long term-interest rates have not.

In the March newsletter and again during our May webcast (both of which can be located on our website www.muhlenkamp.com) we told you that small business optimism had improved immensely postelection—it remains at high levels even though neither the promised health care revamp nor tax cuts have yet come out of Washington. First quarter earnings in the aggregate were good, with both revenues and earnings coming in higher than the prior quarter. On the negative side, we are seeing enormous disruption in the retail sector as consumers change how they shop, creating a few big winners and many big losers. A year ago we saw increased bankruptcies in energy companies, now it’s happening to retailers. We are also seeing an increase in credit defaults by consumers—mostly with auto loans but a little bit with credit cards too.

The U.S. stock market, in aggregate, is expensive relative to its own history and margin debt (money borrowed from brokers to buy stocks, using the stocks themselves as collateral) is once again setting new highs.

That’s what we are seeing. Here’s what we think:
• We expect slow economic growth in the U.S. to continue in the short term while recognizing we can’t see very far down the road. The signs we are seeing in the credit markets are not immediately disconcerting, but will become a concern if they get worse. Increased business optimism hasn’t resulted in increased capital investment by companies—we’re watching for signs of that too.
• We think assets in general (bonds and stocks) have been supported in part by central bank asset purchases. That era may be coming to an end as the Federal Reserve begins to shrink its balance sheet. This makes us cautious and we’ll be paying close attention to the plans of the foreign central banks we’ve talked about as well as the implementation of the Fed’s plans.

Here’s what we are doing:
• We continue to sell assets that have done well for us and reached what we consider full value and invest in undervalued companies when we find them. We are comfortable holding cash when we can’t immediately find undervalued companies.
• We don’t own any bonds as they remain overpriced relative to inflation.
• We are slowly reducing our holdings of companies that are most exposed to the cyclical aspects of the domestic economy.

Until next quarter…

The comments made in this commentary are opinions and are not intended to be investment advice or a forecast of future events.

Refer to the SMA All-Cap Value Fact Sheet for the Top 20 Holdings and performance data as of the most recent quarter-end.

*MSCI EAFE Index is a stock market index that represents the equity market performance of large and mid-cap securities outside the U.S. and Canada. The EAFE acronym indicates that the location of the 21 developed markets are within Europe, Australasia, and the Far East.

No File Found

When it comes to building our portfolios, we say we build them from the bottom up and then we edit them from the top down. During the Muhlenkamp & Company webcast on Thursday, May 11, 2017, Portfolio Manager Jeff Muhlenkamp along with President Tony Muhlenkamp shared our process. Jeff also talked about some of the key indicators that we are following to give investors an insight into what we are doing and why.

Watch the video archive or read the amended transcription (including slides). The question and answer session is included.


Click here for the amended transcription (including slides).

Click here for slides only (no audio or transcription).

If you have questions or comments about the content of the webcast, don’t hesitate to send us a message or call us at (877)935-5520 extension 4.

For the Top 20 Holdings and performance data as of the most recent quarter-end, refer to the SMA All-Cap Value Fact Sheet.

The opinions expressed are those of Muhlenkamp and Company and are not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

No File Found

By Ron Muhlenkamp and Jeff Muhlenkamp, Portfolio Managers

Below is the single most interesting chart we’ve seen in the last quarter.

It is a plot of the National Federation of Independent Business (NFIB) Small Business Optimism Index since March 2000. The NFIB conducts monthly surveys of its members in order to better understand the environment in which small businesses are operating. The way we interpret the chart is that small businesses are MUCH more optimistic about their future post-election than they were pre-election (the arrow is there to highlight that move for you). If that increased optimism results in greater hiring and spending on capital goods, we believe the economy can grow significantly faster than it has managed to do the last few years. In part we think the chart validates our assertion that increased regulations and costs have been limiting business growth—and the promise to reduce them has small businesses more optimistic than they’ve been in years. The questions now are “Will our politicians deliver on their promises?” and “Which companies will benefit and which will be hurt by the changes?” That’s what we are paying a lot of attention to right now.

While potential U.S. policy changes are the most important things going on, they aren’t the only things to keep an eye on. A quick update on some pertinent developments: the U.S. Federal Reserve raised the Federal Funds Rate by .25% in March. This is the third rate hike by the Fed since the ’09 recession and was largely expected. The Fed has stated that they may continue to raise short-term rates this year as the country is near their employment and inflation goals. At this point we don’t expect a rapid run up in inflation nor do we see rising interest rates triggering a recession. Either or both of those things may happen in the future, but we don’t see signs that they are imminent.

U.S. companies in the aggregate in the 4th quarter of 2016 reported an increase in both earnings and revenues—the first time we’ve seen that in five quarters, led by improvements in the energy sector where higher crude oil prices (now in the vicinity of $50 per barrel) have led to increased drilling activity. The strong dollar we saw late last year has weakened a little, easing pressure on the earnings of our exporters. Long-term interest rates have also declined a bit since last year, keeping the cost of rolling over debt low for those companies that need to do so. From a consumer perspective, rising short-term rates will provide savers a marginally better return on savings accounts, money markets, and short-term certificates of deposit but inflation adjusted returns on fixed income products are still pretty poor, as we’ve been pointing out for a long time now. On the consumer borrowing side, rates are pretty cheap with 30 year mortgage rates at about 4% — they’ve been as high as 4.2% and as low as 3.8% over the last year.

Outside of the U.S., elections in France and Germany later this year have the potential to disrupt the Eurozone. Belgian elections in March resulted in a re-election of the status quo, we’ll have to see what develops in France and Germany. The European Central Bank (ECB) continues to buy bonds, keeping interest rates low in Europe and, we believe, helping to keep interest rates low in the U.S. That program is scheduled to end in December, it isn’t clear if the ECB will let it expire or extend it once again. On a positive note, real Gross Domestic Product (GDP) growth in Europe the last quarter was 1.9%, much improved over a year ago and on par with U.S. GDP growth.

The U.S. stock markets remain on the expensive side, as they’ve been for some time now. In the absence of signs of an approaching recession or financial crisis we have stuck to our knitting, selling holdings that have reached full value and reinvesting the proceeds in companies we believe are selling for less than we think they are worth—though good companies selling cheaply are few and far between these days.

Until next quarter…

The comments made in this commentary are opinions and are not intended to be investment advice or a forecast of future events.

Refer to the SMA All-Cap Value Fact Sheet for the Top 20 Holdings and performance data as of the most recent quarter-end.

Glossary
Federal Funds Rate is the interest rate at which depository institutions lend balances at the Federal Reserve to other depository institutions overnight. It is the interest rate banks charge each other for loans.

Federal Reserve Board (informally referred to as “the Fed”), is the central banking system of the United States, created in 1913 by the Federal Reserve Act. The main tasks of the Fed are to supervise and regulate banks, implement monetary policy by buying and selling U.S. Treasury bonds, and steer interest rates.

Gross Domestic Product (GDP) is the total market value of all goods and services produced within a country in a given period of time (usually a calendar year).

No File Found

Click here for a printer-friendly PDF of the Memorandum.

Refer to the SMA All-Cap Value Fact Sheet for the Top 20 Holdings and performance data as of the most recent quarter-end.

In this Muhlenkamp Memorandum:
Quarterly Letter
The plot of the National Federation of Independent Business (NFIB) Small Business Optimism Index since 2000 is one of the most interesting charts that we’ve seen in the last quarter. The NFIB conducts monthly surveys of its members in order to better understand the environment in which small businesses are operating. The way we interpret the chart is that small businesses are MUCH more optimistic about their future post-election than they were pre-election…

Facing the Facts about Your Financial Life
As an amended excerpt from the Muhlenkamp Marathon Financial Training Workbook, this article places you at the “starting line” of your financial marathon, asking you to periodically look at and assess your current financial situation…

Register for our May 11, 2017 Webcast
On Thursday, May 11, 2017 from 4:00 p.m. – 5:00 p.m. ET, join Tony Muhlenkamp as he hosts a chat with Portfolio Managers Ron and Jeff Muhlenkamp. You will have the opportunity to submit questions during the second half of our webcast.

Archive Available – February 16, 2017 Webcast
Visit the archive of our February 16, 2017 webcast. Ron’s maxim, “When you change the rules a little, you change the game a lot,” applies to many things in life. During our webcast, Jeff and Ron looked at the potential impact and the second- and third-order effects that changing policies and regulations by President Trump and his new administration could have on the economy.

Don’t Be Left Out On Important Notices and Invitations
Muhlenkamp & Company regularly publishes information that gets distributed by email only. If you don’t want to be left out, join our email list by clicking HERE or call us at (877) 935-5520 extension 4. Your contact information will not be released to any third party.

No File Found

Ron’s maxim, “When you change the rules a little, you change the game a lot,” applies to many things in life. During our webcast, Jeff and Ron looked at the potential impact and the second- and third-order effects that changing policies and regulations by President Trump and his new administration could have on the economy.

Since the last recession, some small businesses have been reluctant to expand because they were unsure of the rules: the possibility of increased taxes, expanding healthcare costs, and more regulations. After the 2016 election, small business confidence spiked. Jeff and Ron debated what may have boosted optimism. They also talked about current interest rates, bond rates, the dollar, and ongoing concerns in Europe.

Watch the video archive or read the amended transcription (including slides). The question and answer session is included.


Click here for the amended transcription (including slides).

Click here for slides only (no audio or transcription).

If you have questions or comments about the content of the webcast, don’t hesitate to send us a message or call us at (877)935-5520 extension 4.

For the Top 20 Holdings and performance data as of the most recent quarter-end, refer to the SMA All-Cap Value Fact Sheet.

The opinions expressed are those of Muhlenkamp and Company and are not intended to be a forecast of future events, a guarantee of future results, nor investment advice.

No File Found

Library Navigation

Announcements

Muhlenkamp & Company’s 40th Anniversary

2017 marks the 40th anniversary of the founding of Muhlenkamp and Company, Inc. We are pleased, proud, and grateful that...
More ›

Connect with Muhlenkamp

CLICK HERE TO Sign-Up for Our Newsletter and E-news Updates