• The stock market is filled with individuals who know the price of everything, but the value of nothing.

    Philip Arthur Fisher

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Iron Capital Insights

Our insights, reflections and musings on the most timely topics relevant to managing your investments.


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  • Iron Capital Insights
  • January 6, 2025
  • Chuck Osborne

Happy New Year!

We limped to the finish but 2024 was still a good year. What does that mean for 2025? There is lots of talk about the low odds of the market having three big years in a row, but that is all talk; no one who has actually looked at the data would come to that conclusion.


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  • Iron Capital Insights
  • December 16, 2024
  • Chuck Osborne

A Tale of Two Stocks

What do these two unrelated stocks have in common? They are high-quality companies whose stocks were selling at what we deemed to be an attractive price. It did not matter that one was purchased when its stock price was going down, while the other was purchased when its stock price was going up; The price movement of the past has no bearing on whether the current price is a good value.


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  • Iron Capital Insights
  • November 25, 2024
  • Chuck Osborne

What Now?

2024 has been a great year for the market: The economy has continued to grow faster than predicted; Inflation has slowly but surely gotten better; The elections are behind us, and there was a clear winner and no real protest. We enter the holiday season with a deep sigh of relief, but wondering, what now?


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  • Iron Capital Insights
  • October 30, 2024
  • Chuck Osborne

Was That Necessary?

The Fed controls one rate, the overnight Fed Funds rate; all other interest rates are determined by the market, which is under no obligation to follow the Fed’s action. It has chosen not to do so this time because economic data has been strong. That positive economic data also confirms that the Fed didn’t need to lower rates in the first place.


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  • Iron Capital Insights
  • September 10, 2024
  • Chuck Osborne

The Boy Who Cried Wolf

I was reminded of this fable last week as once again the pundits on Wall Street cry, “Recession!” or at least economic slowdown. As we have chronicled already, this incorrect call has been going on at least since the beginning of 2023. They will not admit that they are wrong, but will keep making the same call until it is finally right.

  • We limped to the finish but 2024 was still a good year. What does that mean for 2025? Our long-time readers know that I do not give a lot of credence to the calendar; January 2 is not some alternate universe from December 31. Nothing really changed over the one market-closed day that marks the New Year holiday. Still, psychologically, January is when we wake up from our holiday stupor and turn over a new leaf with resolutions we think could actually stick this time. It is a new year, after all.

    There is lots of talk about the low odds of the market having three big years in a row, but that is all talk; no one who has actually looked at the data would come to that conclusion. In the 1980s the market, as defined by the S&P 500, had eight years in a row of positive returns. They were not all huge years, but from 1982 through 1989, we had positive years. In the 1990s we had nine years in a row of positive returns. The return in 1994 was only 1.32 percent, but still, that is up. Every year from 1995 through 1999 the market was up at least 20 percent.

    The 2000s were a tough period for the S&P 500, but they also marked a good period for stocks outside of the S&P 500 – something we have been unable to sustain since. After the disaster of 2008, the S&P 500 once again went nine years in a row of positive returns. We are so focused on the here-and-now that sometimes we forget to look at the big picture. Yes, we are up considerably two years in a row, but this was after two bear markets within a three-year period.

    © Kenstocker

    I know what you are thinking, “But Chuck, the S&P 500 is so expensive.” That is true. Based on our proprietary work, the S&P 500 is two standard deviations above average from a price-to-earnings standpoint. However, this is mostly concentrated in technology stocks, which are almost three standard deviations above average. In plain English, this means the market is this expensive only five percent of the time, and technology stocks are this expensive only one percent of the time. That is not sustainable.

    The rest of the market is not exactly cheap, but it is much closer to average. There are two take-aways from our perspective on this setup: First, valuation alone does not cause the market to go down. Valuations may predict how severe a downturn will be, but they don’t cause a downturn. Secondly, for the S&P 500 to continue to climb, we need stocks other than technology stocks to take the lead. Will this happen in 2025? Nothing is guaranteed in this world, but the probabilities are high.

    In the third quarter of 2024, the rest of the market took the lead. Honestly, I would have wagered that it would have continued through the fourth quarter as well. It did not, but action in that third quarter certainly showed us that it is very possible for the market to broaden out. The fundamentals suggest this should happen.

    I suggested that we would likely have a correction and that is how we ended 2024, but as we open the New Year, we do so still in a bull market. We have two good years in a row, and at this juncture, number three is looking like the most likely scenario. Of course, it is early and 2025 will certainly provide some surprises as most years do. We begin the year with optimism. Happy New Year!

    Warm regards,

    Chuck Osborne, CFA

    ~Happy New Year!

  • “It was the best of times, it was the worst of times…” ~ Charles Dickens, “A Tale of Two Cities”

    I know that isn’t the Dickens novel we should be quoting this time of year, but it wasn’t Christmas when our story began. There I was in a client’s office in Norfolk, VA, in early March of 2022. The regional bank Silicon Valley Bank (SVB) had just gone under, and panic was ensuing in the regional bank market. As I entered my client’s office I was greeted by the recently retired manager of that location. “Hey Chuck, are you buying banks today?” To which I responded, “Why yes I am. Good to see you, by the way.”

    Let me digress briefly: Whenever I give examples of specific investments, it is important to understand that this is for educational purposes only and not a suggestion to go out there and buy it yourself. I am going to be specific, but the important part is not the companies whose stocks I mention, but the thought process that goes into the decisions.

    Back to the story: That very day while I was in Norfolk, our traders had been given instructions to buy shares of Western Alliance Bank. Like SVB, Western Alliance is a regional bank in the West; Unlike SVB, Western Alliance is well run. Its stock had been thrown out like a baby with the bath water, but this was guilt by association. We knew Western Alliance well as we had owned it before and felt confident in its future. We suspected that once the dust had settled it would actually be a beneficiary of SVB’s demise, while the Wall Street pundit machine assumed that all the deposits at SVB would find homes in one of the big national banks.

    As usual, Wall Street did not understand main street. People who choose to bank at a smaller regional bank do so specifically because they do not want to bank at a large national bank. Some deposits might go to the big banks simply out of fear, but most would search out another small regional bank. Western Alliance was one of the best positioned to take advantage of that. We purchased Western Alliance (WAL) when the stock price was down and most thought it would continue to drop; we pulled the trigger on March 22, 2023, at a price of $34.17. We still own it in accounts where we believe it is appropriate, including my own portfolio.

    Fast forward to this past summer when Michael Smith, our director of research, brought a new idea to my attention. He really liked a company named AppLovin, a company that helps app developers monetize their apps. We really liked what we saw: it is a good company, well run, and in an industry with lots of potential. The problem? The stock had already risen 118 percent year-to-date to that point. Who in their right minds would buy a stock that had already gone up 118 percent? The answer turned out to be Michael and me. We purchased AppLovin (APP) on September 10, 2024, at a price of $87.15. We still own it in client accounts where we believe it is appropriate.

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    What do these two completely unrelated stocks have in common? They are high quality companies and their stocks were selling at what we deemed to be an attractive price. It did not matter that one was purchased when its stock price was going down, while the other was purchased when its stock price was going up; The price movement of the past has no bearing on whether the current price is a good value. This is one of the hardest psychological traps for investors to avoid. We are hard-wired to believe that prices that have gone up are expensive while prices that have gone down are a value. In most of our daily lives this is true, but when it comes to investing, price has to be compared to value. In other words, we compare the price of the stock to the value of the company. The stock price can go down and still be more than the company is worth, and it can also go up and still be a bargain.

    This dynamic is important to understand because the stock market has gone up significantly in 2024 and there is a lot of talk about it being expensive. In fairness, as a whole it is expensive, but the price of the market is heavily skewed towards a small number of really big companies. Prudent investors make decisions from the bottom-up, judging each individual investment. There are still attractively valued opportunities out there and there is no sign that this bull market is over. The economy is still going strong: The Atlanta Fed’s GDPNow says we are growing at 3.1 percent. That bodes well for company earnings, which is what drives long-term stock prices.

    That doesn’t mean we might not be heading for a correction. We have come up quite a bit and it is natural and healthy for the market to take two steps forward and then a step back. We are not traders, so we don’t get worked up about corrections; if anything, corrections provide opportunities. Regardless, to paraphrase Dickens, we are closer to the spring of hope than to the winter of despair.

    Merry Christmas and Happy New Year!

    Warm regards,

    Chuck Osborne, CFA

    ~A Tale of Two Stocks

  • Have you heard the one about the dog who caught the car? After chasing numerous automobiles, a dog finally caught up to one and then realized he had no idea what to do next. The market seems to be in that mode.

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    2024 has been a great year for the market: The economy has continued to grow faster than predicted; Inflation has slowly but surely gotten better; The elections are behind us, and there was a clear winner and no real protest. We enter the holiday season with a deep sigh of relief, but wondering, what now?

    The initial market reaction to the election was positive, then investors started to wonder, “What is this Trump administration going to do? Will it be a policy repeat from the first Trump administration?” It could be, but then again, the rhetoric from the campaign trail was not the same. There are new people surrounding Trump who were not there in 2016. A few notable members of this group were on the other side in 2016. What will they do?

    Pundits will speculate, but the truth is, we don’t know exactly what the policies of this new administration will be, or for that matter what world events will shape the next four years. So, what is an investor to do? Should we cash in our profits from this year or keep letting those winners run?

    The answer can be found in a series of The Quarterly Report newsletters that I wrote in 2013. I began that year with “The Three Rules of Prudent Investing.” Rule one is that all prudent investing is done from the bottom-up. While traders on Wall Street love to speculate on politics, monetary policy, and even who wins the Super Bowl, the truth is that prudent investors focus on each individual investment from the bottom-up. Is this a company I want to own? Apple will sell phones no matter who is in the White House. People will eat at McDonald’s no matter what the Fed does with interest rates. Ultimately, what drives stock returns are the earning of the companies. The primary driver of those earnings is the quality of the company and its product or service.

    Rule two is that all prudent investing is absolute return-oriented. I have never had a client whose financial goal was to beat a market index. Real people have real goals, like paying for retirement or their children’s education. There is a rate of return that must be achieved to reach those goals; that is the focus of prudent investors. The opposite of that is what I like to call competitive investing – always comparing to some random index or to what your neighbor claims. This leads to the fear of missing out (FOMO). FOMO leads to some of the dumbest decisions ever made, and not just in investing. Read here

    Rule three is that all prudent investing is risk averse. We don’t take risk for risk’s sake; this is different than being risk avoidant. Risk averse means we manage risk, and only take risks that are prudent. Defense really does win championships. Read here

    So, what are we going to do now? The same thing we have done since the day I left INVESCO and started Iron Capital in 2003: We are going to do the basic boring day-in and day-out work of prudent investing. We are going to invest from the bottom-up with specific goals in mind for each of our clients, and we will manage risk along the way. Don’t worry, we will pontificate on the world’s events just like everyone else, because it is fun and our clients enjoy it; we just won’t let that tail wag the investing dog.

    It is Thanksgiving once more, and we have much for which to be thankful. This has been a year with a lot of change. I lost both of my parents last fall and will miss them at the Thanksgiving table. Iron Capital was acquired by AssuredPartners Investment Advisors (APIA) on June 1. After 21 years of being my own boss I am now part of a much bigger team. My wife has a brand new hip after suffering for too long on the one that no longer worked. My son has a fresh surgically repaired shoulder. This is the give and take of life. There is no return without risk, there is no joy without suffering, and there is no gratitude without loss. The old decays so that the new can grow. It has been a full year with both sadness and joy.

    It is Thanksgiving, and I am extremely thankful. In keeping with our tradition here is my list:

    ~ I am thankful that we base our investment decisions on sound fundamentals, not narratives.

    ~ I am thankful for the strong foundation that my parents provided for my four siblings and me.

    ~ I am thankful that college basketball has begun, and that Wake Forest has two more wins than Duke and three more than UNC.

    ~ I am thankful for all my new APIA colleagues and the bright future we have.

    ~ I am thankful my wonderful wife and that she can once again keep up with the rest of the family.

    ~ I am thankful for my son and my daughter, both of whom are growing into wonderful human beings.

    ~ I am thankful for my family, immediate and extended.

    ~ I am thankful for my friends.

    ~ Of course, I’m always thankful for Mama’s pumpkin cheesecake, though she is no longer here to enjoy it. I don’t think she will mind me eating her slice.

    ~ Finally, I am thankful for you, our clients and friends. Your trust in Iron Capital and now APIA is our greatest asset, and we value it every day of the year.

    Happy Thanksgiving!

    Chuck Osborne, CFA
    Managing Director

    ~What Now?

  • My wife and I are blessed with two wonderful children; tragically they have both turned into teenagers. Our son, Charlie, is almost 17 and loves basketball, cars, and terrorizing his sister. Our daughter, Mary Frost, is 14, a good athlete, a great student, and truly gifted at pushing her older brother’s buttons. This daily reality has spawned a new favorite phrase in our household, which usually comes out after a sibling ruckus when the instigator will say incredulously, “All I did was …”. To which my wife or I will respond, “Was that necessary?”

    If I were Federal Reserve Chair Jerome Powell, I would be asking myself that very same question. The Fed met September 17-18 with the stock market up significantly year-to-date, the economy growing at 3 percent in the second quarter, and unemployment still low by historical standards, and they decided to lower interest rates by 0.50 percent. On September 16, the day before the Fed meeting, the yield on the 10-year Treasury was 3.63 percent; by the end of that meeting on September 18, the 10-year rate was up to 3.70. The next day, after the meeting adjourned and the 0.50 percent cut was announced, the 10-year rate actually rose slightly to 3.73 percent. The rise has not stopped, and at this writing the current rate is 4.31 percent.

    How can that happen? Didn’t the Fed just cut interest rates? The financial media make it sound as if the Fed is some all-powerful controller of financial conditions – as if when they lower interest rates, suddenly all borrowing cost is lowered, the economy soars, stocks climb, and there is peace on earth and good will towards mankind. If only any of that was true.

    ©Tanarch

    In reality, the Fed controls one rate, and that is the overnight Fed Funds rate. All other interest rates are determined by the market, which is under no obligation to follow the Fed’s action. It has chosen not to do so this time because economic data has been strong. The initial reading for 3rd quarter GDP is 2.8 percent growth. There is no doubt the economy is growing. In a growing economy, investors are going to demand a higher return on their money.

    That positive economic data also confirms that the Fed didn’t need to lower rates in the first place. They seemingly talked themselves into it, largely because they believed the pundits who have been crying recession for almost two years now. Either that, or they have done something that no other Fed committee has ever done to my knowledge: lower rates simply to get back to “normal.” If so, then bravo. The Fed has a long history of reacting to a crisis by taking emergency measures and then never accepting that the crisis is over, until their “emergency measures” have caused the next crisis. If they simply moved to get back to normal before causing a new crisis this would be a huge step, but I have my doubts.

    I think they lowered rates believing that a slowdown was on the horizon. It wasn’t, and now the 10-year rate, which is most important to investors and homebuyers, is actually up and the stock market has leveled off. The Fed will meet again next week, and they have put themselves in a tough situation. If they hold tight, they basically admit that their earlier cut was too early or too big. If they lower again, they risk reigniting inflation. I’m sure they are looking back at the last meeting and asking the same thing we keep asking our kids, “Was that necessary?”

    This is just one more reminder why prudent investing is done from the bottom-up, analyzing each individual investment on its merits, and not from the top down, trying to guess what the Fed will do (or, for that matter, who the next president will be). Our way may seem simple and perhaps even boring. Making investments based on Fed actions seems exciting, but it has to be stressful. Fortunately, it isn’t necessary.

    Warm regards,

    Chuck Osborne, CFA

    ~Was That Necessary?

  • You have heard this one before: A village picks a boy to watch over the sheep. The boy is supposed to yell “Wolf!” if a wolf comes around and the townspeople will come running to save the sheep. The boy watches regularly and nothing happens to the sheep, and finally out of boredom, he decides to cry, “Wolf!” The people come, but there is no wolf. The boy thinks it is funny even though he gets in trouble, so he does it again and again. One day when a wolf finally arrives, the boy yells and yells but no one comes; the townspeople were not going to be fooled by the boy again. The wolf eats all the sheep.

    © Dave Rheaume

    I was reminded of this fable last week as once again the Wall Street pundits cry, “Recession!” or at least economic slowdown. As we have chronicled already, this incorrect call has been going on at least since the beginning of 2023. They will not admit that they are wrong, but will keep making the same call until it is finally right. It may be 2030 by that time, but then they will crow about how right they were. “See, I told you in late 2022 a recession was coming, and now in the year 2030 it is happening! I was right all long.”

    The danger now is not that people are still listening to the doomsayers, but that they are becoming like those townspeople: They have come running so many times for the false warnings that they may ignore them when the wolf finally comes.

    This time, unlike most of this period, there are some signs that slowing could be occurring. A bad jobs report for July took unemployment to 4.3 percent, which is not high historically, but higher than it has been for some time. Then, throughout the first week of September we heard that everything hung on the August jobs report, which came in okay – not great, but not bad. The unemployment rate went down to 4.2 percent. The world is not ending after all, but things may be slowing down.

    GDP for the second quarter came in at 3 percent, and as of September 9, the Atlanta Fed’s GDPNow says our current run rate is 2.5 percent. That is slower. We are moving from the recovery phase of the economic cycle to mid-cycle. In other words, we are getting back to normal with a growth rate around 2 to 2.5 percent. That isn’t a recession and it isn’t even a “soft landing,” it is the normal everyday not-booming-or-crashing run rate.

    What does this mean for markets? As painful as it may be in the immediate term, this two steps forward, and one step back in markets is healthy. We are seeing signs that the long-awaited rotation away from big tech toward the rest of the world seems to be slowly happening. While the entire market has gyrated up and down, large value stocks, as represented by the Russell 1000 Value index, has made higher highs and thus far higher lows, while large growth stocks failed to rebound above the highs from earlier this summer before their fall last week.

    The dollar has weakened, which provides a tailwind to U.S. investors who are investing overseas. This also helps the diversified portfolio. There is plenty to be constructive about.

    The constant calls for a recession are getting very tiresome. However, prudent investors cannot become like the townspeople who simply stopped listening; we must pay attention to the data and continue to refute the pundits until the data changes and we finally say this time they are right. The wolf will come for our sheep, but he isn’t here yet, no matter what that silly boy keeps crying.

    Warm regards,

    Chuck Osborne, CFA
    Managing Director

    ~The Boy Who Cried Wolf