George Costanza advice for investors

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On Monday, I was invited for a return appearance on CNBC’s “Closing Bell” market panel, which features a number of voices making sense of the day’s market activity and offering viewers investment insight. The segment wasn’t digitized and uploaded to the website this time around, but I thought I would offer our blog readers information from the Q&A that took place with producers prior to my appearance.

Q. What is your outlook on the markets; stocks seem to reacting to news from abroad?

A. We still believe the S&P will be fairly valued at 1938, which is based on earnings of $114 and a 17x multiple. In spite of some pretty big changes happening in the world (the Ukraine split is the latest) the market seems to have a willingness to overlook many negatives. While the bias is upward, we don’t believe we’ll see a year in which there are no reactions to bad news, unlike the last quarter of 2013 when the market went up regardless of what was happening in the world. This is positive because markets are supposed to overreact in the short term, but get it right in the long term.

Q. What do investors need to focus on in terms of opportunities or threats?

A. The vacation from volatility is over – expect more market moves and not just upward shifts. We believe volatility is a good thing. It gives investors the opportunity to buy stocks on sale. Remember, at Fort Pitt we are long term holders of companies and believe that the money that an investor has in the market should not be short-term money, it is three to five year money.

Q. We recently hit the five-year anniversary of the market low in 2009. What is the biggest lesson investors should take away from the past five years?

A. For most investors it may be the “George Costanza advice” – do the opposite. When the market is down you should be buying quality companies that you believe have opportunity to grow in the future, not yesterday’s momentum darlings, but quality companies that are most likely to rebound. Going to all cash is not the answer. To keep your assets growing, you need to think like a business owner and own good businesses – not trade stocks.