Mid Year Report Card

     I would rather take the SAT test than back test my picks for 2017, There is little to crow about here. I wish I would have stuck with my conviction to not recommend any specific stocks and just stuck with the basics. Anyway, here I go:
     The Trump agenda has been a bust. The promised infrastructure build-out has been nonexistent. Last December, I mentioned four companies that could benefit from the increased spending on our infrastructure.
  1. ASTEC Industries- down 30% YTD
  2. JACOBS Engineering- down 10% YTD
  3. VULCAN Materials-flat YTD
  4. AECOM-down 15% YTD
The only bright spot in government spending has been in the defense issues which I will cover later in this post.
     I predicted that interest rates would go up this year and I was right about that. The FOMC raised rates twice this year for a total of 50 basis points (half of one percent). As predicted, bonds did poorly in this increasing rate environment. I had recommended a couple of financial stocks that benefit from rising rates. I will use an ETF as a benchmark for the financial sector-XLF- which holds many bank stocks and financial companies. XLF returned 6.9% so far this year. I expect the good performance to continue for the second half of the year.
     Energy did poorly for the first half of this year but I mentioned in December that I did not expect any large gains. I did mention that I thought crude would stay in the $50 range but instead, it has struggled to get there. I still believe it will end the year higher than it is now, and I still believe in the midstream MLP's which are not as dependent on crude pricing. The XLE which is a proxy for energy prices is down 12 3/4% this year.
     The Pot trade has been a bust too. The only stock I liked in the space was Scotts Miracle Grow, which is an indirect bet on marijuana, was flat on the year.
     The defense sector has remained hot this year for many reasons: Our military is overdue for increased spending on weapons, tensions from North Korea's missile testing, and Trump's campaign promise for increased defense spending . So far this year, Boeing is up 50% and Lockheed Martin is up 15%. Buying stocks with high multiples (P.E. ratios) makes me nervous, so I still don't hold these.
     In summary, I don't see the Trump agenda working for investors this year given the turmoil in the White House and both houses of Congress. However, even in this pricey market, I have bought a few value stocks that have been taken to the woodshed for missing their earnings call. Most recently I bought Goodyear Tire, symbol (GT). My reasoning is that no matter what the car of the future runs on, it will probably have wheels. I also liked the fact that it was trading at 7 times earnings-a huge discount to the market. I also bought McKesson because I thought this medical supply company was just too cheap. I don't know what my next post will be about but I hope that I don't have to mention the Donald.

On Vacation

     I recently returned from a vacation to Canada where I spent the week fishing and relaxing. I rarely worry about my investments while I am away from TVs and computers because summertime is also when money managers also are on vacation. Institutional money managers often trade in millions of shares of stock, sometimes moving markets. Between Memorial Day and Labor Day, the top brass of the big mutual funds turn over management of the funds to their subordinates  who have limited authority to make any large changes to the portfolio. This is why summer seems a little subdued for the stock market. The movers and shakers of the financial world are chilling out in Martha's Vineyard, enjoying the perks their incomes affords them. A major news story about politics or an individual stock can still roil the market, but generally, things are quiet. Summer is a good time to do some reading in financial publications for ideas that will help you build a list of investments to buy when the time is right. Some articles that I have read recently were about the emerging autonomous auto transformation. The implications of this technology are enormous. All these vehicles will also be electric powered and recharged by plugging into household current. I have heard it said that our existing electric grid is currently unable to handle the extra power demands of a large scale conversion to electric vehicles. If this is true, then the purchase of Solar City by Elon Musk was a stroke of genius. Elon is the CEO of Tesla motors, which plans to produce 1 million electric cars a year within 5 years. I don't know for sure if he can pull-off this feat but I wouldn't bet against a guy who routinely launches rockets into space and supplies the International Space Station. I have already been in Tesla stock and sold it for a quick profit but now I am looking for an entry point again. The transformation of the auto industry could be the biggest story of the last 100 years. Another point I would make about this is the technology required to make it happen. Computer chips that help the driverless cars navigate are being manufactured now by Micron Technology (MU). Lam Research makes the equipment which manufactures the memory needed by autonomous cars. Lam has been on a tear lately so buy it on a dip.