NYSEPatriot

 After a significant rise on Monday, the stock market declined sharply on Tuesday, December 4. We believe this was a result of several issues that converged, heightening investor concern. Adding fuel to the fire and increasing volatility were traders that, in our opinion, felt an extra dose of urgency to balance or close positions ahead of Wednesday’s stock market closure for the National Day of Mourning for President Bush.

We believe concern about the following issues, while not new, has been increasing and that various news reports on these issues have unnerved the market. 

  • The G20 meeting last weekend was initially met with relief when the U.S. and China agreed upon a 90-day tariff truce. The Trump Administration emphasized that any trade agreement between the U.S. and China requires strict rules prohibiting forced technology transfer, preventing intellectual property theft and preventing cyber espionage. Tuesday’s article in the Wall Street Journal titled “China Maneuvers to Snag Top Secret Boeing Satellite Technology” highlighted the severity of these issues and the necessity that any trade deal include significant protection of intellectual property. While the truce announced at the G20 is welcome news, articles like this one highlight that reaching a trade agreement extends beyond simply narrowing the trade deficit the U.S. has with China. It must also address the significant issues surrounding intellectual property protection, forced technology transfers and cyber security. Formulating a trade agreement will require extreme cooperation on both sides and could take more than the 90 day tariff truce agreed to at the G20 meeting. 
  • Historically, a yield curve inversion (i.e. when short term interest rates are higher than longer term rates) has been the precursor to a recession that occurs in the following 12 to 24 months. The 3-month Treasury bills to 10-year Treasury bonds and the 2-year Treasury bonds to the 10-year Treasury bonds are the most predictive yield curves to watch. Neither of these have inverted as of yet. However, many hedge funds have been expecting the Federal Reserve to raise interest rates in keeping with its current policy. 

    This expectation resulted in huge short positions in both the 2-year and 10-year Treasury bonds. In other words, many investors have been betting that Treasury bond prices will decline and bond yields will continue to increase. However, the Fed indicated recently it is likely to slow or pause the pace of rate hikes to reducethe upward pressure on interest rates. This slowdown or pause caused what looks to be significant short covering in the bond market. As a result, bond prices moved significantly higher and bond yields declined across all maturity dates, bringing yields closer to inversion.  

    We believe the flattening of the yield curve yesterday unnerved the stock market. However, we do not believe that Tuesday’s yield compression is the result of a bad economic report. Rather, we believe it is the result of leveraged traders exiting positions that had them on the wrong side of trades. In other words, these traders had to cover their short positions. As a result, they had to buy Treasuries, thereby driving up their prices which in turn brought down their yields. 
  • Combined, these events have heightened concerns about the ongoing strength of the world economy and the longevity of the current U.S. expansion. The International Monetary Fund (IMF) estimates that a full implementation of the trade tariffs would reduce world GDP by a half percent. In our view, the recent correction in the stock market has discounted (i.e. priced in) much of the potential for slower growth should all tariffs be implemented.

To summarize, we believe we witnessed a massive swing in sentiment rather than a change in fundamentals.  While a recession is inevitable, we do not see signs of one in the near term. Fundamentally, we believe the U.S. economy, consumers and corporate America remain strong and that stock prices are likely to rebound from this recent sell off. That said, we continue to watch economic indicators for material changes, as well as talk to and monitor the companies in which we are invested. If we see changes that we believe will be more than short term, we are prepared to act accordingly.

Click here to access the above CM Update in a PDF format. 

Disclosures: 

Century Management reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the trends discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable. Forward-looking statements are not guaranteed.

Past performance is not indicative of future results. Investing involves risk including the potential loss of principal. The discussions, outlook and viewpoints featured are not intended to be investment advice and do not take into account specific client investment objectives. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness.

Century Management is an independent registered investment adviser. Registration does not imply a certain level of skill or training. Century Management is also registered as a Portfolio Manager in the Province of Ontario.  More information about the advisor, including its investment strategies and objectives, can be obtained by visiting www.centman.com. A copy of CM’s disclosure statement (Form ADV Part 2) is available without charge upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact Century Management at 512-329-0050 if you would like to receive this information.. 

  marketsmartphone

In our latest market update we discuss:

  • The fundamentals of the companies in our portfolios are by-and-large doing well as of the third quarter, with most providing positive guidance looking forward.
    We believe the overall economy is in good shape, and we do not see a recession on the horizon.
  • We believe this market correction is largely due to fears of a slowing market and economy as a result of trade issues.
  • We believe that stocks, overall, are entering a fair value zone, and have largely priced in a slower economy that has yet to arrive, and stocks are materially cheaper than bonds.
  • We continue to believe that oil and energy-related stocks are in a long-term bull market.
  • We believe the cause of this week’s market sell-off (other than stretched valuations in many companies) is due to the concern over rising interest rates, which the Fed is raising in an effort to head off the potential of higher inflation.

Click here to access the full report. 

Disclosures: 

Century Management reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the trends discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable. Forward-looking statements are not guaranteed.

Century Management reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that any of the trends discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable. Forward-looking statements are not guaranteed.

Century Management is an independent registered investment adviser. Registration does not imply a certain level of skill or training. Century Management is also registered as a Portfolio Manager in the Province of Ontario.  More information about the advisor, including its investment strategies and objectives, can be obtained by visiting www.centman.com. A copy of CM’s disclosure statement (Form ADV Part 2) is available without charge upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact Century Management at 512-329-0050 if you would like to receive this information. 

CM Outlook Market

In our latest commentary we discuss:

  • We believe the cause of this week’s market sell-off (other than stretched valuations in many companies) is due to the concern over rising interest rates, which the Fed is raising in an effort to head off the potential of higher inflation.
  • From everything we can see today, we believe the U.S. economy is doing well. Even after the recent market volatility and pullback, we are encouraged by the fact that a majority of our indicators are showing no signs of a recession for the foreseeable future.
  • We do not believe that this is the beginning of a major bear market. Instead, we believe this is a correction within a major bull market.
  • We believe there is a rotation into value stocks from growth stocks and that our basket of stocks at Century Management continue to represent very good values.

Click here to access the full report. 

Disclosures: 

This material is for informational use only and is not financial advice or an offer to buy or sell any product. Forward-looking statements are not guaranteed.

Past performance is not indicative of future results. CM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The discussions, outlook and viewpoints featured are not intended to be investment advice and do not take into account specific client investment objectives. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness.

CM is an independent registered investment adviser. More information about the advisor including its investment strategies and objectives can be obtained by visiting www.centman.com. A copy of CM’s disclosure statement (Form ADV Part 2) is available without charge upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact CM at 512-329-0050 if you would like to receive this information.


 

Oil and Gas Discovery Levels 2

We at CM believe that an oil shortage is coming:

  • Global oil consumption is over 35 billion barrels annually.  
  • Global discoveries of oil and natural gas in 2017 totaled only 6.7 billion barrels annually of oil equivalence - a level last seen in the 1940s. 
  • Average oil discoveries over the past 6 years have been approximately 15 billion annually
  • Since 2014, exploration expenditures fell over 60 percent due to low oil prices and cash flow. 

Disclosures: 

The source for data sited in the bullet points is Oil and Gas Journal.  The viewpoint featured is not intended to be personalized investment advice. There can be no assurances that we will continue to hold these views, which may change at any time based on new information, analysis or reconsideration. Forward-looking statements are not guaranteed. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. Past performance is not indicative of future results.

 


CM in the news white2

Forbes interviewed Jim Brilliant on June 22, 2018 about our belief that oil prices are going higher and the opportunities that we see in energy.  In this interview Jim states that:

  • We believe that oil prices are going higher.
  • We believe that the IEA has underestimated demand for energy.
  • Energy demand from India and China is growing exponentially.
  • We are finding value in the offshore drillers.

Click here to access the full report. 

Disclosures: 

This material is for informational use only and is not financial advice or an offer to buy or sell any product. Forward-looking statements are not guaranteed.

Past performance is not indicative of future results. CM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The discussions, outlook and viewpoints featured are not intended to be investment advice and do not take into account specific client investment objectives. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness.

Century Management is an independent registered investment adviser. Registration does not imply a certain level of skill or training. Century Management is also registered as a Portfolio Manager in the Province of Ontario. More information about the advisor, including its investment strategies and objectives, can be obtained by visiting www.centman.com. A copy of CM’s disclosure statement (Form ADV Part 2) is available without charge upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact Century Management at 512-329-0050 if you would like to receive this information.

 


 

Oil Shortage 2018

 As recent as six months ago, much of the world was convinced that oil prices would remain lower for longer, with most experts anticipating oil prices would remain in a band between $40 and $60 for a very long time. It was thought that demand was peaking, shale had boundless growth, and OPEC (Organization of the Petroleum Exporting Countries) had abundant spare capacity. However, the fundamentals of oil (supply/demand and oil inventories) have forced this consensus view to change. 

Click here to access the full report. 

 

Disclosures: 

Century Management reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that the sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable. Forward-looking statements are not guaranteed.

Past performance is not indicative of future results. The discussions, outlook and viewpoints featured are not intended to be investment advice and do not take into account specific client investment objectives. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness. 

Century Management is an independent registered investment adviser. Registration does not imply a certain level of skill or training. Century Management is also registered as a Portfolio Manager in the Province of Ontario. More information about the advisor, including its investment strategies and objectives, can be obtained by visiting www.centman.com. A copy of CM’s disclosure statement (Form ADV Part 2) is available without charge upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact Century Management at 512-329-0050 if you would like to receive this information.

 

 


 Bull Bear Image

We believe the recent market decline is part of a normal bull market correction, and not the beginning of a long, protracted market decline or bear market.  Within this Century Management update, Market Appears to Be in a Correction, Not a Bear Market, we discuss the following:

  •  What's changed?
  • What do we expect at this time?
  • How can we tell the difference between a bull market correction and the beginning of a bear market?
  • What we believe about the current environment

Click here to access the full report. 

Disclosures: 

This material is for informational use only and is not financial advice or an offer to buy or sell any product. Forward-looking statements are not guaranteed.

Past performance is not indicative of future results. CM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The discussions, outlook and viewpoints featured are not intended to be investment advice and do not take into account specific client investment objectives. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness.

CM is an independent registered investment adviser. More information about the advisor including its investment strategies and objectives can be obtained by visiting www.centman.com. A copy of CM’s disclosure statement (Form ADV Part 2) is available without charge upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact CM at 512-329-0050 if you would like to receive this information.


 

CM in the news white2

Jim Brilliant, CFA, CIO, and Century Management portfolio manager has been interviewed by Bloomberg Businessweek, Barron's, Reuters, and Market Watch.  He has also been featured in an on air interview by Bloomberg Radio.  The following are quotes or excerpts from those interviews:

 US capitol dome

Should investors worry about a federal government shutdown?  We believe the history of government shutdowns suggests that investors can sleep soundly in the week ahead. 

Click here to read Market Performance and Government Shutdowns  

Disclosures: 

This material is for informational use only and is not financial advice or an offer to buy or sell any product. Forward-looking statements are not guaranteed.

Past performance is not indicative of future results. CM reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The discussions, outlook and viewpoints featured are not intended to be investment advice and do not take into account specific client investment objectives. Information was obtained from third party sources which we believe to be reliable but are not guaranteed as to their accuracy or completeness.

CM is an independent registered investment adviser. More information about the advisor including its investment strategies and objectives can be obtained by visiting www.centman.com. A copy of CM’s disclosure statement (Form ADV Part 2) is available without charge upon request. Our Form ADV contains information regarding our Firm’s business practices and the backgrounds of our key personnel. Please contact CM at 512-329-0050 if you would like to receive this information.


Arnold Van Den Berg provides Century Management's current market and economic outlook.

Disclosures:

Century Management reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security. It should not be assumed that the sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable.

The CM Value I Composite primarily invests in stocks, bonds, and cash. The focus of this composite is to find undervalued securities that over time will produce above average returns with a lower degree of risk than that of the general market. Portfolios in this composite are not constrained by market capitalization (size). Therefore, a significant portion of portfolio assets may be invested in micro cap, small cap, medium cap, large cap, or mega cap companies with one market capitalization being more heavily weighted over the other at any given time. In addition, there are times where portfolios in this composite will be invested in bonds and cash. Historically, cash and cash equivalent positions have ranged from 2% to 60% of the composite for extended periods of time. However, the long term average has been approximately 21%. The CM Value I Composite was created September 16, 1974. Prior to 2004 the composite was named the CM Standard Value Composite. Prior to 2010 the composite could have accounts with up to 30% fixed income mandates.

The Russell 3000 Index measures the performance of the 3000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market. The Russell 3000 Value Index measures the performance of those Russell 3000 Index companies with lower price-to-book ratios and lower forecasted growth values. The Russell 3000 Growth Index measures the performance of those Russell 3000 Index companies with higher price-to-book ratios and higher forecasted growth values. The Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 92% of the market. The Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 10% of the total market capitalization of the Russell 3000 Index  It is not possible to invest directly in the indices.

Past performance of markets, composites, or any individual securities is no guarantee of future results. The performance of accounts in any Century Management (“CM”) strategy may be materially different at any given time. Differences that may affect investment performance include strategy type, cash flows, inception dates, historical prices, and fees.

Positions held within each individual account may not be the same from one account to the next. Individual securities may be traded at different times as well as receive different execution prices. In addition, individual accounts may be pursuing similar objectives but may have different investment restrictions.

Certain statements included herein contain forward-looking statements, comments, beliefs, assumptions, targets and opinions that are based on Century Management’s current expectations, estimates, projections, assumptions, targets and beliefs. Words such as expects, anticipates, believes, estimates, projects, targets and any variations of such words or other similar expressions are intended to identify such forward-looking statements.

These statements, beliefs, projections, comments, opinions, assumptions, and targets are not guarantees of future performance and involve certain risks, uncertainties and assumptions, which are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in, or implied by, such forward-looking statements.

You are cautioned not to place undue reliance on these forward-looking statements, that reflect Century Management’s judgment only as of the date hereof. Century Management disclaims any responsibility to update its views, as well as any of these forward-looking statements to reflect new information, future events or otherwise.

Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind, including, without limitation, no warranties regarding the accuracy or completeness of the material.

Century Management is an independent registered investment adviser. A full description of Century Management’s investment strategies and risks are supplied in our Form ADV Part 2. To receive Form ADV Part 2 or if you have any questions about this report, please contact your client service representative at 1-800-664-4888, write to us at 805 Las Cimas Parkway, Suite 430, Austin, Texas 78746, or email us via our website at www.centman.com. You may find ADV Part 2 at www.centman.com