Opening act....

I thought I'd kick things off by reposting an article I wrote for the Castlemoore Investment Letter, in which I shamelessly appropriate quotes from the hit TV show (now in syndication), "Cheers."

Enjoy:


Overweight's the Norm.

Coach: What's shaking, Norm?
Norm: All four cheeks and a couple of chins, Coach.

--from TV sitcom “Cheers”

Let me begin this column by apologizing…for last column, which many of you, due to a server hiccup, received up to eight times by email. And to those of you who did receive it that many times and didn’t read ANY of them, this apology does not apply.

Still and all, it’s nice to know that most of you have a sense of humour; otherwise you might not be reading my columns at all. Speaking of my last column, I briefly touched upon the idea that, in certain situations, being overweight was not necessarily a bad thing, “a waist being a terrible thing to mind” and all. I’m old enough to remember the inflationary ‘70s, when food was so expensive that being overweight was a status symbol.

But I digress.

Most investors have seen research reports from investment dealers which recommend that certain sectors of the market be “overweighted”, “underweighted”, or “market perform.” What these terms meant was certain sectors of the market were expected to outperform the broader market (or index), certain sectors were expected to under perform, and certain sectors to perform about the same.

I recall from my days as an analyst at a firm then known as Nesbitt Thomson (now “BMO Nesbitt Burns”) that we would rank sectors from “1” (worst) to “5” (best) based on how that sector was expected to perform relative to other sectors in the market. We would also rank individual stocks from 1 to 5 based on each stock was expected to perform relative to other stocks in its unique sector. I must say that both sectors and stocks ranked “4” and “5” consistently outperformed those ranked “1” and “2”. Overweighting the former would certainly have been a profitable strategy.

That idea hasn’t been lost on me throughout the years. What we do for our Focus clients at Castlemoore is an expression of that very thought, although implemented somewhat differently: we “Focus” our clients investments in what we believe will be the best performing sectors of the market (or countries) we expect to outperform.

Incidentally, if you’re a fan of legendary investor Warren Buffet, you might interested in knowing that he too follows a focused approach. He believes that spreading one’s money over too many investment opportunities only dilutes the effects any one of them, including the one’s expecting to outperform the others.

And speaking of Buffet, it’s time to eat. Here’s more from Norm, starting with my personal favorite:

"Hey Norm, how's the world been treating you?"
"Like a baby treats a diaper."

"Can I draw you a beer, Norm?"
"No, I know what they look like. Just pour me one."

"How about a beer, Norm?"
"Hey I'm high on life, Coach. Of course, beer is my life."

"How's a beer sound, Norm?"
"I dunno. I usually finish them before they get a word in."

"Beer, Normie?"
"Uh, Coach, I dunno, I had one this week. Eh, why not, I'm still young."

"What's new, Normie?"
"Terrorists, Sam. They've taken over my stomach. They're demanding beer."

"How's it going Mr. Peterson?"
"It's a dog eat dog world, Woody, and I'm wearing Milk-Bone underwear!"

"What will you have, Norm?"
"Well, I'm in a gambling mood, Sammy. I'll take a glass of whatever comes out of that tap."
"Oh, looks like beer, Norm."
"Call me Mister Lucky."

"How's life treating you?"
"It's not, Sammy, but you can!"

"Can I pour you a draft, Mr. Peterson?"
"A little early, isn't it Woody?"
"For a beer?"
"No, for stupid questions."

"Pour you a beer, Mr. Peterson."
"Alright, but stop me at one...make that one-thirty."

"How about a beer, Norm?"
"That's that amber sudsy stuff, right? I've heard good things about it!"

"What's going on, Mr. Peterson?"
"The question is what's going in Mr. Peterson. A beer please, Woody."



sheldon@castlemoore.com
1.416.306.5770 or toll free 1.877.289.5673