Investment Opportunities in the Producer Manufacturing Sector: Part 15


Although I consider the overall stock market as represented by the S&P 500 to be overvalued, not all stocks are overvalued. This has been one of the primary reasons that I have attempted to cover the 20 sectors reported on by FactSet. It’s very common for investors to get caught up in either their views or others views of stock market values based on generalities. However, it is my position that it is a market of stocks and not a stock market. Consequently, I consider it more prudent and in the long run profitable to pay more attention to your individual holdings than the overall market.

Now that I have covered 15 of the 20 possible sectors, it should be clear to those who have followed this complete series that there are more differences between individual stocks than similarities. Moreover, not only are companies in different sectors quite different from companies in other sectors, there are also a lot of differences between companies in the same sector. As the following 23 screenshots on the companies I am covering in this Producer Manufacturing Sector clearly illustrate, even companies in the same sector can possess their own unique and often radically different characteristics from other constituents in the same sector.

Some of you may be asking what’s the point of all this, aren’t I merely stating the obvious? When your focus is clear, that may be true. However, I am reminded of a recent conversation I had with a long-standing client who was asking me why I was not currently including bonds in his portfolio. I pointed out that I am only temporarily avoiding bonds because I believe their interest rates are too low. Nevertheless, he responded with “yes, but stocks are risky.” I responded back with the level of risk in stocks varies from company to company. Additionally, I pointed out that the risk of price volatility in bonds are also potentially high due to today’s low interest rates.

My point is simple and straightforward. All stocks should not be judged the same. The concept of risk is a very multifaceted concept. As this relates to stocks, there are some that are quite risky, and others not so much. It is my contention and opinion that these risk assessments should be made on a case-by-case basis and not in a general way. Therefore, I offer this series of articles in order to put a spotlight on this very important point. Although all the companies I’m covering with this article are in the same sector, I hope the reader appreciates that there are significantly different levels of risk between one and the other.