George Seay, CEO & Chairman, Annandale Capital is waiting for a 10% drop before getting more aggressive in the market.
Transcript:
CAROLINE WOODS: In terms of a number, a percentage of when you would be comfortable getting in, how much does the market need to decline before you say, OK, I think that this is fairly valued. I think that it’s time to get back in and start buying?
GEORGE SEAY: Yeah, that’s a function both of the Fed’s interest rate policies because that obviously has a big impact on the future value of corporate earnings. And then also the earnings growth. You know the market. Warren Buffett famously has said that in the short term, the market is kind of a political animal. And it’s kind of a voting machine. What’s popular. And then in the long term, it’s a weighing machine. And what it’s weighing is the increase in the percentage increase on free cash flow and earnings for, for corporate America. So the way I’m looking at it now, because I really like a margin of safety, is as long as stocks are priced at 20 times earnings or more, I’m not super constructive on the market. I just don’t think your odds are very good at those kind of prices. But once it dips down to 19, 18, 17 times earnings, I get a lot more interested. So you’d have to see the market drop around 10% before you get to those kind of multiples. And we’re going to wait and see. Right now we’ve got enough exposure. And we never completely get in or out of the market because you don’t want to time the market. It’s just a function of whether our exposure is higher than our targets for allocation to stocks are lower. And right now they’re slightly higher. So we’re going to just stand Pat or trim for the time being.
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