If history is any guide, the companies most negatively impacted by a Clinton victory could reach their low point by the day she takes office or contrarily the day after the election if Trump pulls off an upset. This would be eerily similar to what the Reagan-favored securities did in January of 1981. We are diligently watching the trading of company insiders to get clues for good entry points on our existing holdings and other healthcare companies which could meet our eight criteria for stock selection.
One great irony to the stock market story of 1980 was how things played out over the next five years. After declining 22% during the first 19 months of Reagan’s first term, the Dow Jones Industrial Average rose from around 780 to 2,722 by late August of 1987. The buyers of U.S. common stocks in 1980 struggled for two years, but were well rewarded by 1987. Lastly, stocks in 1980 were very attractive from a historical standpoint at below 10 times earnings. They became even cheaper by the bottom of the market in August of 1982. Today’s stock market does not have the luxury of historical cheapness working in its favor, especially in the industries favored by the party in power. At Smead Capital Management we’re not traders or market timers, but as long-duration common stock owners we believe our contrarian approach has positioned us well regardless of who wins the election.
Warm Regards,
William Smead