stocks bonds ETFs straight out of downtown Chicago. This is Zach's Market Edge. Welcome to Zach's Market Edge, the podcast about investing in your life. I'm your host, Tracy Reinek.
And this week I'm going solo again for an important podcast about looking ahead to 2023. We only have about another month until we get to the new calendar year. So this is a good time to think about what happened this year in investing and in your portfolio and to reflect. So obviously we are in a bear market here in 2022.
It looks likely barring any kind of unforeseen huge rally in December that the S&P 500 will finish in the red by the end of the year, never say never, however. So I may be proven wrong in just four weeks time, but it's likely it probably will. And after the boom of the last few years, this has kind of been a shock, right? For many of us, we were so used to 20, 30, 40% gains, either in individual stocks or in even the major indexes.
And if you owned any kind of tech fund, it might have been up 50% in one year during the pandemic. It seems so easy to invest, right? And then this year, the shocking declines. And I keep using that word shock because it kind of has been shocking and a lot of us have kind of been frozen and unsure of what to do now that the market conditions have changed.
So it's really time to look ahead to 2023. And if you're looking ahead, the key thing is to have some kind of plan. We've talked about having a plan many, many times on this podcast, usually when I have Kevin Cookon, who's my work colleague here at SACS, but many times when we've talked about should you sell stocks or basically should you sell? What should you do during the sell off?
Should you sell? Should you stay in? Those kinds of questions, it's all about having a plan. And the same thing should be asked if you're looking ahead to the next year, have that plan as the calendar turns.
So here's a few tidbits of advice about what you should be thinking about for your plan for 2023. So the first piece is that you're likely going to want to stay the course. If you are putting money into your 401k or say an IRA account, just continue, dollar cost average, even if this isn't the bottom and we see another pullback into the end of this year in 2022 or to start 2023, dollar cost averaging is your friend. You're buying more shares every month.
And in five or 10 years, you will pat yourself on the back that you simply just stayed the course. Now this would be for people who consider themselves to be actual investors, not traders, people who are long-term with long-term goals. And not a long-term of one year or three years, but much longer term, five years, 10 years, 20 years, maybe 30 years, you have time to write out the volatility. Because I ask you to think back to February and March of 2020, it was not that long ago now.
We're heading on to almost the third year since that time period. But it seemed very dark and grim when the coronavirus pandemic began, right? Both on the stock market and globally, health-wise and everything that was going on. And now, almost three years later, it's kind of hard to remember what was actually going on then.
And the fear and the panic on the stock market side about what was going on. But if you just stayed the course through that time period, and I'm hoping most of you did, as we talked about it here on the podcast, while it was going on, if you did, even just three years later, you're feeling pretty good about that decision. So keep this in mind for 2023 coming off of this down year that years from now, it will most likely hopefully be a brighter day and you'll be glad you stayed the course. Now, a second thing you should do is do an assessment of your portfolio.
This is always what you should do at least once a year. It doesn't have to be at the end of the year. Maybe you want to do it in the middle of the year or right when it's beginning. But at some point, you should be checking in on your portfolio, even if it's a long-term portfolio, even if it's your 401k or an IRA.
Are you diverse in that portfolio? And what I mean by that is you might have some big cap stocks, you might have some mid caps, you might have some small caps. And I'm just talking about stocks here, not even diversity with say bonds or real estate investment trusts or REITs, as they're called, or commodities, anything else. I'm just basically talking about stocks on this podcast.
So are you diverse in the stock world? Do you have the S&P 500 and the triple Qs or the NASDAQ? We tend to overweight and what is working. And so we kind of chase the returns, even if we're just in ETFs and in like a long-term portfolio.
So we'll check into our 401k. We look at what either mutual funds or ETFs were in in the 401k and yes, we get swayed by, oh, that one in my plan was up 40% last year. Maybe I should allocate some money to that. So we do, but you may not have diversity.
You may suddenly find that your largest holding is now a tech type fund or the triple Qs or NASDAQ 100 type of index. You might find you're underrated in the small caps, especially small cap value because it has underperformed over the last decade. So if you were kind of chasing the returns and what was hot, you may be overrated in the big cap stocks, which is like the thing stacks and you may be underrated in the small caps, especially small cap value. So you might be a good time to go take a look and see where you are because now's the time for 2023 to write the ship, so to speak.
And if you invest in individual stocks in your portfolio, you might find you are also overrated in one sector like tech. Now tech is say 28% of the S&P 500 now. So it is quite a significant sector just in general, but maybe you're at 50% or 75% or maybe even 100% in some kind of tech stocks. And so again, now is the time to reassess this.
Also, you might want to start to ask yourself, are you holding onto a stock or an ETF because it's down big and it might come back? This is the psychology of a bear market, right? Like, oh, it's down 50% or 80%. It might come back.
I'm going to stay in. So the question you have to ask if you're a long-term investor is, is the company still performing as you thought it would? Is this business still doing what it is you bought the company to do? That makes any sense.
So every year you should be reevaluating your businesses because remember if you own the individual stocks, you are an owner of that business. So if you bought the business because it had great free cash flow or it paid you a big dividend, does it still do those things? Will it be able to do those things if there's a recession and its earnings decline? Just because the stock sells off doesn't mean you should be selling it.
You have to look at the underlying business, especially if you own a company and you intend to be a long-term investor. There's always going to be ups and downs in what is happening with the business. Just ask anyone who's owned any stocks over the last five years. There was a lot of down momentum in earnings during the 2020 coronavirus sell-off in that time period.
Companies like Alphabet got hit on the earnings side because advertising declined initially when the pandemic arrived. But if you were looking and owned at Alphabet, you were thinking about, hey, as a business, is this what I still want to own? Then you might have come to the conclusion, oh, this is going to bounce back as things get better, as the lockdowns ease, and it did. And Alphabet's earnings bounce back too.
So you really have to look at each company and really do this assessment every year. It might be time to exit some of the speculative positions, however, that's what this whole thing is about of reassessing. So maybe you bought a company like Wayfair, TiggerW. You bought it during the pandemic, thinking, they're crushing it, we're all rushing out.
I need a desk for my kids for school. I need a desk to work from home. I need some cooking supplies because we can't go out to eat and I'm cooking all the food at home. I'm buying all the stuff from Wayfair, Wayfair, Wayfair, but now several years into it, things have changed, right?
I thought maybe it might continue to crush it, but now it's not. The consumer's still spending, but they're going another direction into experiences. And now everybody's back in school. I don't need another desk for my kids to work at school at home.
So Wayfair, again, TiggerW is down 88% over the last year. It does not have a PE. It has expected to see earnings fall 427% this year, and that's going to see a loss. Negative earnings of $7.59.
It did have positive earnings in 2021 of $2.32, but now that everything has slowed, it's gone the other way. 2023 is expected to rebound a bit, up 37%, but still seeing a loss of $4.78. So as an investor, you might want to ask, is this doing what I thought it would continue to do? It's no longer seeing positive earnings, and it may be quite some time before it does, and what happens if there's a recession?
And could this get even worse? So these are questions you need to do as we head into 2023. It's difficult as they are. This is a stock you may be asking, what if I just stay in it?
Might it come back? Well, again, do the assessment on the actual business. On the flip side, maybe you still want to own some kind of furniture. What about one of the other furniture companies like Ethan Allen, ticker ETD?
It's been in business 90 years. It's more upscale furniture, and it manufactures most of it, 75% of its products in North America. So it was not hit as bad by the supply chain problems out of Asia. And this one pays a dividend, yielding 4.6%.
So they do have positive earnings. Those are expected to be down 9.9% in fiscal 2023, which they just started. They just reported first quarter. That's $3.54.
They did make 393 in 2021. So that was the boom year for them too. But still positive earnings, and then fiscal 2024 down another 15%. So the analysts do think it's going to slow further down to $3, but it's still going to make $3 so far for now as of November 2022.
They have no debt, however. And they have a PE of just 7.9. Over the last year, these shares are actually up 19%. But they have had a big rally in the last month during this mini rally in this bear market here.
So you can see the divergence between these two. But if you were in Ethan Allen, you might be asking how safe is that? Did they keep paying it? Plus they paid some special dividends with their free cash flow over the last two years.
So unclear, they don't have to keep paying those, but they have paid them. But they at least have positive earnings. And so when you're assessing on this one, maybe your assessment might be different than something like with Wayfair. Now, what if you own the auto retailers?
You might have bought Carvana during the pandemic, thinking everybody's buying cars, we can't go to the dealers, we're just ordering online, Carvana is the future. Ticker C, V is in Victor, N is in Nancie, CV, N.A. But over the last year, these shares are now down 97.3%. 2022 EPS is now down 496%.
She had loss of $9.72 from a loss of $1.63 last year. So unlike Wayfair, they were not even seeing positive earnings last year during the boom. So more negative earnings still to come. 2023, EPS expected to jump back up 30%, but still a loss like Wayfair down $6.81 is what they're looking for.
So again, no PE because of the negative earnings and the situation in auto retail appears to be deteriorating still. We have high interest rates and so lending is more difficult. You have to pay more now for your monthly payment on the car. And now we're starting to see a bit more inventory.
So use car prices are starting to come down. Carvana's already laid off some people here in 2022. So this one, if you're doing an assessment, there's a lot to assess, right? But what if you had one of the traditional retailers on the auto side, like Luthea Motors, Ticker, LED?
They also have online car buying in their driveway division. So the old economy retailers on the auto side are not dropping the ball. They are competing against Carvana and the others. Luthea though, 2022 earnings are expected to be up 14.2%, but the estimates have been cut for this year in the last 60 days, but 2023 down 16%.
So finally, the earnings are falling for the auto retailers maybe by 2023, but it looks likely they will down significantly double digits here. So they made $40 and $0.03 in 2021. These was like a record year, expected another one this year to 4570, but then next year, 3828, which is still pretty solid, given what it's done in the last couple of years, but down a bit. So one year these shares are down 20% over the last year, and they have rallied in the last month up about 16%.
Pee is just five on Luthea. So it's pretty cheap and it does pay a dividend, I believe, but it's very small, but it is paying one. It is as X number four sell right now with those earnings estimates being cut. So again, I'm just doing the kind of assessment that you should be doing on every single one of your companies in your portfolio every year, not just heading into 2023, but we are doing it, especially this year because of what is happening in both the economy and with the bear market, we wanna make sure we're in high quality companies that can write out any kind of deteriorating economic situation and can come roaring back when things start to grow again.
So what about on the tech side? A lot of you own tech, I own some, I've sold some of my positions. I've lowered the waiting in a couple of mine already this year, but you have to do the same kind of similar assessment with some of those, why do you own them? And what does the outlook look like?
What are you paying for those shares? So one of the stocks that I do find intriguing, I own it in the insider trader right now because an insider did buy at this particular tech company is Adobe, ticker ADBE. And I find it intriguing because it's one of the few tech companies where earnings are holding up right now and expected to be up both this fiscal year and next fiscal year, at least so far. There's been no reason, no earnings warnings, nothing of that kind for the analysts to be cutting drastically, but there have been some cuts.
So what do these earnings look like? So fiscal 2022 up 9% to $13.62 from 1248 last fiscal year. But next year, next fiscal year is key, still up 11.5% to 15, 18, but nine estimates were cut in the last 60 days. So the analysts were a little too bullish.
They had to pull back a little off the last earnings report, but still looking pretty good for next year because we're not seeing that many companies with another year of earnings growth expected next year. But these shares are down over the last year, 50%. So they are a little bit off their recent lows, but still 50% sale on Adobe shares, PE, little pricey still at 24 times. They can kind of tell you what was happening with the PE ratio on this company, right?
That the shares are down 50%, still at 24, but that's come way down. So it's looking more attractive here. And again, everybody should be doing an assessment to kind of see what's happening with their company. Certain ones will get hit hard in a recession, like the ones dependent on advertising, like an alphabet or a meta.
And you should just be assessing to try to figure out how long will it take to like rebounds. Should I add more to my position here if it goes on sale or is something else changing in its business that is not gonna be good going forward and could hit those earnings? So these are all the questions you should be asking. So even with the panic, you know which of the tech companies have earnings, at least let's start there with a positive earnings.
But be sure to be diverse in what you're owning. So many of us, as I mentioned earlier, are likely to be overweighted in big cap tech. That's where the winners have been, right? That's why we have fang.
That's why we have fang men. Do you own all of fang men? Do you own all of those? So it's Facebook, Amazon, Nvidia, the G is alphabet, M, Microsoft, A, Apple, and Netflix.
Do you own all of them? You should be doing a reassessment. You should be asking yourself, am I diverse? Do I have things in other sectors and industries than just these fang men stocks?
Maybe I need to lighten up a bit on my positions in some of these. They are all great companies. They all have earnings. But those companies that led the last bull rarely lead the next one.
So this is also what we're looking at and that's why diversity is important. So heading into 2023, you might wanna make a plan to put some money to work in other sectors and industries. If you are too heavily weighted in some kind of tech fund in a 401k, maybe cut that back some and add more to small caps or some other sector, like healthcare that you might not have much exposure to. Don't focus so much on the past.
This is easy to do, especially when it's a bear market. It's kind of easy to say, oh, what might have been? Or, oh, if only I had sold at the beginning of the year. If only I'd take some gains off or whatever it is.
Don't focus on the past. The sell off has already happened. There's nothing you can do. You can't go back.
The question going forward is how you plan to map out your future. So have a strategy, have that plan. Check your investing goals. Are you still heading in the right direction with those goals?
Bear markets happen, but how you respond to it is really what matters. And it does often bring opportunities, especially for long-term investors. Because as I mentioned at the beginning of this podcast, if you're just staying the course and your dollar cost averaging every month, you'll look like a genius, like 10 years from now, right? A lot of people who'd stayed the course in 2008, 2009 during the great financial crisis, when we had very scary declines in the stock market, are reaping the benefits now over 10 years later, almost 15 years now.
But they just had to have some patience, and they did have to stay the course. So be sure, again, to know what your goals are, have that plan, because it'll give you some control over what is happening. Because we can't control the bear or the bull market. So let's recap the tickers I talked about on this episode.
There was Wayfair down pretty big over the last year. So you're going to have to reassess this one, ticker W, Ethan Allen, also in the same area on the furniture side. But it does have that big juicy dividend of 4.6%. Ticker E, T as in Tom, D as in David, E-T-D.
Then there's Carvanna, another one that's seen a big decline over the last year. Ticker C, as in Charles, V as in Victor, and as in Nancy A, CV and A. And also on the auto retail side, also seeing cuts in their earnings estimates, but still with positive earnings, Lithium Motors. Ticker L-A-D is a ticker there.
L is in Larry, A is in Adam, D is in David. And then on the tech side, Adobe is one of the few with rising earnings estimates. This fiscal year and next fiscal year, ticker A is in Adam, D is in David, B is in Boy and E as in Edward, A-D-B-E is Adobe. And as always, you want to be sure to subscribe so you don't miss a single episode, because I'm bringing them to you all throughout this end of the year period.
And then we'll be back to start 2023. That's why you gotta be prepared, right? Gotta have your strategy. It's coming up fast.
So be sure to subscribe either on Apple Podcasts or on Spotify. We're on a bunch of other platforms, including Amazon Music. But you can also get us on YouTube. All of our podcasts are on Zex Podcast Page, or you can get it in a video format, but you're not gonna see me, but it is on like a video on there, on using Headliner on there.
You can get that on the Zex YouTube page. So be sure to get us somewhere, and I'll see you again next week with some more stacks. This material is being provided for informational purposes only, and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. Do not act or rely upon the information and advice given in this podcast without seeking the services of competent and professional legal tax or accounting counsel.
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