Most of the stock market’s 2023 gains were concentrated in a few stocks dubbed the Magnificent Seven. Those stocks now are highly valued. But the rest of the market is moderately priced and it lagged well behind the indexes the last couple of years. So, I think more stocks will see solid gains in 2024 and like Boston Partners Global Long/Short Fund (BGRSX), says Bob Carlson, editor of Retirement Watch.
It’s still important that our investments have solid margins of safety and our portfolios be diversified and balanced. We also want to avoid stocks that have extended prices because of high valuations and expectations that historic profit margins will continue. It’s not clear their margins can remain at these levels. If they don’t, valuations and prices should fall.
Geopolitics are a higher potential source of market vulnerability than they’ve been in decades, too. Markets had modest reactions to the invasion of Ukraine, the Israel-Hamas war, and other events. But that could change in future conflicts.
One fund I like is BGRSX. It invests in stocks around the world, both owning stocks and selling some short. The fund owns stocks of companies it views as high-quality businesses with positive momentum that sell at attractive valuations. It uses both fundamental and quantitative research to select stocks.
At the same time, BGRSX sells short stocks that it believes are overvalued. The turnover rate of the portfolio is high, but it recently had 87 long positions and 100 short positions. The fund was about 91% long and 45% short. Leverage used in the short positions gives a total exposure exceeding 100%.
BGRSX gained 5.1% in a recent four-week period, 7.9% in three months, 7.6% for the year to date, and 16.1% over 12 months.
Recommended Action: Buy BGRSX.
