Dear investors,
CLOSED POSITIONS PROFITABLE, SOME OPEN POSITIONS NOT (YET)
The month of April saw a slight decline for the AEX, with the index falling by 0.33%. This represented a period of consolidation.
RVM Strategy performed at –2.27% in April and RVM Retirement at –4.74%. The systems therefore had a weaker month than the index. Why was that?
THE MONTH OF APRIL
SHORT-TERM STRATEGY
In April, our short-term strategy was positive for both systems. RVM Strategy achieved +0.67% for the month with its usual cautious strategy. RVM Retirement achieved +0.68% with a similar short-term strategy.
TARGET POSITIONS
There were also some price target positions in the portfolio, based on our quantitative analysis. The calculated upward price targets were not achieved in April, and these current positions traded lower in April.
It also depends on the comparison. The positions are recorded for different underlying values and at different times. So, in itself, a position may be intrinsically profitable, but if this is not the case relative to the benchmark at the end of March, this will be reflected in the current results.
The RVM systems are essentially price target systems. The algorithm used calculates these price targets for the underlying values in which positions are held. The algorithm continues to calculate, of course. Price targets are constantly being added, either upward or downward.
The fact that RVM Retirement underperformed RVM Strategy in April is mainly due to the fixed-income securities in the portfolio, which were significantly lower in April than at the end of March. These positions are not present in RVM Strategy, of course.
In summary, one could conclude that we still have to wait and see whether the target prices will prove to be correct, whether the targets will be achieved, and whether the main trends will remain intact.
OUTLOOK FOR MAY AND BEYOND IN 2024:
IS THE STOCK MARKET CURRENTLY TOO EXPENSIVE?
May has been a bit higher so far, and you can read on all kinds of financial websites that there are "gurus" who, for example, believe that Berkshire Hathaway's large cash position and, with it, Warren Buffett and his associates, indicate that the stock market is no longer cheap. Or also: Buffett has sold some of his large Apple position. Is he signaling that Apple's global dominance is over, that it is no longer a 'wonderful business'?
And, of course, there are the usual doomsayers predicting crashes. I've already seen the analogies with 1929, where, in hindsight, not long before the peak of the New York Stock Exchange, stocks were still being touted as the place to be to grow your wealth.
What is our opinion on this at RVM Systems? Based on our quantitative analyses, we have no opinion on this. The price targets are calculated and that's it. The hit ratio for the price targets cannot be flawless, of course, but on average it is good enough to be reliable.
If you look at the fundamentals, such as price-earnings ratios and growth prospects, the picture is, as always, quite mixed. But let's take the financial sector as an example. In 2024, it played a very important role in the rise of the AEX index. Are ING, ABN AMRO, AEGON, ASR, and NN Group expensive? Let's take ING as an example, with a price-earnings ratio of 7.85 and a dividend yield of 6.76%. Is that an excessive price-earnings ratio? Objectively speaking, no. And what does that enormously high dividend tell us? That it will prove unsustainable? Who knows? Anyone looking at these figures objectively must conclude that the current share price reflects a great deal of skepticism. After all, anyone expecting stable profit growth from ING would expect a price-earnings ratio of 10 or even higher.
In other words, despite the increase in value, ING Group is priced on the stock market as if no one believes that it can continue to perform well in the coming years and that we may soon be looking at a price-earnings ratio of 4, or another very low price-earnings ratio. And there are other sectors for which these low expectations apply.
Looking at it this way, it is highly questionable whether the market as a whole is too expensive.
TECHNICAL STANDARDS
At RVM Systems, we also use technical benchmarks to determine whether the market may be overvalued, although we do not act on this. We look at the weekly and monthly charts of the AEX, for example, to get the bigger picture. Based on this, our technical assessment is that the market is currently worth buying on correction. You could also call 'worth buying on correction' a 'hold' recommendation.
Specifically for the AEX, I do not see any significant long-term sell signals at this time, not even in quantitative systems that specialize in identifying peaks or troughs.
SUBSCRIBE TO OUR SYSTEMS; MANY HAVE GONE BEFORE YOU
If you are not yet a follower of RVM Strategy or RVM Retirement, you are welcome!
Most investors who ever decided to follow have never left.
Sincerely,
Ruud van Megen