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ANNUAL FORECAST ISSUE

Small Caps Will Roar Ahead in 2023

Alexander Green, Chief Investment Strategist, The Oxford Club

Alex Green head shot

2022 is a year that most investors will be happy to put in the rearview mirror. 

War broke out in Europe. Inflation hit the highest level in 41 years. And the Federal Reserve took interest rates higher at a gallop. 

As a result, stocks have turned in their worst performance since the financial crisis. Bonds turned in their worst single-year performance ever. 

Even investors with well-constructed, broadly diversified portfolios had a tough year, with high volatility and subpar returns. 

Should we expect more of the same in 2023? 

Quite the opposite, in my view. Inflation is still too high but it’s coming down. The American consumer remains surprisingly resilient. The Fed is nearly done raising rates. 

Indeed, stocks appear poised for better-than-average returns in the year ahead – especially small cap stocks, for reasons I’ll soon explain.

One small cap in particular looks poised for spectacular gains. 

It’s a little-known energy company that is experiencing triple-digit growth in production… sales… earnings… and cash flow. 

It is paying down debt. It is buying back shares. And it is reinvesting nearly half its free cash flow to generate even greater gains in 2023. 

Yet the stock is priced like it’s having a going-out-of-business sale. 

This is a hypergrowth stock masquerading as a value play. I wouldn’t be surprised to see it more than double in 2023. That’s why it’s the newest addition to our Oxford Trading Portfolio. 

Before we get into my newest recommendation, it seems only right to take a look back at previous Forecast Issues to see how those predictions and recommendations panned out…

In the January 2022 issue, I made the case that value stocks would trounce growth stocks in 2022. And I focused on one value stock in particular: Arch Capital Group (Nasdaq: ACGL), a global insurance specialist. 

I emphasized its low-risk profile, generous operating and profit margins, heady earnings growth, and low valuation, as well as telltale insider buying. 

As I write, 2022 is not yet over. But it’s not too early to say that U.S. value stocks have easily outperformed U.S. growth stocks this year. They are ahead by several hundred basis points. 

And Arch Capital? While the S&P 500 is down 14% over the last 52 weeks, shares of Arch Capital are up 74%. 

Incidentally, International Business Machines (NYSE: IBM) – my prediction stock for 2021 – continues to trend higher in our Oxford Trading Portfolio as well. 

As I noted at the time… 

While investors have poured money into megacap tech stocks like Apple, Amazon, Microsoft, Google parent Alphabet and Facebook, they have given IBM a collective shrug.

Well, nearly two years later all those glamour names have tanked. Yet IBM is more than 40% higher. 

We have a long history of success going against the consensus.

And I disagree with today’s conventional wisdom that stocks will stay down – and perhaps go even lower – in 2023.

There are opportunities aplenty in this market, especially with small companies. Read on to learn why I believe 2023 will the year for a small cap comeback.

The End of the Bear Market

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Many investors don’t realize it, but small caps outperform large caps over the long term. And not by a little. 

In his newly updated edition of the investment classic Stocks for the Long Run, Dr. Jeremy Siegel at the Wharton School of the University of Pennsylvania reveals that from 1926 to 2021, small caps returned 11.99% annually vs. 10.35% for the S&P 500. 

Let me put that 1.64 percentage point difference in perspective… 

Ten thousand dollars invested in the S&P 500 in 1926 – with dividends reinvested through 2021 – turned into $115.7 million. 

That’s a powerful case for equity ownership. Yet the same amount invested in small stocks over the same period – a period that included the Great Depression – would have grown to $469.9 million. 

So over time, small companies clearly return a lot more than large companies. 

The trade-off is that they are also more volatile. That was especially true in 2022. 

History shows that in a bear market, large cap stocks hold up better than midcaps. And midcaps hold up better than small caps. 

However, history also reveals that when stocks lift off in earnest, the whole process reverses. Midcaps outperform large caps, and small caps outperform midcaps. 

In other words, when a bear market ends, small cap stocks reclaim the lead. 

And I believe that’s exactly what we’ll see in 2023. 

As I mentioned before, inflation is coming down. The Federal Reserve is close to the end of its tightening cycle. And there are signs – from record-low unemployment to strong consumer spending – that the U.S. economy is holding up better than many investors realize. 

Don’t get me wrong. There’s plenty of bad news out there too, from the ongoing war in Ukraine to continued tensions with China to ongoing snags in the global supply chain. 

But these negatives are already priced into stocks, and improvement in any of these areas – or potentially all of them – will set us up for a powerful rally. Especially in small caps. 

For all these reasons – and more – let’s take a closer look at an especially attractive small company: Earthstone Energy (NYSE: ESTE).   

An Undervalued Gem in the Energy Sector

Based in The Woodlands, Texas, Earthstone is an oil and gas exploration and production company with a growing portfolio of shale deposits in the Permian Basin. 

When Russia invaded Ukraine in February, energy stocks boomed. As the war dragged on, it forced the Biden administration to reopen idle shale fields, particularly in the Permian Basin. 

That region now accounts for almost 40% of domestic crude production and 15% of natural gas production. 

According to the U.S. Energy Information Administration, oil output in the western Texas and southeastern New Mexico regions rose by approximately 50,000 barrels per day (bpd) – to a record 5.4 million bpd for the month of November. 

(By contrast, the shale oil-rich Bakken drilling area in Montana and North Dakota is only about a quarter of that.) 

Earthstone’s asset portfolio includes the Midland Basin of West Texas, Delaware Basin in New Mexico and Eagle Ford Trend in South Texas. 

The company operates 890 drilling locations on over a quarter-million acres and has more than 350 million barrels of proved reserves. 

Most of its properties have more than 12 years of high-quality inventory life. And the firm is growing rapidly. 

Earthstone has made seven acquisitions since early 2021, which has increased production more than fivefold, reduced costs and improved operating efficiencies. 

Oil production in the third quarter alone rose 265% to 94,329 bpd. That helped increase year-over-year revenue by 382%. Adjusted earnings soared 432% to $346 million. And free cash flow skyrocketed 877% to $174 million. 

That has allowed the company to buy back millions of shares in the past 12 months, including 3 million in just the third quarter. 

Now, President Biden has expressed frustration that U.S. oil companies haven’t reinvested a significant percentage of their profits in exploration and production. 

(Even after he signed a raft of executive orders suspending oil and gas leasing on federal lands on his first day in office.) 

Yet Earthstone Energy – which is making money hand over fist – is happy to comply. It is reinvesting half its free cash flow in further exploration and production. 

In the third quarter alone, it brought 19 wells online. Fourteen of them produce over 1,000 bpd. And seven of them produce 1,500 bpd or more. 

That means sales and earnings will continue to ratchet higher in the weeks and months ahead. 

I estimate that earnings per share will rise from approximately $5.18 a share in 2022 to well over $7 a share in 2023. 

Yet take a look at the stock. It currently sells for less than four times earnings, one times sales and 1.1 times book value. 

No wonder the average price target on the Street for Earthstone is $28. 

But I think that’s a conservative estimate. 

This is a well-managed, rapidly growing energy play. The company has nearly $3.9 billion worth of proved reserves and a current market cap of approximately half that. 

So I expect the stock to more than double in 2023. 

That is, if the company isn’t bought out by one of the oil giants first – a reasonable expectation given the company’s exceptional growth prospects and dirt-cheap valuation. 

Action to Take: Buy Earthstone Energy (NYSE: ESTE) at market. And use our customary 25% trailing stop to protect your principal and your profits.

building wealth

Four Themes That Will Dominate 2023

Matt Benjamin, Senior Markets Expert, The Oxford Club

Alex Green head shot

Many years ago, I wrote about the economy and financial markets for weekly news magazine U.S. News & World Report. We routinely brainstormed cover stories that would fly off newsstand racks.

Two themes always sold well: stories about 401(k) plans and features about the life of Jesus.

One year when the markets were down sharply, a humorous editor suggested a hybrid theme that would surely sell like hotcakes: “Jesus, what happened to my 401(k)??”

That, basically, is the story of 2022 – a year that has been anything but kind to investors.

Supply shocks and too much economic stimulus in the U.S. (and many other nations) led to sudden, soaring inflation. And the Federal Reserve neither expected it nor was temperamentally prepared to deal with it.

And the spike in consumer prices was anything but “transient” – the Federal Reserve’s pat prediction for the rise in consumer prices that we suffered through this year.

The frantic efforts of Fed Chairman Jerome Powell and his colleagues to catch up to inflation with a nearly unprecedented series of outsize interest rate hikes spooked financial markets, sending both stock and bond prices into a tailspin.

Stocks and bonds are both down more than 15% this year. If things don’t improve, 2022 will be just the sixth time in the past 94 years that both have finished the year down by double digits.

But good news! The stars may be aligning for a very good 2023 for investors…

Not a Soft Landing… but Not a Crash Either

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In the new year, we will start to see disinflation take hold as demand falls and supply ramps back up.

The Fed’s unprecedented rate hikes will grip consumers and businesses – causing them to spend and hire less.

And Americans will finally run through all the excess savings they’ve had on hand since the massive stimulus effort by the federal government, which will further depress demand.

At the same time, the supply shocks that have limited the amount of goods and services available – which is the other half of the inflation equation – will largely conclude in 2023.

For example, research firm Sea-Intelligence expects shipping supply chain issues to be completely resolved and full capacity regained by March 2023.

So expect inflation to continue to drop through 2023, dipping to around 4% by the second half of the year. While that’s still twice the Fed’s (somewhat arbitrary) 2% target, it’s low enough for the central bank to pivot to a neutral stance well before midyear.

Thus, while economic growth will certainly slow, the U.S. will likely avoid a recession in 2023.

That won’t deliver the holy grail the Fed wants – a soft landing – but it won’t be a crash landing for the economy either.

A Good Third Year

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The stock market’s pre-presidential election year pattern will hold this cycle.

Since 1939, there has been only one down year for the Dow Jones Industrial Average in the third year of a presidential term.

The pattern has been the same with the S&P 500 since 1928.

Typically, a bear market occurs in the first or second year of each term, and a bull market resumes right around midterms, delivering strong gains from the elections through the end of the following year.

And the third year of presidential terms in particular – the year we’re about to begin – has been the best by far, with a 10.4% average gain in the Dow Jones Industrial Average.

By comparison, the fourth year had a 6% average gain, the second year a 4% gain and the first year a 3% gain.

So far, this pattern is holding. And the midterm elections delivered a split government that is giving markets confidence that further inflation-igniting stimulus is off the table.

A Small Cap Boom

The kind of economic recovery we’ll see should be good for one investment in particular: small cap stocks.

Why?

Smaller companies tend to be more focused on services than goods, more domestic and less dependent on international markets.

And consider that…

  • The service economy took a bigger hit than goods-producing firms during the pandemic, so there’s more room for growth there.
  • The U.S. economy will outperform Europe and many other regions, giving domestic-focused firms an advantage.
  • Firms with local and domestic supply chains will do better than those still dealing with international bottlenecks. And “reshoring” – bringing production back home to avoid future disruption to supply chains – will reward domestic producers.

Best of all, small caps are trading at a roughly 40% discount to large caps, according to Yardeni Research. The S&P 500 (large cap) price-to-earnings (P/E) ratio is currently above 17, while the S&P 600 (small cap) P/E ratio is closer to 12.

Small caps may close that gap early in 2023 too, considering that small cap stocks tend to outperform large caps in January.

I’m sure you’ve heard about the “January effect.”

Well, between 1980 and early 2021, the Russell 2000 index of small stocks averaged a gain of 18.2% in January (on an annualized basis) compared with a 12.7% gain for large caps, as measured by the Russell 1000.

Why does this happen?

That’s not exactly clear. Market researchers who have studied the January effect think that year-end bonuses and dividends give investors extra money to invest, and they often put it into less-known and smaller stocks to start the new year.

In addition, some investors may also sell stocks in December to claim a capital loss on taxes and then reinvest the money into smaller stocks with greater growth potential.

Whatever the reason, the January effect is statistically significant and will give small caps an early head start on a big year.

American Prosperity

Finally, one larger development I’m expecting is that the prophets of American decline will continue to be proved wrong in 2023.

Rival nations and economic systems that were predicted to eclipse the U.S. in economic and political stature are suddenly flailing under authoritarianism, economic and political repression, and war.

As a result, the U.S.-led international order that was established shortly after World War II suddenly looks appealing to many nations again.

The stability, open markets and rules-based institutions of the current world order are good for peace, trade and economic growth… all conditions that are great for investors too.

I expect that trend to also continue through 2023.

Here’s to a peaceful and prosperous new year!

Beyond Wealth

How to Talk Politics Without Committing Murder

Alexander Green, Chief Investment Strategist, The Oxford Club

A buddy of mine recently confided that his wife and he are at daggers drawn. He openly questions whether their marriage will last. The problem isn’t money, infidelity, drugs, alcohol or anything like that.

Their issue is that he is a dyed-in-the-wool liberal – as they both were when they married 30 years ago – but she has since become much more conservative.

“Now whenever we talk politics,” he said, “our voices rise, my blood pressure spikes and the Yorkshire hides under the couch. God only knows what the neighbors think.”

He’s hardly alone. Who among us hasn’t seen a social occasion degenerate into an intellectual food fight when politics rears its head? As a result, many hosts have an ironclad rule: No religion or politics at the table.

You can hardly blame them. Yet it’s a shame in some ways, since few subjects – under the right circumstances – are capable of sparking more interesting or provocative discussions.

“That’s the problem,” my wife, Karen, insists. “You prefer provocative discussions. Why don’t you just ask about their jobs and their kids like everyone else?”

She has a point.

Too many are unable to talk politics without quickly coughing up black bile. As I see it, there are two reasons these “discussions” generate such supercharged emotions…

  1. Political views represent core values. When someone disagrees with your politics, it’s easy to construe it as an attack on what you hold dearest. That might be freedom and personal responsibility or equality and fairness. Foundational principles like these are tough to compromise. And when uncompromising views collide, sparks often fly.
  2. Politics is often about self-interest. You might be unaware how close to home your “theoretical” discussion is hitting. More than a century ago, Ambrose Bierce defined politics as “a strife of interests masquerading as a contest of principles.” You can spend years studying and debating whether a particular policy is good for the nation. But most voters know immediately and reflexively whether it will affect them personally. No one wants to appear selfish or ignoble, however, so we tend to characterize policies that counter our interests as unjust, unworkable or just plain unrealistic.

Given these high hurdles, how do you have a civil exchange with someone holding opposing views? As a lifelong political junkie, I’ve pondered this for years and eventually came up with Seven Ground Rules for Political Discussion. Feel free to give them a try. Here are the terms of engagement…

Seven Ground Rules for Political Discussion

  1. You and your partner (or opponent, if you prefer) agree not to use the words Republican, Democrat, conservative or liberal, or to mention the name of any living politician. This prevents the conversation from devolving into an emotional rant against a particular party or candidate.
  2. Agree to use a level voice and normal tone, the kind you’d use to talk about last week’s weather.
  3. Agree that your mutual goal is to hear and understand your partner’s point of view, not to change it. (A tough condition for proselytizers.)
  4. To begin, your partner takes approximately five minutes to describe one particular policy they favor and why. Sticking to a single topic keeps the discussion from becoming unfocused.
  5. When your partner’s five minutes are up, you make no statement that confirms or contradicts their point of view. Instead, you take a few minutes to ask nonjudgmental questions that allow them to clarify their position and their reasoning.
  6. Your partner then repeats steps 4 and 5 so you can voice your point of view on the same subject.
  7. Afterward, you take a few minutes to summarize what you do and don’t agree on and why. Assuming a first aid kit wasn’t necessary, you can then move on to another policy position.

If you have the patience – or the temperament – necessary to do this, you’ll learn that those with opposing views aren’t necessarily as “idiotic” or “ridiculous” as you may have assumed.

Granted, the objective here is modest. It’s not to defeat your partner with verbal jiujitsu, point out the error of their ways or change their party affiliation. (Trust me. It’s a big enough victory just to hear “I see your point.”) The idea is to have a forthright exchange of views, increase your understanding of their views and vice versa.

Of course, this all presumes that you want to talk politics and are willing to keep your side of the bargain. Even then, a couple of disclaimers…

  • Some of your fellow citizens – including many with the most ardent views – are not particularly well informed. Polls show most Americans can’t name their congressman or any members of the Supreme Court. They confuse the Declaration of Independence with the Constitution, have only the foggiest notion of the size of the federal budget deficit and think foreign aid is a huge part of discretionary spending. As Winston Churchill noted, the best argument against democracy is a five-minute conversation with the average voter.
  • Don’t waste your time arguing with anyone whose opinion you don’t respect. This is doubly true when the person you’re dealing with is a zealot. (I define a zealot as someone who can’t change his mind and won’t change the subject.) You probably have better things to do than bang your head against the wall. Ideally, you want to converse with someone who knows more than you on a particular subject and can enlighten your point of view.

You might reasonably ask how much success I’ve had using my Seven Ground Rules. Some, I’d say. Things can still get passionate, but a civil exchange is possible.

On the other hand, it really is a lot easier just asking about their kids.

Portfolio Review

Portfolio Review

Alexander Green, Chief Investment Strategist, The Oxford Club

No asset class – not bonds, bills, real estate, commodities or precious metals – has come close to delivering the consistently high long-term returns of a diversified portfolio of stocks.

The trade-off, of course, is that stocks can (and will) fluctuate wildly in the short term. The market demonstrated that in spades during 2022.

But it shouldn’t surprise investors, really.

After all, if stocks offered double- and triple-digit returns and the same level of safety as investments like Treasury bills, no one would invest in anything else.

With stocks, high returns are the reward. But greater volatility is the price of admission.

That being said, if the 2022 market felt different than previous bear markets, that’s because it was.

In virtually every downturn over the last 40 years, investors were confident that if the economy needed a boost, Congress would crank up the spending and the Federal Reserve would cut interest rates.

That didn’t happen this time.

Zero interest rates and massive deficit spending – along with mandatory business lockdowns – are what stoked today’s high inflation in the first place.

It was a classic case of too much money chasing too few goods and services.

Now governments here and abroad are cleaning up the mess they made.

Sure, there will still be spending sprees and budget deficits. But they won’t be multitrillion-dollar ones.

As for cutting interest rates, that’s not likely anytime soon.

Jerome Powell and company have gone to great lengths to make it clear that – like Paul Volker in the early ’80s – it won’t back down.

The Federal Reserve is willing to risk a business slowdown – and even a potential recession – to combat high prices.

That’s what has the market in a tizzy. The “Fed put” is officially dead. (At least for now, anyway.)

This is bad news for companies that depend on a strong economy and/or low interest rates.

But it’s not a major negative for firms that are not sensitive to the business cycle.

That’s one reason I remain bullish on Glaukos (NYSE: GKOS) in our Ten-Baggers of Tomorrow Portfolio.

Based in San Clemente, California, Glaukos is a medical technology company focused on novel therapies for the treatment of glaucoma, corneal disorders and retinal diseases.

Glaucoma – which can develop in one or both eyes – is actually a group of diseases that damage the eye’s optic nerve, causing vision loss or blindness.

The diseases create pressure inside the eye. And their creeping, symptomless nature means eyesight is often slowly but irreparably stolen.

Without treatment, people with glaucoma first lose their peripheral vision. Over time, central (straight-ahead) vision also decreases. In the worst cases, those afflicted lose their eyesight altogether.

There is no cure for glaucoma.

However, the disease can be detected through a visual field test and a dilated eye exam. And with the proper steps, further vision loss can be avoided.

Patients generally begin treatment with eye drops. But many eventually opt for cataract surgery.

That’s where Glaukos comes in.

Its groundbreaking product is the iStent, a tiny L-shaped titanium implant that has helped thousands of people with glaucoma successfully manage intraocular pressure.

The device received regulatory approval from the FDA in 2012. And Glaukos has released new iterations over the past decade.

Glaucoma currently impacts 3 million Americans. Yet traditional surgery is invasive and can have serious side effects, including bleeding and retinal detachment.

The iStent, however, has an excellent safety profile.

It enables most patients to once again maintain normal eye pressure after the procedure.

Before the pandemic, 4 million cataract procedures were performed annually in the U.S. Nearly half of these were related to glaucoma.

Over the past three years, however, many medical procedures were postponed as prospective patients were afraid of contracting COVID-19.

Thousands of healthcare facilities stopped performing elective surgeries, including those for glaucoma. That caused a rare, but temporary, drop in Glaukos’ sales.

But with the pandemic receding, U.S. healthcare has reopened. And that bodes well for Glaukos.

The firm has built a wide-ranging, proprietary portfolio of microscale surgical and pharmaceutical therapies, and it has the most comprehensive pipeline in ophthalmology. New product launches – including the iStent SA, iDose TREX, iDose ROCK and IOP Sensor – will substantially expand its market opportunities.

Its balance sheet is strong, with manageable debt and nearly $400 million in cash.

In short, the Fed may eventually push the U.S. economy into a recession. But that won’t affect the business prospects for Glaukos one iota.

We’re sitting on a significant gain in this stock. But plenty of upside remains.

A Great Company in a Bumpy Market

I also continue to like the outlook for Marvell Technology (Nasdaq: MRVL).

Marvell, another holding in our Ten-Baggers of Tomorrow Portfolio, designs and manufactures a wide variety of integrated circuits that are at the core of 5G-capable networks.

The firm’s products are state-of-the-art and in high demand. Offering blistering data rates up to 100 times faster than 4G technology, the products allow businesses and consumers to take advantage of new 5G capabilities, as well as future ones as they become available.

Several years ago, most of the firm’s business came from consumer electronics manufacturers.

But today the majority comes from data centers, industrial and automotive manufacturers, and mobile networks.

Marvell’s products are proprietary and largely made in-house.

And the company has beaten Wall Street’s consensus earnings estimates in each of the last four quarters.

A few highlights from the most recent quarterly report…

  • Sales reached a record $1.52 billion, up 41% over the year-ago period thanks to strong performance in both its wireless and its wired end markets.
  • Earnings per share increased 68% year over year.
  • Operating margin hit a record 36.5%.
  • The company’s annual revenue run rate hit $6 billion, a full year ahead of target.
  • It returned $101 million to shareholders through cash dividends and share repurchases.

Clearly, the business is firing on all cylinders.

Looking ahead, I expect earnings at Marvell to rise from $2.30 a share this year to more than $3 next year.

(No wonder Rosenblatt Securities has a $125 price target on the stock.)

Marvell has a world-class management team with deep technical expertise, vast industry experience and a proven track record.

Its profit margins are protected by more than 10,000 global patents.

The company is one of the world’s fastest-growing chipmakers and is set to transform the cloud, industrial and consumer markets for years to come.

That makes Marvell Technology especially attractive at current levels.

A World Leader in the Cloud, AI and the Next Big Thing

And don’t overlook International Business Machines (NYSE: IBM) in our Oxford Trading Portfolio.

Long known as “Big Blue,” IBM has been a member of the Dow Jones Industrial Average since 1979.

The firm helps businesses and governments reconfigure their IT departments for the cloud era.

It also ensures that technological systems are not only faster and more efficient but far more secure.

In today’s economy, technology serves as a fundamental source of competitive advantage.

It allows organizations to boost innovation, productivity and resilience. It enables them to scale up. It allows them to cut costs. And it fuels growth.

Consider that the world now creates 2.5 quintillion bytes of data each day.

Artificial intelligence (AI) is the only way to effectively process and use all this information.

According to a new study, 35% of companies are now using some form of AI in their business.

It enables computers, robots and other connected devices to mimic the perception, learning, problem-solving and decision making of the human mind.

This allows computers to perform specific tasks with increasing accuracy and without human intervention.

Applications are now used for speech recognition, language processing, virus and spam prevention, autopilot technology, image recognition, real-time recommendations, even automated stock trading.

IBM is the world leader in AI. So it’s not surprising that the company continues to top expectations.

Third quarter results were $500 million above Wall Street estimates, thanks to strong demand in all three of its key business segments: mainframes, software and consulting.

Despite strong headwinds from the dollar, revenue grew by 6% year over year – and more than half that revenue is recurring.

IBM’s clients aren’t simply buying hardware and software. They are forging a tight relationship with the company so they can navigate the future of technology.

That future includes quantum computing, one of the most disruptive technologies of all time – and truly the next big thing.

Here’s why…

Leading-edge semiconductors are reaching a physical limit. They simply can’t get much tinier. But computers using quantum physics instead of traditional semiconductors have far greater processing power and performance capabilities – and have the potential to transform everything from technology to healthcare.

IBM is the global leader in quantum computing and owns the world’s largest fleet, with over 20 of the most powerful quantum systems.

This new technology is widely expected to solve problems that today’s most powerful supercomputers cannot solve… and never will.

These machines won’t just deliver lightning-fast performance. Quantum-safe encryption will also be an enormous leap forward in cybersecurity, yet another area where IBM is fast becoming a world leader. In June, IBM acquired Randori, a leading cybersecurity provider. This builds on last year’s acquisition of ReaQta, a specialist in threat detection solutions that are undetectable to adversaries.

Despite these positive developments and a favorable outlook, IBM remains inexpensive at just 13 times prospective earnings for the next 12 months.

The stock also yields nearly 5%. And this dividend will only increase over time, as it has every year for the past 27 years.

In short, IBM has trounced the market since we got in two years ago. But plenty of upside remains.

MEET THE EXPERTS

A portrait of Chief Investment Strategist Alexander Green. A Caucasian male in his 50s with grey hair and a nice smile. He is wearing a navy-blue suit with a light blue button-up underneath and navy tie.

Alexander Green
Chief Investment Strategist

Alexander Green is an analyst, author and speaker whose primary mission is to show investors how to achieve and maintain financial independence. For 16 years, he worked as an investment advisor, research analyst and portfolio manager on Wall Street. He has been the Chief Investment Strategist of The Oxford Club since 2001.   

He has written several New York Times bestsellers, including The Gone Fishin’ Portfolio, Beyond Wealth, The Secret of Shelter Island and An Embarrassment of Riches 

In addition to directing The Oxford Communiqué, he oversees three fast-paced trading services: The Momentum Alert, The Insider Alert and Oxford Microcap Trader. He also writes for Liberty Through Wealth, a free daily e-letter focused on financial freedom, with nearly 300,000 subscribers.   

Matt Benjamin
Senior Markets Expert

Matt Benjamin has worked as an editorial consultant to the International Monetary Fund, the World Bank, the Economist Intelligence Unit and other global macro-institutions. He wrote about markets and economics for U.S. News & World Report, Bloomberg News and Investor’s Business Daily, among other publications.

He also worked for several years as head of political economy for a Financial Times-owned macroeconomic consulting firm, advising hedge funds around the world. Matt’s claim to fame is that he’s interviewed two U.S. presidents and has spoken with five Federal Reserve Chairs from Paul Volcker through Jerome Powell.

Matt also served as The Oxford Club’s Editorial Director for two years. He now contributes regularly to Liberty Through Wealth and other Club publications. Most recently, he has been working closely with Alex on The Oxford Communiqué Pro.

THE OXFORD TRADING PORTFOLIO

An active and diversified portfolio of the market’s most compelling opportunities.

COMPANY/SYMBOL

REC. DATE

REC. PRICE

CURR. PRICE

RATING

TRAILING STOP

TOTAL GAINS

Arch Capital Group (Nasdaq: ACGL)

Jan-21

$43.54

$60.04

Buy

$45.45

37.9%

Corteva (NYSE: CTVA)

Sep-22

$62.13

$62.99

Buy

$50.48

1.6%

CVS Health (NYSE: CVS)

Mar-20

$53.65

$101.65

Buy

$81.72

100.1%

Earthstone Energy (NYSE: ESTE)

Jan-23

New

$12.33

Buy

New

New

IBM (NYSE: IBM)

Jan-21

$123.34

$147.05

Buy

$111.87

38.0%

Illumina (Nasdaq: ILMN)

Aug-22

$219.26

$205.62

Buy

$182.06

-6.2%

Mercedes-Benz Group (OTC: MBGAF)

Dec-22

$67.04

$68.00

Buy

$51.00

1.4%

Merck & Co. (NYSE: MRK)

May-21

$75.97

$108.78

Buy

$83.14

52.9%

Novo Nordisk (NYSE: NVO)

Oct-22

$99.53

$128.91

Buy

$96.68

29.5%

SPDR S&P Biotech ETF (NYSE: XBI)

Jul-22

$70.54

$79.53

Buy

$71.18

12.7%

Note: If a “Buy” recommendation pulls back to within 5% of our protective stop, we routinely move it to a “Hold.” If the stock resumes its upward climb, we will move it back onto our “Buy” list.

THE TEN-BAGGERS OF TOMORROW PORTFOLIO

A select group of more speculative stocks with the potential to rise tenfold or more.

COMPANY/SYMBOL

REC. DATE

REC. PRICE

CURR. PRICE

RATING

TOTAL GAINS

Butterfly Network (NYSE: BFLY)

Dec-21

$5.06

$2.71

Buy

-46.4%

Exscientia (Nasdaq: EXAI)

Feb-22

$15.42

$5.11

Buy

-66.9%

Glaukos (NYSE: GKOS)

Dec-16

$34.10

$45.46

Buy

33.3%

Marvell Technology Inc. (Nasdaq: MRVL)

Oct-19

$25.40

$41.50

Buy

66.5%

Novocure (Nasdaq: NVCR)

Feb-20

$71.38

$75.30

Buy

5.5%

Note: We do not use trailing stops in this portfolio. A sell recommendation will be issued if we believe the company’s business prospects have worsened in some fundamental way.

THE OXFORD ALL-STAR PORTFOLIO

A diversified basket of funds and holding companies managed by some of the world’s top-performing money managers.

COMPANY/SYMBOL

REC. DATE

REC. PRICE

CURR. PRICE

RATING

TOTAL
GAINS

Berkshire Hathaway B Shares (NYSE: BRK-B)

Jan-01

$44.58

$306.39

Buy

587.3%

Equity Residential (NYSE: EQR)

Jul-01

$28.05

$62.73

Buy

305.5%

Icahn Enterprises LP (Nasdaq: IEP)

Nov-13

$78.23

$50.39

Buy

46.5%

Markel Corp. (NYSE: MKL)

Jul-15

$789.45

$1,298.06

Buy

64.4%

Pershing Square Holdings (OTC: PSHZF)

Nov-20

$28.48

$35.00

Buy

26.3%

Templeton Dragon Fund (NYSE: TDF)

May-02

$9.20

$10.45

Buy

466.2%

Templeton Emerg. Mkts. Fund (NYSE: EMF)

Jan-02

$8.80

$12.52

Buy

260.1%

Note: The All-Star managers make buy and sell decisions within these securities themselves. We do not use trailing stops here.

THE GONE FISHIN’ PORTFOLIO

A simple but sophisticated long-term investment system based on a Nobel Prize-winning strategy.

COMPANY/SYMBOL

REC. DATE

REC. PRICE

CURR. PRICE

RATING

ALLOC.

TOTAL GAINS

Vanguard Small Cap Index (VSMAX)

Apr-03

$15.13

$90.78

Buy

15%

589.6%

Vanguard Total Stock Mkt. Index (VTSAX)

Apr-03

$19.59

$96.48

Buy

15%

477.7%

Vanguard Emerg. Mkts. Stock Index (VEMAX)

Apr-03

$9.53

$33.55

Buy

10%

396.0%

Vanguard Europ. Stock Index (VEUSX)

Apr-03

$34.67

$70.74

Buy

10%

231.0%

Vanguard High-Yield Corp. Fund (VWEHX)

Apr-03

$6.02

$5.22

Buy

10%

105.1%

Vanguard Inflation-Protected Securities Fund (VIPSX)

Apr-03

$12.09

$12.39

Buy

10%

66.8%

Vanguard Pacific Stock Index (VPADX)

Apr-03

$36.07

$81.26

Buy

10%

225.8%

Vanguard Short-Term Investment (VFSTX)

Apr-03

$10.82

$9.98

Buy

10%

49.2%

VanEck Gold Miners ETF (GDX)

Apr-03

$28.26

$29.07

Buy

5%

175.9%

Vanguard Real Estate Index (VGSLX)

Apr-03

$51.53

$121.88

Buy

5%

284.3%

Note: The Gone Fishin’ strategy requires annual rebalancing and does not require the use of trailing stops.

THE FORTRESS PORTFOLIO

Holdings that will reduce your risk and boost your profits in any market.

COMPANY/SYMBOL

REC. DATE

REC. PRICE

CURR. PRICE

RATING

ALLOC.

TOTAL GAINS

SPDR Bloomberg Convertible Securities ETF (NYSE: CWB)

Jul-22

$66.14

$65.77

Buy

12.5%

0.2%

iShares MSCI EAFE Value ETF (CBOE: EFV)

Jul-22

$43.25

$46.30

Buy

12.5%

7.1%

SPDR Gold Trust (NYSE: GLD)

Jul-22

$159.53

$167.06

Buy

12.5%

4.7%

Pimco 15+ Year U.S. TIPS Index ETF
(NYSE: LTPZ)

Jul-22

$66.59

$62.35

Buy

12.5%

-3.9%

iShares Preferred and Income Securities ETF (Nasdaq: PFF)

Jul-22

$33.47

$31.28

Buy

12.5%

-4.1%

Consumer Staples Select Sector SPDR Fund (NYSE: XLP)

Jul-22

$72.92

$75.89

Buy

12.5%

4.7%

Utilities Select Sector SPDR Fund
(NYSE: XLU)

Jul-22

$69.30

$70.83

Buy

12.5%

2.9%

Health Care Select Sector SPDR Fund (NYSE: XLV)

Jul-22

$129.30

$137.98

Buy

12.5%

7.1%

Prices as of December 9, 2022 | For the absolute latest updates on all of The Oxford Communiqué’s portfolios, visit www.oxfordclub.com.