Macro Talk

First and foremost, Conrad’s Utility Investors is devoted to helping our subscribers buy the best stocks at the best prices. The publication also aims to provide the tactical nous to weather the market’s inevitable storms while avoiding major blow-ups that result in permanent loss of capital.

To this end, we monitor macro developments that could affect our holdings, including trends in the global economy and relevant political news. Technical factors also come under consideration, from momentum-based indicators to the composition of a company’s shareholder base.

But our process of selecting stocks for the model Portfolio hinges on rigorous, bottom-up analysis of the more than 200 essential-service stocks covered in the Utility Report Card. Although we don’t build our Portfolios from 30,000 feet, we do incorporate our understanding of the macro environment to improve our odds of buying low and, in some cases, taking profits when valuations reach unsustainably high levels.

In contrast, investors who primarily buy exchange-traded funds (ETF) and other investment vehicles that offer one-stop exposure to a theme or group of stocks necessarily bet on macro and, to a lesser extent, technical factors.

A sharp run-up in an individual stock can boost an index or ETF’s return, but the other stocks in these baskets will dilute this outperformance. And if market sentiment sours on the particular theme to which an ETF offers exposure, stocks that feature prominently in those passive strategies will suffer disproportionately.