What’s 200 points between friends, anyway?


200 point moves in the DJIA are headline-grabbing news items in the popular press. In an effort to entertain, alarm, or soothe, these large, triple-digit moves are used by the media to create the atmosphere of action and drama.  But are 200 point moves really news-worthy?  Here’s a quick look at what a 200 point move (on an absolute basis) looks like compared to the closing value (relative basis) of the Dow for the past number of years:


If you learned your investment rules of thumb and gained your early experience in the 80s, then you may have a very different view of a 200 point move in the Dow.  In 1987, the Black Monday crash erased 508 points and represented over 22% of market value (!).  Today, 508 points represents “just” 3.4% of the Dow value, and 200 points is a fairly modest 1.3% move.  Our finances can trigger emotional reactions, so before you leap into action after a few 200-point days, take a deep breath and look at the relative change in prices, too.  You may find that you are still living in the 80s!

Economic Outlook–Conerly Charts

View the latest charts and comments on the U.S., Oregon, and Washington economies from Dr. Conerly of Conerly Consulting.

We are pleased to re-post Dr. Conerly’s June charts for our clients. Please see his site for more data and comments: www.conerlyconsulting.com. Click the images below for larger versions.

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Smaller Companies Update

We added Navigant Consulting (NCI) to the Smaller Companies portfolio.  Navigant, market capitalization $700 million, provides consulting services to government and corporate entities in four main areas:  Disputes, investigations, and economic; Financial, risk, and compliance; Health care; and Energy.  Navigant had a return on tangible invested capital (ROIC) of 37% in 2012.  NCI has been a consistent generator of free cash flow ($55 million in 2012) and economic profits ($45 million in 2012 per our assessment).  At our purchase price, NCI was trading at an unlevered operating income to market value of invested capital (OP/MVIC) yield of 13.6% compared to approximately 8.8% for the S&P 500.

In many cases you will see us trimming back or completely selling CoStar Group, Inc (CSGP).  We not only owned CSGP in the Smaller Companies portfolio but it purchased our holding in Loopnet in 2012.  CSGP currently trades, based on our estimates, at a OP/MVIC of approximately 3% compared to approximately 8.8% for the S&P 500 and 13.6% for Navigant Consulting.