I regularly tell people that they need to try and time the market to accelerate their investment income. This puts me at odds with many financial advisers.

However, most of those financial advisers have a vested interest in creating a steady stream of investments. They don’t want that regular and anticipated stream of investments to dry up or be diverted to other investment opportunities. So, while their advice to regularly invest is good advice, the advice to not vary your investment vehicles could be more self-servicing for them then is prudent.

The reality is that the best of the best investors regularly time their investments. They don’t invest when the price is high and they heavily invest when low price opportunities are available to them.

As I write this, we are a couple of weeks into a fairly major drop in the stock market due to the coronavirus SARS-CoV-2 outbreak. I thought this article on Bloomberg.com was very revealing and it produced the following table:

Buyer Company Money
Carl Icahn Hertz, Newell 120
Carlos Slim PBF Energy 48
Kelcy Warren Energy Transfer 91
Rausing family International Flavors
& Fragrances
Reimann family Keurig Dr Pepper 200
Tammy Hughes Gustavson,
Bradley Hughes
American Homes 4 Rent 108
Warren Buffett Delta Air Lines 45

Source: Regulatory filings
Note: Transactions made since Jan. 1. Includes purchases made by firms partially or fully controlled by the person, such as Buffett’s Berkshire Hathaway and Slim’s Inversora Carso.

If the biggest and most successful investors are timing the market, then doesn’t it make sense that you should as well?

In a recent Wall Street Journal article, Goldman Sachs compared the top 5 companies in 2000 to the top 5 companies today. In that comparison, Goldman concludes that the market is not repeating the problems of 2000 that caused the stock bubble in today’s market.

The top 5 companies in the S&P 500 today are:

  1. Facebook Inc.  [stckqut]FB[/stckqut],
  2. Apple Inc.  [stckqut]AAPL[/stckqut],
  3. Amazon.com Inc.  [stckqut]AMZN[/stckqut],
  4. Microsoft Corp.  [stckqut]MSFT[/stckqut],
  5. Alphabet Inc.  [stckqut]GOOGL[/stckqut].

and of 2000 were:

  1. Microsoft,
  2. Cisco Systems Inc.  [stckqut]CSCO[/stckqut],
  3. General Electric Co.  [stckqut]GE[/stckqut],
  4. Intel Corp.  [stckqut]INTC[/stckqut],
  5. Exxon Mobil Corp.  [stckqut]XOM[/stckqut].

The five companies in 2000 traded at 47 times expected earnings, according to Goldman. Today’s five biggest companies trade at 30 times expected earnings—making them by no means a bargain, but still less expensive than the stocks that dominated the stock run in the early 2000s.

The tech giants powering the S&P 500 today also reinvest far more of their profits into their businesses than their predecessors did. The five companies funnel about 48% of their cash flow from operations into capital expenditure and research and development spending, according to Goldman, well above the S&P 500’s 21% average and the 26% average for the five biggest companies in March 2000.

According to Goldman, “Lower growth expectations, lower valuations and a greater reinvestment ratio suggest the current concentration may be more sustainable than it proved to be in 2000.”