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Zacks Market Edge Highlights: Southwest, United Continental, JP Morgan and Bank of America

Zacks Equity Research

For Immediate Release

Chicago, IL – January 31, 2019 – Zacks Market Edge is a podcast hosted weekly by cks Stock Strategist Tracey Ryniec. Every week, Tracey will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life. To listen to the podcast, click here:

Please use the Soundcloud link from this URL for the PR. Thanks: https://www.zacks.com/stock/news/350542/the-most-important-rule-of-investing

The Most Important Rule of Investing

Welcome to Episode #164 of the Zacks Market Edge Podcast.

Every week, host and Zacks stock strategist, Tracey Ryniec, will be joined by guests to discuss the hottest investing topics in stocks, bonds and ETFs and how it impacts your life.

In this episode, Tracey is going solo to talk about the most important rules of investing: diversification.

Diversification in a stock portfolio can mean diversity in industries, sectors and market cap. This podcast focused on industries and sectors.

As of the Nov 9, 2018 13-F, Warren Buffett’s Berkshire Hathaway owned shares in 4 different airlines including Southwest LUV and United Continental UAL.


They’re all in the same industry and fly to similar cities. They are all trading with similar valuations. Do you need to own 4 in your portfolio?

Investor Mistakes

Often, investors think that owning “more” stocks means they are more diversified. When, in reality, they often own a lot of stocks in the same industry or sector. This doesn’t lower the risk, it enhances it.

The airline stocks often move together. If fuel costs are rising, they usually rise at all of them. Similarly, if there’s a recession, they are all likely to be impacted in similar ways.

Investors should make sure that they are sufficiently diverse in their holdings. ETFs are another good way to add diversity if you can’t achieve it through individual stocks.

How Many Banks Should You Own?

Berkshire Hathaway is also a big holder of bank stocks. It now owns 7 of the 10 largest US banks such as JP Morgan JPM and Bank of America BAC.

But you can achieve that by buying a single ETF.

The Financial SPDR ETF XLF has over 60 holdings but four big banks make up 28% of the ETF. Those are JP Morgan, Bank of America, Citigroup and Wells Fargo. Berkshire Hathaway, itself, is also 14% of the ETF.

The top 5 holdings, therefore, are over 40% of the ETF.

What else should you know about diversification in a stock portfolio?

Tune into this week’s podcast to find out.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.

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