It has been 76 days since Lawrence Carrel’s article about Equity Risk Sciences and the high risk of the overall market appeared in Forbes. On May 27, 2020 the S&P 500 closed at 3,036.13. Today, August 11, 2020, it closed at 3,333.69, or about 10% higher than it was when the Forbes article was released. Does the fact that the market rose 10% mean the dangers ERS warned of have failed to come to pass? It’s too soon to tell. That being said, it may be worthwhile to point out that all of the reasons we urged caution in May are still applicable in August.
We commented on two individual stocks towards the end of the article. One of them, Bristol Myers (BMY), we called a “high-risk” company which had borrowed too much money; the other, BorgWarner (BWA), we called a “fundamentally strong company with an extremely low risk profile” due to its much lower liabilities. It may interest readers to learn that in the 76 days since the Forbes article ran, BorgWarner has significantly outperformed Bristol Myers: