Concept, as I see it, is the elevator speech that sums up the general case for buying either individual stocks or aggregates like industries or sectors. The ultimate issue is the why for earnings to be higher than the market expects and/or for longer than the market expects. I typically use Walmart as an example, but let’s take Micron Technology (MU).

MU makes memory chips that are used as storage in just about every computer device. They’re also key elements of AI chips. Demand is very high and, if anything, is increasing. The industry is running at full capacity right now. Significant new capacity that’s in the works will take several years to come online. In addition, ASML, the premier maker of chip manufacturing machines, will also likely actively control the amount of new capacity created. In the meantime, the price of output, which is already up a lot, will continue to rise.

Valuation, again as I see it, is the issue of how much of the potential good news is already factored into today’s stock price. In today’s world, this can either be because our estimate of future earnings is higher than the consensus, or because brokerage house trading bots are programmed for fast reaction to actual company announcements rather than to anticipation of them.

Sort of like baseball, each side gets its turn at bat.

My sense is that until relatively recently, the year to date has been dominated by concept. Now, though, it seems to me that valuation is up at the plate. How long this half inning will last is unclear. But, assuming I’m correct, while it’s going on, year to date winners will have a difficult time, while previous laggards shine.

Two choices, in my view: do nothing; or try to strengthen the portfolio by selling stuff that has been hiding in the dark corners of the portfolio and use the funds to buy stronger names that are selling off. Knowing one’s own tendencies–meaning how this has worked out in the past–will tell us which of the two to do.