A Concentrated View Towards the Future
April 15, 2019
With the recent volatility, thankfully for us, there are opportunities that are materializing. So all of the research that we were doing on companies for the last year and a half or two, that we really couldn’t implement because of the way the asset was priced, [is] now kind of coming into, kind of, more attractive kind of price territory. So for us, this is a good thing.
Always be prepared. So we think of volatility, really, more as an opportunity than a risk. We do a lot of research on individual companies. We believe we are very, very good at pricing assets. So the volatility really is an opportunity. It also exposes those investors that really execute strategies that stand for nothing. We see a lot of trauma in these types of environments: people that have no compass, have no real clear direction of what their strategy is, what it stands for. So they don’t know how to behave.
What’s been interesting is the lack of volatility over the last three, four years. So it looks like things are normalizing a little bit. We can think of many reasons that might be happening. It appears that the volatility is here to stay. We think that’s a good thing for active investing. We start with great businesses. We think of that in terms of proﬁtability. We think of that in terms of balance-sheet strength. We’re always building portfolios around companies that generate the capital they need to invest in the future. So volatility can’t hurt these businesses in the short term if they’re in need of capital to kind of execute a business plan. That’s important to us.
The other part of this is companies that are highly proﬁtable. What you ﬁnd in moments that are unstable, that have a lot of volatility, is investors really ﬁnd newfound respect for those types of businesses. So they tend to outperform in unstable markets. They might not go up. They might not stay ﬂat, depending on how much damage is done in the marketplace. But it’s a great way to think of protecting principal in an unstable market. The beauty of these businesses is those opportunities to invest in the future. We’re prepared and we’re ready to kind of exploit and really kind of position a portfolio for what will drive excess performance over the next three, ﬁve years.
From our perspective, you know, clients or other investors really need a foundation to understand opportunity, [to] understand how they want to think and behave in markets. And too many people just don’t have the skill or the constitution to really engage markets in a way that [creates] long-term value.