We do lots of hidden work during the quiet times so that we can act quickly when the moment comes.
That moment is now. When markets fall, that is the perfect time to bring some investments off the bench and into our portfolios. Over the past month we have been actively rebalancing our portfolios to take advantage of truly outlandish volatility (both up and down) and increase our holdings of American stocks. That’s because we did all the necessary work on this late last year.
When buying investments, there are three things you need to know: What exactly are you buying? What’s the full price? How will it benefit me? With markets churning, prices flying all over the place and investors running for cover, we know we’re paying much less than we were just a few months ago. And we know the companies well, because we’ve been studying them for months if not years. They have low leverage, quality businesses that customers simply can’t avoid and flexible managers who are always adapting to the future. We believe these companies should weather the pandemic and be best placed to keep on doing what they do best once the world has beaten it. Some of them will no doubt benefit from the changes in the world that come about because of COVID-19.The benefits of these investments may not be seen over the next month or two – or even the next year. But give it five years, give it 10. And if investing isn’t stepping up during uncertain times to give cash to quality businesses, what is it?
Late last year I went on one of my regular research trips to the US. When making investments far from your day-to-day life, it always pays to go take a look yourself. Like Eddie Murphy and Dan Aykroyd in John Landis’s classic film Trading Places, it does you good to walk a while in someone else’s shoes. It gives you perspective and leads to questions that would never have occurred to you before. It gives you the opportunity to lunch with Jay-Z. It can also lead to pain, embarrassment and discomfiture in pursuit of a dollar bill.
If you want to see why our multi-asset portfolio funds have been so quick to buy several American companies during the recent correction – like CME Markets, Clorox and Equinix – have a read of my travel diary, Trading places. It gives an insight into why we buy the businesses we do. It’s also something positive you can read during these dark times.
Everyone is focusing on how to get through the next few weeks and months. Hopefully this report can remind you that there is a future out there. In the meantime, please know that we’re working hard to help you benefit from the recovery when it comes.
