• Mondial (Dubai) LLC

Mondial Academy: “It’s a market of stocks and not a stock market…”

“It’s a market of stocks and not a stock market…”

Stock-picker or stock market? A valid question in times of crisis. For those that missed the news: the world is in crisis- to the point where the Oscar Wilde of the investment industry, Warren Buffet, sold his Berkshire Hathaway holdings in airlines on the basis that “the world has changed” for the aviation industry. It can’t be that good for a host of other businesses as the Buffet-view is one that suggests that the S&P market has some way to fall before it scrapes the bottom. So- why doesn’t he sell everything? That takes me to a favored Buffet quote on his three biggest mistakes: “selling Coca-Cola, selling Coca-Cola and selling Coca-Cola”.  The point of course is that if the Sage of Omaha doesn’t know when the market is going to fall, or when it is going to rise, then he is better off doing nothing. In short, if he can sleep at night with a stock which is fundamentally a good company that will eventually restore to profit, then he would not be inclined to sell, but simply hold until “fair value” is restored. The flyer from VAM Funds provides and insight into the battle between selecting specific stocks versus relying on the aggregate of the market. The flyer reflects the battle as the time spent in Bull and Bear S&P markets.

THE CASE FOR THE MARKET: BULL MARKET VICTORIES. Our VAM flyer lays out the case for trusting the market over time. They are convinced “markets will recover”. They can rely on a number of aspects of usual market recovery. Firstly, in a standard year well over 50% of an annual gain is in a handful of days. Picking those days is notoriously difficult for the best of traders meaning that, if the market is going to inflate upwards, you might as well simply hold it and not trade it in case you miss the upward volatility. Secondly, very few asset managers outperform market indices. Momentum asset manager research suggest that across asset classes some 80% of managers fail to beat market indices. Much of the reputation of market ETFs is built on low prices but also the bull market over-performance of the market versus asset managers. THE CASE FOR SPECIFIC STOCK SELECTION: BEAR MARKET VICTORIES. The VAM Flyer whilst weighted over time towards market recovery can’t hide the fact that today’s drama is a negative one. US equity market volatility has breached all sorts of records and at the time of writing sits somewhere between minus 14% and minus 20% for the year- with (in Buffets view) worse to come. But even Buffet hasn’t sold everything. Instead, the shrewd stock-picker seeks to “kick-the-tyres” of those companies attracting business. There are clearly some of them around: technology and medical firms are busy, agile firms re-purposing manufacturing for the needs of the hour: PPE, sanitizers- there have been a few quite remarkable swift re-purposing of machinery to change the end result from what was being purchased to what will be purchased in the coming months. There are firms out there adapting to “the world has changed”……..do you wish to know more?  Speak to one of our financial advisers.

Need that explained? Speak to one of our advisers.

© 2019 Mondial [Dubai] LLC

  • LinkedIn Social Icon
  • Facebook Social Icon