Who doesn’t like a comeback? How many times have you thought, no way that can happen, and then it does? History is littered with such events. It’s the story of greatness. If you didn’t see it last night, a remarkable thing happened in New Orleans. The Golden State Warriors rallied together against a 20 point deficit in the 4th Qtr, to grab victory out of the jaws of defeat. The Warriors did something special. Things were looking really dark, but they didn’t give up they saw an opportunity. In fact many people probably turned the game off in the 3rd Qtr and missed it completely.
We draw some parallels to the investment world we live in, where loud voices have spooked investors for years, to the point that many have been turning off the stock market because the perception is this Bull Market is over. Not so fast. The S&P and Nasdaq reached new highs this week, in fact the Nasdaq officially erased the losses from the year 2000 dot.com bubble burst. This occurred despite the fact that the equity markets saw large money outflows in 9 of the last 10 weeks. There’s a large population who haven’t trusted this Bull run from day 1.
Remember, the Stock Market is a market of stocks. Not everything is influenced by what’s happening in Russia, Europe or the Middle East. This week proved that people around the world are still drinking high-end coffee, searching for things and buying a lot of stuff online at a fast and growing rate. This certainly impacts various companies in the Market.
There will always be infinite scare tactics to cause concern, and it seems even more so in the always-on, connected world in which we live. At the of 2014 we identified that this year was going to be a “stock-pickers” market. We reached this conclusion from our micro-fundamental research work which was being heavily complemented with our technical stock and cycle analysis. In other words, stock specific analysis. We anticipated more volatile price action in the face of the issues overseas. We’re living it. The Market at large has seemingly gone sideways, but under the surface, there has been tremendous activity, both up and down. It’s been a dream for us Market geeks. Stock picking is what drives us.
Last night the Warriors had to balance a strong, stout defense and spurts of unbelievable offensive output to secure that 4th Qtr comeback. Our investment strategies have similar underpinnings. There are unequivocally times for pure defense and preservation of capital and then there are times to take advantage of the offensive opportunities in the market place. Many are hyper-concerned with the macro issues at large, which we certainly don’t dismiss. However, we continue to favor our offensive minded 2015 approach and believe it will continue to deliver strong returns.
Have a great weekend.
By Mike Frazier & Mike Harris