Checking in with you, amid COVID-19 lockdown

Dear Clients, Colleagues, and Friends,

A few weeks ago, I shared some big-picture thoughts about the current health crisis and its financial impact now and in the future. Obviously, there have been some ups and downs since this began, with headlines in the Wall Street Journal including:

“Dow posts worst day since 1987” (March 13)

And 12 Days Later:

“Dow Soars 11%, Best Day in 87 Years” (March 25).

Over that same timeframe, business executives and board members have also shifted in large numbers from selling shares in their companies to buying shares.

This wide range of reactions reflects a few factors:

  • We’re still in the early stages of an unexpected crisis, when information is at its sketchiest and least certain.
  • Volatility is exacerbated by large flows of automatic trades driven by algorithms rather than humans, and most of those algorithms are purposefully designed to be reactive: they sell when prices are declining and buy when prices are rising—resulting in higher highs and lower lows.
  • We are also seeing companies with stronger balance sheets (more cash, less debt) outperform companies with weaker balance sheets (less cash with more debt).

This is in no way surprising, but it validates our strategic preference for companies with stronger balance sheets relative to the structure of their business. It’s also part of the reason that our investment portfolios have continued to outperform the broader market indexes during this volatile year—so far, both on the way down and on the way back up.

While I can’t predict the short-term moves of the financial markets (no one can) and I can’t know when our discipline will out- or under-perform the broader markets, I am confident that owning better quality companies (Quality) , purchased at attractive prices (Value), will produce good results over the long haul. And, as I mentioned last time, we’re continuing to look for new investment opportunities amidst the volatility.

Questions or Suggestions?

Our plan is to continue with these updates on a regular basis. If you have questions or suggestions for specific topics you’d like us to cover, reply to this email and we’ll make note and do our best. (If you have a specific question about your own portfolio or situation and need a faster response, feel free to call us 585-586-1731 or drop a note to Jen Kenney-Zimmerli.)

Live a Richer Life

How are you doing? The one thing about the near-term that I do know is that it’s important that each of us take care of ourselves and our loved ones. If we’re not individually mentally and physically healthy we won’t be able to help all of us maintain our collective health. It’s a good time to read that book, watch that movie(s!) or send that letter you’ve been thinking about.

Beyond taking care of yourself and the people you love, opportunities to do more are popping up in every community. Here in Rochester there’s a Facebook group connecting people with relatively simple needs to those who can easily help. Yesterday, we delivered moving boxes that were piled in our basement to a group that will use them to deliver food care packages. We wore gloves and kept our social distance. The Facebook group is called Hey Rochester, NY! What do you need? What do you got? and you can subscribe here.

I’m sure there are similar efforts going on in your town.

As always, stay safe and thank you for your continued confidence in the work we do for you.

Jack McGowan, CFA
Founder and CEO

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