Blog
Shaken, but not Stirred – Presented by Barry Schwartz and Ernest Wong
Given the current environment, interest rate hikes, inflation, further disruption to supply chains and the Russian invasion which resulted in a very bumpy start to 2022, Barry & Ernest share their views on the market as well as specific examples of companies we are holding and how we analyze them.
Unprecedented events occur with some regularity
If there’s anything to be learned from the last few years, it’s that unprecedented events occur much more often than one would expect. This isn’t exactly a new concept – the idea is borrowed from famous investor Seth Klarman – but the events that have taken place recently have really driven this concept home.
Chasing the Past
If your house is like my house, you have a box of ear swabs that you use regularly for their intended purpose, cleaning your ears. But if you read the fine print on the box, you will find a warning. You are told that you must not put this product in your ear, that it is dangerous to do so, and whatever made you think to call cotton swabs “ear swabs” anyway?
An Ernest Opinion
Have growth stocks bottomed?
A notable feature of the current stock market decline is how disproportionately growth stocks have been impacted. The S&P 500 is down only about 12% year-to-date, while the technology-focused NASDAQ is down about 18%. Apart from Energy (+41%), the top performing sectors are low-growth, dividend-heavy Consumer Staples, and Utilities stocks. This result is not too surprising as high-growth stocks are more impacted by rising interest rates than low-growth stocks.
What to do about inflation
By now, there is unanimous consensus that inflation is happening and that it is not as transitory as once thought. I normally don't spend time thinking about macroeconomic issues such as future inflation since it is difficult to not only forecast such factors accurately, but even more importantly, have a correct non-consensus macro view that adds value. This is why our investment strategy focuses on company-specific factors such as business quality and capital allocation and why we often say, “We own individual companies, not the market”.
Why we don’t invest in oil stocks
Given the current oil price environment particularly with the geopolitical issues in Russia and Ukraine, it is natural to ask questions about whether an investor should buy energy producers.
Media Appearances
Barry Schwartz on BNN Bloomberg: Buy shares of big tech companies at a very reasonable valuation now
Barry joins BNN Bloomberg to comment on the Rogers-Shaw deal and talk about opportunities tech companies may offer in the future. He is certain that we will be using more of the products and services in future from all these companies.
Barry Schwartz on BNN – Top Picks & Past Picks
Barry discusses his top & past picks.
Barry Schwartz on BNN – Market Outlook
Barry discusses his outlook for the markets.
Outlook
Monthly Newsletter – May 2022
During May, the outlook for interest rates and inflation continued to rise, consumer demand weakened, supply chain constraints appeared to be getting worse, and the Ukraine/Russia conflict showed no sign of ending. Despite headlines that are certainly not improving, the S&P 500 ended the month exactly flat, and the technology-heavy NASDAQ was down just 3%. This result was encouraging because it suggests that investors are no longer reacting as harshly to bad news. As Barry noted during our Shaken but not Stirred presentation in April (which can be viewed here), stocks start going up far in advance of any actual improvements in the situation.
Monthly Newsletter – April 2022
Usually, when the stock market is having a bad period, as it certainly is now, investors can take some comfort in the fixed income part of their portfolio. They know that returns on fixed income are lower over time, but at least the capital is protected and yields are predictable. Usually. The last six months have seen the biggest drop in the bond market in history. In Europe, where government-issued debt has traded with yields at or below zero for the last three years, losses have been in the trillions of dollars (or Euros). In North America, losses have been on a smaller scale, but are still very substantial.
Monthly Newsletter – March 2022
LIONS AND TIGERS AND LOTS OF BEARS We all follow our own paths towards our financial goals. Sometimes we appear to be on the yellow brick road where the sun is shining, the sky is blue and there are no [...]
Wealth Management
Don’t Hesitate; Just Designate
Designating a beneficiary on your registered accounts is one of the most important decisions in estate planning. By designating a beneficiary, you inform the financial institution of your plans for your estate after your death. While it is a simple act requiring little in the way of paperwork, it can do a great deal of heavy lifting in establishing your wishes for your estate and ensuring your assets are distributed according to your wishes when you die.
Knowledge is power
s the great Francis Bacon proposed, “knowledge is power”. If so, then so too must be saving and sponsoring another person in their pursuit of that knowledge. The Registered Education Savings Plan is a highly effective vehicle for Canadians to save for the education of a loved one, chiefly children and grandchildren.
TFSAs – The magic of tax free compounding
How large can a TFSA get? It depends, of course, on the rate of return and the number of years that compounding has to work its magic.