September 25, 2020

Value or Growth

The simple answer is neither. I’m occasionally asked if I’m a Value Manager (think dividends) or a Growth Manager (think tech), my immediate answer is neither, I’m an Event Manager. What I mean is, after macro analyzing the global economies in areas that include commodities, currencies, interest rates, employment, and consumer data, I then move to find the companies that are best equipped to provide future benefits. But my interest isn’t simply about a company that has fallen out of favor, rarely because of dividends and certainly not the call of the crowed. My strategies begin with what is referred to as event driven investment, meaning I look for mergers and acquisitions and other corporate events that are complementary to the needs of an economy perpetually in transition and also increase the competitiveness of the sector. Events can also be  a change in the overall social mood, for example the clear trend toward renewable investing has driven many companies such as Parker Hannifin (PH) to be available to growth in areas ranging from electric cars to solar or nuclear. Or an acquisition that takes an older company into new technologies, such as Jacobs Engineering (J) or XPO Logistic (XPO), both names also are poised for less certain, but more potential, infrastructure prospects. Predicting the future is less about analyzing and predicting the outcome of a narrative, and more about the outcome of an action.


The broad indexes closed the week in the positive. But just as it opened the week in the negative, looking at the week in total left the indexes at a slight negative with the exception of the NASDAQ. This isn’t necessarily a bad thing since the overall market is still oversold, and even some of the more onerous tech names are looking a little down and worthy of looking at for opportunity. Most technical indicators are showing weakness and, in my opinion, the back and forth of the indexes is a common sign of working off anxiety that comes with declines, just as it occurs in overbought conditions. If that sounds like a reason to be constructive, it is.


Much of the more constructive economic data that came in this week was overshadowed by the current jobless claims which showed a slight increase in new claims. This wasn’t surprising since there is no plan for any stimulus package and companies, especially those seriously hurt by the pandemic, such as Airlines have already announced a new spat of layoff as of October 1st. What’s more worthy of paying attention to is the upcoming end of the Third Quarter and the release of data that some economists are predicting will show a sharp snap back in GDP growth from the disastrous Second Quarter, with some estimates as high at 25% annualized. With the outcome of this week’s increases in industrial production, retail sales and housing starts, it should be a good number, although I don’t the anticipate the ensuing narrative to concur.

External Events

The highlight of this week was the comments from both the administration and Fed Chairperson Powell imploring action on negotiating another stimulus. Unfortunately, it was met with silence and there’s very few who anticipate any action. How the pandemic plays out over the fall flu season will determine the urgency, and with new layoffs on the horizon some may take notice. Outside of that, only the upcoming continuation of the election show should distract most from commenting on the stock markets and that’s not necessarily a bad thing. I’ll leave it there.

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