If You Don’t Like the Market Now, Just Wait a Few Minutes
Recent shocks to financial systems have created opportunities if you act now.
Mark Twain is often attributed as saying, “If you don’t like the weather in New England, just wait a few minutes.” The aphorism has been adopted by residents of any locale well beyond New England wherever the weather is subject to sudden reversals, real or imagined.
Nearer to our own interests, we might borrow Twain’s witticism to describe the stock market in recent weeks: “If you don’t like the market now, just wait a few minutes.”
The high-profile misfortunes of several banks generated a shock to the global financial systems, re-igniting fears about a recession in the U.S. and triggering another interest rate hike by the Fed. As the dust settled on a historic round of bank failures and bailouts, investors could be forgiven for reconsidering their portfolio strategies.
Turning to a wit of another generation, Warren Buffett reminds investors to “Be greedy when others are fearful and fearful when others are greedy.” Buffett certainly did not mean for investors to change tactics from week to week, which would result in desultory portfolio churn. His admonition works best when keeping a firm eye on a long-term horizon, at which point the volatility of the current markets resembles nothing more than the gentle lapping of waves on a white sand beach instead of monster whitecaps pounding the surf.
Despite the apparent fearfulness of many market players, nothing in the current market shakes our conviction that buying and holding well-managed businesses can outperform the broad market when purchased at reasonable prices.
While equities markets could worsen from here (things could always get worse before they get better), reacting to the fearfulness of other investors with action right now is a testimony to our principles. Laser-focused on the likely returns of our selections by 2028, we remain committed buyers of sound businesses when opportunities present themselves.
In this issue of the SmallCap Informer, those opportunities come from two compelling companies both previously covered in SCI, and both selling at reasonable (or better) valuations.
Our first pick revisits a strong contender in the regional banking industry, an institution that is not likely to share the balance sheet problems that have plagued other national and global banks.
Our second selection has suffered from fears of investors about the impact of economic hard times on its medical device business. We see those fears as overblown and, since the fundamentals are strong, the stock is inviting at its current valuation.
Stay the course!
- DOUG GERLACH
Read Doug's complete commentary and profiles of two recommended small company stocks in the April 2023 issue of the SmallCap Informer stock newsletter. Not a subscriber? Subscribe to the SmallCap Informer and get monthly small company stock recommendations and updated buy/sell prices for each of the 48 high-quality small company stocks currently covered in the newsletter.