Choose Your Battles Wisely Because If You Fight Them All You’ll Be Too Tired to Win the Really Important Ones!
Anyone who knows me understands I enjoy a spirited discussion about both sides of an issue. When I was younger, especially in college, I would often engage in heated battles over topics which were quite trivial. Nonetheless, this is part of maturing, and those days are long gone, but the intensity of the verbal warfare remains memorable. Some might call them arguments, but I prefer the term discussion. When the topic is controversial, participants can get emotional. It is why keeping your cool and staying level headed is important. If you are going to analyze a subject with accuracy, you have to understand both the positive and negative aspects of any topic. When you engage in a conversation where one side brings out the opposite viewpoint, if you give answers which are more logical and thought out than the other side, your point of view is seen as having more merit. In any case, you only have so many hours of the day, and the busier you are, the less time you have for long ‘discussions.’ How is this applicable to investing?
The two most important things for investors are your time and your capital. As your capital grows larger, your time becomes increasingly more valuable because the decisions you make have a greater effect on the overall value of your assets. Your capital is never unlimited, and there is only so much of it available. In most cases, there is a specific amount to work with, so it is not practical to invest in every interesting idea out there. It makes sense to have filters to weed out the kinds of investments you want to pursue. For example, I don’t even think about biotech. I have no interest in automobiles. Don’t bring up startups, I don’t want to hear about them. The vast majority of IPO’s are of no interest as well. As you eliminate more of what you don’t want, you now can concentrate on what you do want. Once you do find an idea you want to pursue, it is critical to evaluate the strengths and weaknesses of the business. Most institutions have investment committees which assign analysts to argue each side of the investment thesis when they evaluate candidates for a portfolio. If a potential asset is allocated ten million dollars or more, you can understand why decision makers want to understand the case before any dollars are spent. The same thing holds true for decisions on giving money to specific managers. Investment managers are probably researched more extensively than investment ideas, and it is quite understandable why. The more money involved, the more clarity is required on who the firm is (background), where they are located, how they operate, what their support operations are, and what systems they have in place. In sum, the investment management profession mandates efficiency. As the quote from above says, choosing your battles is critical, both regarding your time and your capital.
In the market this week, Pfizer’s announcement on Monday of 90% effectiveness for it’s Covid vaccine candidate ignited a huge rally. Preliminary indications are up to 50 million doses will be available by year end. Weekly jobless claims were lower than expected, coming in at 709,000 (740k expected). On the earnings front, McDonald’s beat estimates, while Simon Property Group and Beyond Meat missed, as did Norwegian Cruise Lines. DR Horton, the large home builder, had strong results, while Lemonade tasted sweet with their report. Looking ahead to the rest of the year, the IPO market is lined up with high profile candidates AirBnB, Doordash, Instacart, and game maker Roblox. Roblox has my daughter quite excited as she alone probably accounts for half their revenues.
In the political realm, the country and world will be waiting a few more weeks on the lawsuits and vote counting to finalize a verdict on the US Presidential election. As more races have been decided in the House of Representatives, Republicans have picked up additional seats and the Democratic majority is only at a handful of votes. Senate control rests on the the two Georgia races, but the worst Republicans can do a 50-50 split. The Democrats and Mr. Biden have an interesting approach to leading the country as apparently upsetting the majority of your constituents seems to be their desired approach. Biden is talking about potentially shutting the country down again, and a mask mandate. Republican governors want no part of either. Governor Cuomo doesn’t want the Pfizer vaccine, and Governor Newsome is busy banning Thanksgiving as we know it. Mrs. Pelosi, after losing quite a few seats in the House, declares the Democrats have a mandate, and invites newly elected representatives to a dinner where the Covid restrictions aren’t followed. Many see politics as complete absurdity and a waste of valuable minutes, and these examples provide more proof of this idea. As such, it’s probably better to use your time for more important battles.
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Yale Bock, Y H & C Investments, its clients, and the family of Yale Bock have positions in the securities mentioned in the blog, Investing in securities involves risk and the potential loss of ones principal. Past performance is no guarantee of future results. All investment decisions should be considered with respect to ones risk tolerance, return objectives, liquidity needs, tax considerations, and one’s overall financial situation. The fact that Yale Bock has earned the right to use the CFA designation does not mean Y H & C Investments will outperform broad market indexes.