“Pain is temporary. It may last a minute, or an hour, or a day, or a year, but eventually it will subside and something else will take its place. If I quit, however, it lasts forever. That surrender, even the smallest act of giving up, stays with me. So when I feel like quitting, I ask myself, which would I rather live with?” ― Lance Armstrong
When you are in high school, students must take physical education. As part of this course, teachers usually require some form of running. When you run distances, it helps your cardiovascular system. You may be required to run a half mile, or a mile, or a certain number of laps around a track, or maybe circling a large field. In many cases, it is timed. There are many people in the world who enjoy this form of exercise, and there are others who detest it. If you are trying to do the best you can and get the quickest time possible, sprinting at the finish is advisable. When you do push yourself, there is going to be physical pain involved. Mr. Armstrong, a controversial ex athlete who won quite a few Tour de Frances, was once considered the greatest cyclist of all time. While his steroid use may minimize his stature, the observation about the temporary nature of physical pain versus quitting seems quite fitting, especially if we apply it to our neck of the woods, which is the investment universe.
As we all know, things constantly change. The outlook for specific industries, and the companies that populate them, is dynamic. For example, in the last decade, sports betting was viewed as a staid area of the gambling market. Up until two years ago, illegal gambling had a huge share of the sports betting market. Once the Supreme Court allowed sports betting to be determined by the individual states, it changed the perspective of investors towards this endeavor. Mobile sports betting now dominates the sports betting landscape, and there is a great deal of excitement about it’s future prospects. A great deal of capital has been raised to compete for customers in the states which allow sports betting. Not every company will be successful, but the industries future is seen as bright. Conversely, a few years ago, we saw a similar circumstance in the marijuana industry, both in medical and recreational marijuana. Canadian companies dominated the conversation because the government in Canada passed countrywide approval. Investors poured their dollars into stocks which they thought would have plenty of success. If one looks at the current status of the marijuana companies, their valuations have been dramatically reduced. Is there an opportunity now? Maybe, maybe not. Investing is a long slog, and not everything you allocate capital to is going to have success. Interestingly, because things constantly change, segments which are out of favor may offer the most opportunity, especially when they are absolutely detested. Like the person who suffers pain when they go on a run, it may very well be the case the condition is temporary. The difference is that with investing, ultimately, if there is a rebound, you may be able to benefit for quite a long time.
In the markets this week, it was a relatively light week on the earnings front. The headline reports came from Nike, Costco, Darden Restaurants, and KB Homes. All exceeded market expectations. Two areas of the market to consider, especially if you are looking for places which should offer stability for the near future, are housing and pharmaceuticals. The country suffers from a dearth of available housing, both in new and existing homes. The lack of supply and available financing at rock bottom rates bode well for those seeking calm and less volatile areas of the market. With pharmaceuticals, it is an industry which has great profitability metrics and demand which is constant. At a time when most investors are gearing up for a tough few months, these are areas to consider.
In the political realm, Tuesday night will be the first presidential debate between Joe Biden and Donald Trump. The atmosphere is increasingly hostile. On the left, New York Governor Andrew Cuomo stated he wouldn’t believe the FDA’s approval of any vaccine and New York health officials would check out any drug after the Federal Government’s approval. CNN host Don Lemon made a remark that because of the latest ruling in the Breonna Taylor shooting, “It all needs to be burned down.” On the right, Donald Trump’s no comment about not accepting election results was seen as highly controversial as well. With such a charged environment, the stakes are incredibly high going into the debate. Ultimately, there will be some pain involved, especially for the loser. It remains to be seen how it unfolds.
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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.