We often find that in times of market stress, our commitment to fundamentals and diligent research builds resilience into our portfolios and a window into compelling long-term investment opportunities when markets discount all stocks at once. With 2020 presenting unique challenges, our investment management approach is helping our clients keep their balance through the storm.
The recent market turmoil reflects the uncertainty of this unprecedented global crisis, and we expect there will be more volatility as the world collectively tries to model the impact of coronavirus on the economy and public health. Markets do not like uncertainty, and – just as the market herd can lift stock prices too high in good times – it can overshoot on the downside when fear overwhelms. Recent high volatility trading days reflect indiscriminate selling — not selling based on fundamentals or a considered research process. Share prices of quality companies have been taken down along with those of weaker companies. The market is currently discounting enormous economic damage in 2020.
This may present opportunities for disciplined long-term investors. Owning or making modest, selective buys of high-quality companies within high-conviction themes may make sense for some investors. We are currently reviewing potential equity investments that are fundamentally well-positioned and have the balance sheets to last through the darkest scenarios.
Keeping this in mind, we feel confident that the news and headlines we read about stocks are often disconnected from what is actually happening in the portfolios we manage:
- We work diligently to ensure the balance sheets of companies in our portfolios are strong enough to withstand a pause in consumer activity
- We do not hold banks, travel companies, and energy companies
- Banks are better capitalized to help their customers through the next few months
- Coordinated global fiscal and monetary response is unfolding to support markets
- Cash and the high-quality, short-duration bonds in our portfolios are the kind of high ground investments many investors chase to in times of dislocation. These represent liquid ready reserves available to clients.
With a sound, active investment strategy in place, we are also mindful to keep our focus on the health and wellbeing of our clients, employees, and all the families in our orbit; our community is of the highest importance to us. Our thoughts continue to be with all those impacted by COVID-19. We wish everyone well as we collectively navigate this unprecedented situation.
DISCLOSURE: Reynders, McVeigh Capital Management, LLC (“RMCM”) is an SEC-registered investment adviser established in 2005. This commentary is for informational and educational purposes only and should not be construed as investment advice, and should not be relied on as such. The opinions expressed in this material are subject to change and represent the current, good-faith views of RMCM at the time of publication. All information has been obtained from sources believed to be reliable but its accuracy is not guaranteed. Certain statements may be deemed forward-looking, but such statements are not guarantees of future performance. Past performance does not guarantee future results.