Watch out for buses!
It’s important to get a few truths out of the way early on. There isn’t ‘one thing you can’t ignore in 2020’, or if there is, I don’t know it. Even if I did, I’d be reluctant to share it. With that knowledge, I’d be planning our family’s imminent retirement in some tropical paradise!
A friend once said, “it’s the bus you don’t see that kills you”. Yet, as investors, a lot of our collective energy is channelled towards identifying catalysts that might undo an investment thesis. Where we can’t identify one, companies are often described as having large moats or as being ‘high quality’ companies or better yet, ‘compounders’ (today’s Holy Grail). Our lack of tolerance for volatile earnings streams has drawn us to pay very high prices for these companies, many of which are priced for perfection.
The converse is true too. The investment pariah is a company that has either been, or is about to be, hit by a known bus. When this happens, it is almost always impossible to determine the full extent of the injuries that follow, or the time required to convalesce. These are difficult companies to own.
We shouldn’t forget though that the future is far less certain than we like to admit. The one thing, if I must: there are a lot of buses on the road at the moment, some we can see and some that we can’t.
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This wire is part of the ‘One thing investors can’t ignore in 2020’ series. To download the full ebook please click here.
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Simon joined Allan Gray in 2006 as an analyst. Before this, he was at Alliance Berstein, Macquarie Bank, and Deloitte and Touche. Simon has a Bachelor of Business Science with first-class honours (majoring in finance and business strategy) and a...