Oh, would some Power give us the gift
To see ourselves as others see us!– R Burns (since January 25th is Burns day)
In our reflection section we mentioned the concept of perception. When you are in the midst of a market decline there seems to be no rhyme or reason. When you look a market movements over long periods of time, an event that seem insurmountable at the time fades in time. In 1987 the market suffered one of the worst one-day declines in history. Today if you look at a chart of the market you will barely notice the decline. This is not to belittle market declines as the NASDQ took almost a decade to recover its losses suffered in 2000. One point to consider about the market is that they say it is a discounting mechanism. It is a common axiom that the market reflects expectations of conditions in 6 months or a year and not how things are now. Just look at the market rally this month. Economic data was mixed but investors viewed this as a positive as this could mean lower interest rates in a year. It is all a matter of perception.
Our approach to looking for value has not changed over the past few years despite market gyrations. Three years ago, we closed our commentary with the following observation. “We cannot accurately predict where the market will be in a day, month or year. We can analyze stocks and look for companies with a history of paying dividends that can provide income even if the market becomes more volatile than recent history. We try to take a longer-term view and build a portfolio of stocks. That means sometimes we might pick a stock that might not pay a dividend if it offers exposure to an undervalued area of the market. There is a big difference between buying stocks with the same attributes and building a portfolio. Sometimes we purchase stocks the same way you purchase an umbrella on a sunny day, you know it will come in valuable at a later date.”
