Now that we’ve had the 5% pullback we anticipated in recent weeks, many pundits are once again prognosticating the “beginning of the end.” When you dig under the surface, however, the clearer story looks like “the end of the beginning” and most stocks are just at the starting gate of major cyclical recoveries, shares Tom Hayes, Founder of Hedge Fund Tips.
Here are a few points we have discussed in previous podcasts and videocasts: The key to making big money in this business is “zooming OUT.” When you get caught up in the short-term noise, it takes you out of many of the best companies whose recoveries can be doubles, triples, and more in reasonable time frames (over a few years).
If you feel like you missed the rally, or if there’s nowhere to put new money to work, you’ve got what we gently refer to as “stinkin’ thinkin’!” You’ve been watching too many clickbait bears on TV, and it costs you a lot of money to listen to them.
Some of the companies I like have taken off already. But most are just coming out of the starting gate and nowhere near intrinsic value/full recovery (opinion, not advice).
You need only look at the chart of the All-Country World index below to see the percentage of stocks BELOW their pre-pandemic highs...
If your hedge fund manager or money manager can’t consistently find quality businesses on sale (and have the fortitude/experience/knowledge to stick with them through the short-term volatility – until price reaches or exceeds intrinsic value), hire someone who can. The smartest, most successful people in the world focus on that they do best (build their businesses/careers) and outsource the rest.
The perma-bears on TV are like the birds in a farmer’s field. The birds take a bit of the crop from time to time (cause short-term volatility). But if you spend all of your days chasing (paying attention to) the “negative” birds, it takes you out of the field from planting your seeds (gaining an abundant future harvest).
Focus on taking advantage of once-in-a-generation opportunities and ignore the short-term noise. Or in other words, expect bouts of volatility on the surface, but look for opportunities under the surface.