In a year marked by gloom, pessimism and inflation, not to mention war and the continued spread of a highly contagious virus, investors for the most part have sold and hunkered down. There have been few places for investors to hide, with stocks and bonds selling off. Even holding cash subjects one to the pernicious effects of 9% year over year inflation. At a time such as this, a dispiriting summer of economic and cultural tumult, Arrival Capital chooses to spend our time getting ready for a change, an inflection point, where the economy, made up as it is of countless businesses and various industries, bottoms out as inflation crests and interest rates peak, where a semblance of confidence returns, if not in our politicians, then in our fellow citizens, workers, and consumers, to right the imbalances caused by pandemic and war.
We are not suggesting to sit around and hope that things change, but to actively monitor the economy and evaluate the inner workings of otherwise sound and steady businesses, getting ready for the moment when the market's evaluation of a particular company, sometimes a household name and sometimes less well-known, gets low enough to warrant purchasing it and making the stock a part of a client's personalized, long-term investment portfolio. In the market and economy we are all now going through, putting cash out into the world, either through a stock or bond, even a piece of real estate, is not easy, and it shouldn't be. The world, particularly the world of business, is uncertain. In fact, it is always uncertain, it's just sometimes it does not seem so hard to see through to better times for business and better returns for investors.
The economy will turn and growth, genuine growth driven by productivity gains, technological breakthroughs, and higher levels of stability and confidence, will once again allow businesses of all types to ramp up profits and cash flow, rewarding investors with the perseverance and fortitude to hold and actually invest cash in the stocks of businesses that can take their own value to a higher level. We as investors need to be a part of the resurgence and resetting of the US and world economy and now is the time to carefully assess where money should be put to work most prudently and effectively.
The market downturn has slashed the prices that investors need to pay to become long-term owners and partners of some of the best businesses the world has ever seen. There are tech companies, to be sure, but also logistic and retail companies with irreplaceable infrastructure built over many years. There are financial and industrial companies that have an almost unlimited runway for further growth and cash generation in the years ahead. These are the great companies at good prices (and now even cheap prices) that value investors strive to fund. But to add to this, there are now many good companies selling not just at great prices but at extremely low prices discounting the direst of futures either for the company itself or the economy as a whole. Finding all these investment possibilities, through a mix of quantitative and qualitative research, is what Arrival Capital seeks to do for clients looking to make sense of a confusing economic period but also generate the wealth, income and peace of mind that we all strive for.
Besides looking at markets, summer 2022 is a good time to look at ourselves and evaluate what are our most important financial goals and needs. Do you have enough cash for the next 6-12 months so you don't have to sell into weak markets? What are your income needs from a portfolio that may not generate the capital gains we have gotten used to in the last few years? Most of all, we don't want to become paralyzed by uncertainty and gripped by negativity. In the excellent HBO series, Winning Time: The Rise of the Lakers Dynasty, an interesting insight can be gleaned by the observation of the Jerry Buss character, the real-life owner of the Lakers and successful (and bold) real estate investor, that even when things seem bad, you should not forget that "things can also get better." This is not to be pollyannaish or a call to bet the house on a rapid turnaround, it is a call however to invest something, time first, then money, on the prospect that things will improve, not everywhere, all at once, but slowly and incrementally, in quality companies selling at great and good prices.
The time to create value is here and now. Arrival Capital is here to help investors make sense of a changing economy and put capital to work in a way that promises a real chance to profit from an improving and better balanced economy and hopefully a healthier and more peaceful world.
Enjoy the Summer!
