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Swimming in the Macro


Recently, I was at an investment meeting with one of the premier investment brokerage firms on Wall Street today.  One of the key takeaways for investors was "not to get lost in the macro," in other words don't get carried away with focusing on the macro economic issues when selecting great stocks.  Select great companies particularly if you have a mid to long term investment horizon.  That said, its hard to ignore the massive disruption (adverse) caused by today's central banks, particularly the US Federal Reserve, as Chaired by Jerome Powell. The Fed has tightened and hiked so fast and so hard, that its literally unprecedented in terms of its impacts.  Traders tend to cling onto every word that Fed Reserve Chairman Powell says and then there are weeks of Fed leaks coming from Regional Feds, thus it becomes a negative narrative of 'Fed Speak' raining on rallies and really working against bull markets, turning them bearish.  The Administration in DC handles fiscal policy; clearly this has an impact on markets.  The inflation outlook in the last few years has created significant volatility, beyond the norm, resulting in swings that become oversold or overbought rather quickly. Then you have what I like to call 'doomsayers' coming onto Bloomberg and Yahoo, telling investors to run for the hills. Each has his/her own agenda, and must be taken with a grain of salt.  In the end, we like great companies that have great growth prospects and strong cashflow, whose management can navigate the volatile marketplace with an edge on competition.  The list of great companies changes from time to time, but what changes most is how much the marketplace is reflective of their respective valuation(s). 

The pearl of wisdom gleaned from our last conference is not only to "not get lost in the macro" but to buy your favorite companies on dips where "the baby gets thrown out with the bathwater" thus building positions in companies you have conviction in. Conviction however means different things to different people.  For us, conviction means we have done lots of research on the Company, we have reviewed their recent past performance from Q's and K-1 and have further read analysts reports and have tracked forward guidance in comparison to best of breed or close peers. 

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