Wellington’s investor community is collaborative and supportive, characteristics that shine in times of crisis. We come together to support one another, share information and insights, and ensure that we continue to make the best possible decisions for our clients. Michael Carmen, one of Wellington’s senior investors, sent a note out to his colleagues recently. His comments follow.
I thought I would put a few thoughts out there, as we once again navigate a difficult market environment.
- During periods of extreme volatility, mistakes are inevitable. Right now, it may seem like every transaction we made before the market declined looks bad and every upgrade we’ve made since hasn’t worked out. Don’t look in the rearview mirror; the information is changing fast. Just focus on trying to make the right decision for your clients every single day.
- Maybe another way to say this is, don’t let a bear market (or a recession) go to waste. Make sure your portfolio is positioned to hum on the other side of this. An old mentor of mine once said, “You might need to underperform in the near term in order to outperform in the long term.” Remember, while some of these prices will probably look amazing two years from now, they could still look horrible next week.
- Stay true to your investment philosophy because it will ultimately serve you well. The worst mistake I made during the global financial crisis was getting more conservative at the beginning of 2009. It was a bad decision and led to a period of disappointing performance.
- Stick to your guns, but always be flexible as new data arrives. A flexible mind is a sign of strength, not weakness. Don’t be afraid to adjust your “philosophy and process” if you believe there are ways to make it stronger. After that period of poor performance in 2009, we added our Up/Down valuation framework, and we have never looked back. Time and again, it has been super helpful in giving us a much better quantitative view of the downside if a thesis didn’t play out.
- As our colleague Mark Whitaker likes to say, “Stocks can always go lower.” In 2009, the poster child was Las Vegas Sands, which dropped 99% from its high. Don’t anchor yourself into a specific price. The old adage that the market can remain irrational longer than you can remain liquid is true.
- For younger investors (maybe old ones too), don’t be shy about reaching out to us veterans. We’ve been through this and can provide perspective. Ask us anything: Would you upgrade this stock? Would you sell here? How is this different or like the time when…? We are here to help, and we want to help. I’m happy to do a video call with anyone who is interested. Plus, as an extrovert stuck at home, I crave interaction!
- Sleep! I know it is very stressful and I’m sure everyone has lay awake in bed at 2:30AM, wondering what could possibly be coming at us next. I know I have. But none of us can make good decisions for our clients if we are sleep deprived. And we don’t have to commute to work right now, so we have all that time back. In our tenet “client, firm, self,” self might be last, but it’s still a priority. Take care of yourself.
