There is a tremendous amount of commentary these days about the future of equity markets. Much of this talk is focused on what can be termed, “top down” issues, for example the geo-political tensions around the world or whether the economy will stall in the face of higher interest rates. But “bottom up”, company-specific analysis rules the day in the long term. Using a car road trip as a metaphor, focusing on the fortunes of individual companies to create a portfolio will determine your end destination, while those top down, macro issues will affect the route to your destination. If you’ve got the tolerance for detours (volatility), and the time horizon to allow the trip to be completed, company-specific analysis and prudent portfolio construction provides a high likelihood of success. As the saying goes, “it’s a market of stocks, not a stock market”.
But what defines success? That’s a complex question that invariably will have different answers depending on who you ask. In portfolio performance terms, is it a predetermined number such as an 8% return per year? One might counter, what if inflation is running at 10% per year. You would be losing purchasing power. Another question that could be asked is, how much risk are you taking on to reach that 8% return annually? At Goodreid, we take the view that all results are relative. We strive to outperform benchmarks and competitive managers regardless of the environment. In good markets we want to be better and in poor markets we want to be “less poor”. Importantly, we also structure our portfolios so that we achieve these goals with less financial risk.
Analyzing portfolio performance, by definition, is a backward-looking exercise. Every investor has the same question before committing to a new manager. Do I have confidence that past performance success can be repeated? Having managed for decades utilizing the same framework, we have confidence that we can add value, not all the time but rather, over time. Why? Because our research leads us to quality companies with contained risk characteristics. Below is a summary of factor attribution of Goodreid’s U.S Large Capitalization portfolio as of February, 2023. The conclusion when analyzing the results is that Goodreid’s portfolio has greater growth potential than the market at a significantly discounted cost.
We recognize that there are many routes to success. What they all have in common though, is consistent application. You get that at Goodreid.
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