I often wonder what it would feel like to experience owning a stock as an investor rather than an investment advisor. I understand what is going on in stock market every time I read the newspaper or watch TV however the same cannot be said for some investors including the clients that I advise.
So much uncertainty is built up in market and yes, the risk appetite of investors seems to be rattled at the moment however I do not believe we should determine a company’s future potential solely based on its share price. Rather than focusing on stock prices today, I wanted to share with you the following observations I made over the weekend.
Take a look at the orange and blue boxes below that illustrates the one-month total returns (daily) of 10 publicly traded companies with 10 different business models that serves 10 different client types. Notice any commonalities between the 10 companies? Although these companies are separate entities, their stock prices seem to be moving in the same direction. Is it possible that all 10 companies are experiencing a reduction in value at the same rate and the same time? Or is the market discounting stock prices as a group rather than on their own economic circumstances?
In the red box, AFRM and SHOP.TO seem to be following the same direction however the difference in size between both companies today is about $100 Billion in market capitalization.
Source of data: Y-Charts (01-24-22)
The same group of companies that experienced a sharp decline in their share prices has also experienced an increase in year over year revenue growth. Except for ABNB and UBER who interestingly performed better on the 1-month total return (daily) metrics even though both companies experienced a reduction in revenue based on a year over year factor.
Source of data: Y-Charts (01-24-22)
In my opinion, the stock market is applying the same headline uncertainty factors including a quick or slow rise of interest rates, higher inflation, supply chain disruptions to a basket of companies rather than based on their totally separate circumstances.
I believe that by having an investment framework, investors can identify more accurately companies that could suddenly be mispriced by the market and therefore create an opportunity to acquire these effected businesses at a discount. Your investment framework can help you focus on the characteristics of the business rather than simply the stock price.
If investors already own these stocks they could consider increasing their ownership at a fraction of the price they were willing to pay one month ago. What is equally important is that you factor your own appetite for risk before investing. Just because a company’s stock is trading at a discount does not mean the investment choice is prudent for your own individual situation.
Anthony Scaramucci, Founder and Managing Partner of Skybridge Capital, a global alternative investment manager in New York City made this comment about volatility that stuck with me. He said the following during a CNBC interview:
“Remember, volatility may not be a measurement of risk. In early adoption technology stories, investors are going to have to accept some volatility as people get comfortable with the story.”
Have a great weekend!
Talk soon,
Michael Zagari, FCSI, CIM, CIWM
Investment Advisor with Mandeville Private Client Inc.
Financial Security Advisor with Zagari + Simpson
Disclaimer: Nothing on the website shall be construed as an offer to buy or a solicitation of an offer to buy any services or products. Commissions, trailing commissions, management fees and expenses may be associated with investments. Products are not guaranteed, their values change frequently and past performance may not be repeated.
Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.
This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice.
The Stock Market Perception
I often wonder what it would feel like to experience owning a stock as an investor rather than an investment advisor. I understand what is going on in stock market every time I read the newspaper or watch TV however the same cannot be said for some investors including the clients that I advise.
So much uncertainty is built up in market and yes, the risk appetite of investors seems to be rattled at the moment however I do not believe we should determine a company’s future potential solely based on its share price. Rather than focusing on stock prices today, I wanted to share with you the following observations I made over the weekend.
Take a look at the orange and blue boxes below that illustrates the one-month total returns (daily) of 10 publicly traded companies with 10 different business models that serves 10 different client types. Notice any commonalities between the 10 companies? Although these companies are separate entities, their stock prices seem to be moving in the same direction. Is it possible that all 10 companies are experiencing a reduction in value at the same rate and the same time? Or is the market discounting stock prices as a group rather than on their own economic circumstances?
In the red box, AFRM and SHOP.TO seem to be following the same direction however the difference in size between both companies today is about $100 Billion in market capitalization.
Source of data: Y-Charts (01-24-22)
The same group of companies that experienced a sharp decline in their share prices has also experienced an increase in year over year revenue growth. Except for ABNB and UBER who interestingly performed better on the 1-month total return (daily) metrics even though both companies experienced a reduction in revenue based on a year over year factor.
Source of data: Y-Charts (01-24-22)
In my opinion, the stock market is applying the same headline uncertainty factors including a quick or slow rise of interest rates, higher inflation, supply chain disruptions to a basket of companies rather than based on their totally separate circumstances.
I believe that by having an investment framework, investors can identify more accurately companies that could suddenly be mispriced by the market and therefore create an opportunity to acquire these effected businesses at a discount. Your investment framework can help you focus on the characteristics of the business rather than simply the stock price.
If investors already own these stocks they could consider increasing their ownership at a fraction of the price they were willing to pay one month ago. What is equally important is that you factor your own appetite for risk before investing. Just because a company’s stock is trading at a discount does not mean the investment choice is prudent for your own individual situation.
Anthony Scaramucci, Founder and Managing Partner of Skybridge Capital, a global alternative investment manager in New York City made this comment about volatility that stuck with me. He said the following during a CNBC interview:
“Remember, volatility may not be a measurement of risk. In early adoption technology stories, investors are going to have to accept some volatility as people get comfortable with the story.”
Have a great weekend!
Talk soon,
Michael Zagari, FCSI, CIM, CIWM
Investment Advisor with Mandeville Private Client Inc.
Financial Security Advisor with Zagari + Simpson
Disclaimer: Nothing on the website shall be construed as an offer to buy or a solicitation of an offer to buy any services or products. Commissions, trailing commissions, management fees and expenses may be associated with investments. Products are not guaranteed, their values change frequently and past performance may not be repeated.
Mandeville Private Client Inc. is a member of the Investment Industry Regulatory Organization of Canada and a member of the Canadian Investor Protection Fund.
This publication contains the opinion of the writer. The information contained herein was obtained from sources believed to be reliable, but no representation or warranty, express or implied, is made by the writer, Mandeville or any other person as to its accuracy, completeness or correctness. This publication is not an offer to sell or a solicitation of an offer to buy any securities. The information in this publication is intended for informational purposes only and is not intended to constitute investment, financial, legal, tax or accounting advice.
CNBC Interview with Anthony Scaramucci
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