At Sionna, we believe that investing is very similar to chess; we need to think long term when choosing to take a course of action – it’s not just about the next move, but a number of moves ahead. To succeed in chess and investing, it’s important to harness our ability to think deeply and concentrate in an undistracted environment.
Building muscle is not easy. I should know – I’ve been lifting weights for several years now, but you wouldn’t be able to tell just by looking at me. I’m still the same stick figure I was in high school. Nonetheless, it’s a fun and grueling hobby, one that I find strangely calming and meditative. A slow journey for sure, but I’ve committed to it for the long term; images of body-building legend, Arnold Schwarzenegger, at his prime, remind me to stick with it.
When I first started in the industry, one of the more popular styles of investing was top-down stock picking; where you made an economic forecast, decided which sectors were going to benefit and then tried to buy the quality names within that sector. Effectively, this approach required investors to focus on the short term; they predicted what economic trends were underway and then adjusted their portfolio accordingly. Value managers generally didn’t, and still don't, believe that the economy could be accurately forecasted in general, and they definitely didn’t believe that it could tell you how to invest.
Recent volatile markets and accompanying daily negative news headlines are a constant reminder of just how much noise exists. Not all negative news is noise though. When there’s a fundamental change in an industry or a specific company, we need to listen and update our views accordingly. The challenge is to distinguish potential distractions from relevant information.
The topic of Environmental, Social and Governance (ESG) investing is one that continues to gain in popularity. ESG investing can have different meanings to individual investors, and ESG principles can be incorporated into investment processes in a multitude of ways. At Sionna, we thought it would be worthwhile to share our interpretation of ESG principles and how we apply them to our research process.
With the number of buybacks hitting record-breaking highs, share repurchases have increasingly become a popular topic on the news. Many commentators argue that the surge in buyback activity was an impending sign that the market was set for a correction. History, and recent market weakness, tells us that there may be some truth to this belief.