Zooming Out of 2020!

Courtesy: Christopher Myers

Seventy six years ago, on December 16, 1944, an engagement began in the Ardennes forest between the German & Allied Forces in what has become known as the Battle of the Bulge.

Why this name?

Simply because the objective of the German military was to break the American lines. However, they were unable to do so and only created a ‘bulge’.

I look at 2020 and feel similarly.

We bent, not broke; similar to the Allied forces that winter.

2020 tested our resilience and fortitude as a country – as citizens, as parents, as sons and daughters, as well as that of our own children.

Yet here we are…

We learned to adapt, and are overcoming.

Neighbors helping neighbors, neighbors helping strangers.

2020 allowed us to find our better angels once more.

That’s why as I sit here in retrospect, I am so optimistic for the future.

‘Necessity is the mother of invention’  they say, so what will 2020 yield us in the future?

One can only dream…

2021….

That being said, I can think of the possibilities, but will not make guarantees as to what 2021 will do. 

And the reason is because the other day while I was on social media, I came across a post from Bloomberg, that asked the question: Who Can You Listen When Everybody’s Wrong?

Fair question in my opinion, as seemingly every market ‘talking head’ missed the events of this past year…

But I will let you in on a little secret: No one knows what will happen!

Shocking I know, but this is the expectation anyone should have when outlooks and guides are presented that seemingly ‘predict’ the future.

Lessons Learned:

If 2020 reinforced anything, it is that sticking to your plan and ignoring the noise is the best path to follow.

However, I would be remiss to say 2020 didn’t teach some new things that I think will continue to be beneficial in 2021: specifically – being flexible.

And not what you would ordinarily think of in regards to the events of the past year.

I am referring to how I conduct equity research.  

Most investment managers will pick certain metrics (factors), use those as their screens, and work off of that.  I too have mine.

But like anything: garbage in, garbage out.  Which is exactly what we learned once the selloff in February began distorting certain data points significantly and it was hard to gauge the quality of the company off of the distorted data..

So after some contemplation and consultation with other investment professionals, I began adding a layer to the screens to produce some confidence in the research I conducted.

I am happy to say that this addition worked well in 2020 and I will continue to use it until the forces of government stimulus subside and the ‘real’ economy takes over again.

Another crucial lesson is sticking to the plan, but in this case it applies to me more than to you.  As much as I stress sticking to the plan, there are inevitably moments when you experience some self doubt.  And being a ‘value’ investor provided plenty of opportunities for just such a thing.  

However that all changed on November 9, with the announcement of the Pfizer/BioNtech vaccine.

Source: Morningstar Direct

Value was ALIVE!!! And the patience of executing the plan had come to fruition.

Finally, and I say this partially tongue in cheek….my Campbell’s Soup Indicator is alive and well.

What do I mean by that?

Well you can tell how bad things are or perceived to be in the economy by the way Campbell’s Soup stock performs relative to the S&P 500.

For instance below are charts from Aug 2008 to April 2009 & 2020, and you will see when fear is prevalent during market sell-off’s, Campbell’ Soup stock begins to spike…Why? Because as I half joke, people fear that is all they are going to be eating when the volatility is over….

2008        Past performance is no guarantee of future results. Indexes cannot be invested into directly.

2020        Past performance is no guarantee of future results. Indexes cannot be invested into directly.

2020 just confirmed this observation from 2008.

Putting a Bow on It…

So as we close out 2020 , I wish you and your family the happiest of holidays.

Be safe & well!

I look forward to seeing you in 2021!

And I will leave you with the only way a kid from New Jersey knows how during the holidays:

(Fun Fact: This is from the Baltimore 2009 show, the first and only time we ever saw this performed live, and what made it more special was Ben was in utero for one of the final performances of this song by the whole band.) 

Disclosure:

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. 

All performance referenced is historical and is no guarantee of future results. 

All indices are unmanaged and may not be invested into directly.

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