Last Friday, I wrote about my experience at the annual Stansberry Research Conference. I believe the most important part of attending a conference like that isn't watching the presentations (although they're full of interesting and useful insights).
Rather, it's the moments in between presentations that are most valuable. You get a chance to meet people and connect in ways you just can't online.
During an audience Q&A session, one person brought up my lifelong interest in martial arts. If you don't know, over the years, I've trained in a number of different martial arts – including karate, Brazilian jiu-jitsu, judo, and kickboxing.
This person asked me how martial arts have impacted my research methods and investing. I wasn't expecting the question... But I realized that investing and martial arts have more in common than you might think.
It's all about finding the right tool for the job.
When I considered this man's question, I immediately thought of Bruce Lee. A true master of martial arts, he studied kung fu, taekwondo, karate, judo, American boxing, fencing, wrestling, and more.
With so much experience, people would ask him his opinion on the "best" martial art. He of all people should be able to provide the answer.
But here's how he'd respond...
There is no fixed teaching. All I can provide is an appropriate medicine for a particular ailment.
Said another way, there's no single best martial art discipline. You should choose the one that helps you defeat a particular opponent... in that particular situation... and on that particular day.
Folks will often ask me for the best valuation measure, or the best metric for growth, or the best investing style.
Some investors swear by valuation metrics like the price-to-earnings (P/E) ratio, which looks at a company's stock price relative to its earnings per share. Others prefer the price-to-book (P/B) ratio, which compares the share price with total assets on the balance sheet.
Some folks are lifelong value investors who try to find companies trading below their "intrinsic values." Others are traders who never look at company fundamentals and only invest based on technical analysis.
No one metric or approach is inherently better than all the rest. Much like Bruce Lee, you need to pick the right medicine for the particular ailment on a given day.
By that, I mean there's a lot to consider when it comes to your investing strategy... things like where we are in the market cycle, what industry you're examining, who's leading a particular company, and where the business is in its corporate life cycle.
Tools that have worked for years – like investing in high-growth tech companies or those that have expanded with tons of debt – just aren't working anymore.
That's because interest rates are up and debt is no longer dirt cheap. That makes it harder for companies to grow.
Pretty much the entire stock market rose during the post-Great Recession bull market. Tech did particularly well. But now, things are changing...
We've covered two "investing themes" at length recently. The supply-chain supercycle deals with the massive wave of infrastructure spending that will carry American industry to new heights. And the shale renaissance means an uptick in oil and gas investment that should boost both commodities.
These are areas we think could buck the trend and lead the next bull cycle. But that doesn't mean you should commit to only one or two ideas.
Keep your eyes open for new themes. And consider the metrics that will fit each situation best.
We're no longer in an environment where almost all investing styles are effective. To do well during the pandemic rebound, pretty much all you had to do was be in the market. But you can't "set it and forget it" with your money anymore... and your investments won't pay off immediately.
Be open to changing your approach to the markets depending on the situation. And above all, be patient. You might not see the gains you expected for a year or more.
Wishing you love, joy, and peace,
November 4, 2022