885 West Georgia Street
Posted on: August 1, 2018
Let’s not mince words—the era of growth investing has been steadily declining for years. We’ve all
heard the talk, whispered that the end was near, but the time is here and the straw that broke the camel’s back (excuse the cliche) was the Facebook data scandal.
Now, talking about the implications of the Facebook data scandal is an article all on its own, so I won’t digress too much here. What I will say, however, is that Facebook’s stock is down more than 15 percent from the highs, and other big name companies like Google, Apple, Netflix, and Microsoft—I could go on—are down as well. We’re seeing vulnerability in previously undisputed tech giants, not to mention the burn of issues in corporate governance.
What does this mean? The era of growth investing is over.
You might think that’s a pretty bold statement, but the climate is right and all the indicators are there: monetary tightening, fiscal recklessness, global populism, moderate inflation, just to name a few.
So, the question on everyone’s mind right now is, “how do I survive the transition?” It’s a question I’ve been asking myself ever since I saw the signs, one I’ve been bracing for, and one I’ve responded to with five key strategies:
1. Prune Your Portfolio
This one isn’t really a surprise or a significant move for Chalanchuk. We have a pretty short list already, but fewer names with high ratings and cash on the balance sheet are investments you want to keep in your portfolio. If they don’t meet these criteria, it’s time to get out your pruning shears.
2. Focus on Balance Sheets
During this transition, it’s imperative for investors and wealth managers to avoid companies who have refinancing risks. Now is the time to concentrate on balance sheet quality.
3. Hedge Interest-Rate Risk
How should you hedge interest-rate risk? Via alternative credit funds and short-term floating rate notes.
4. Concentrate on Value
Value is what matters right now, so when it comes to growth stock, take profits. There are opportunities out there for deep value investments, ones with minimal correlations do the US economy.
5. Raise Some Cash
In the coming months, we can all expect liquidity shortages to occur, and when they do, a few able buyers will be able to take the forced sellers out of their long risk positions. Make sure you raise some cash!
As the climate continues to change, so will the strategies, but these five tips will help any investor or wealth manager weather the storm. We’ve implemented each of these initiatives with great success and increased our USD position, so if you’re thinking the juice isn’t worth the squeeze anymore, you know how to pivot.