The late Peter Drucker was the first celebrity corporate strategist and for me, still the best one that ever lived. His thoughts embody the combination of simplicity and relevance that implies real wisdom. “The single most important thing to remember about any enterprise is that there are no results inside its walls. The result of a business is a satisfied customer” is a Drucker quote I think about at least monthly. “There is nothing so useless as doing efficiently that which should not be done at all” is another.
For investors, the most important insight from Mr. Drucker is “Strategy is a commodity, execution is an art.” Investment strategies are the readily available commodity – they’re not rare. Portfolio managers have implemented numerous, widely different market models from deep value to GARP to momentum. The scarce commodity is the diligence, discipline, patience and experience to become an ‘artist’ that can generate strong returns, through changing market conditions, using a consistent investment strategy.
In investing and business, bad outcomes are too often blamed on the strategy rather than the execution or implementation of the plan. This is, after all, a good way for everyone to dodge responsibility. But hypothetical investors attempting to use a value-based stockpicking method, who lose money by focusing too much on price-to-earnings and forgetting about debt service ratios, only have themselves to blame. It’s not the value investment strategy’s fault.
I’m not suggesting every market loss is a mistake by the investor. The market is a probability game, not a certainty game and sometimes, even with the odds correctly calculated in an investors’ favour, losses occur and nothing could have been done. Investors, however, should stick with an investment approach that best suits their situation until they feel it’s close to being mastered. Just because investment strategy options are everywhere, doesn’t mean they should change their approach.
-- Scott Barlow is The Globe's in-house market strategist.
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Stocks to ponder
Sabina Gold & Silver Corp. The stock has a potential imminent catalyst and there is speculation that the company may be a future takeover target. However, a further move higher on positive news may prove to be a profit taking opportunity for investors. As the saying goes, “buy on the rumour, sell on the news.” Jennifer Dowty explores.
Savaria Corp. This stock was last profiled by Jennifer Dowty in late February. The share price subsequently rallied 70 per cent to a record high on May 29 before retreating. This is a stock that has delivered solid top line growth, which is expected to continue, revenue is forecast to jump 55 per cent in 2017. Over recent weeks, the stock price has declined 13 per cent and the recent price weakness may represent a buying opportunity for growth investors. Jennifer Dowty explains.
Nvidia Corp. The future may belong to this stock, “the smartest company in the world,” according to a recent ranking by the MIT Technology Review, writes Scott Barlow. Nvidia is best known as a maker of graphic processing units (GPUs) for use in video games. More than half the company’s revenue still comes from that business (see accompanying bar chart) but the recent huge gains in the stock price have accompanied the application of GPUs in the fastest-growing, hottest areas of technology. These new business areas include autonomous vehicles, cloud-based data analysis, robotics, artificial intelligence/machine learning and health-care technologies. Nvidia also has a dominant market position in “virtualization” – programs allowing users to access operating systems and hardware situated elsewhere.
Markets face a delicate balance of higher interest rates and economic growth
Central banks are unwinding extraordinary economic stimulus and investors couldn’t be happier: Stocks are holding firm worldwide, reflecting optimism over the health of the global economy. But what can investors expect if central banks continue to raise interest rates? David Berman explains.
These Canadian banks will profit most from an interest rate hike
When interest rates rise, bank investors cheer. But the greatest enthusiasm should be reserved for banks with a penchant for domestic lending: Canadian Imperial Bank of Commerce, National Bank of Canada, Canadian Western Bank and Laurentian Bank of Canada – your time has arrived. David Berman explains.
Preferred shares: A surprise ally for your portfolio against rising interest rates
Preferred shares as a hedge against rising interest rates? Believe it. The changing profile of the preferred share market in recent years has remade what was once a dismal place to be in a rising rate world. Rob Carrick explains.
David Rosenberg: Why it may be time to start buying commodity stocks
It is no secret that valuations continue to be a headwind for the U.S. equity market – but this does not necessarily mean that investors should avoid the market altogether. The headline number will move around, but there will always be opportunities underneath the surface. One such area of the market that we feel presents good relative value (aside from financials – something we have been talking about lately) is the commodity space. David Rosenberg explains.
Private equity a lucrative option for bold investors
How many times have you seen a product you liked and wished you could buy shares in the company – only to find it was privately held? Well, with private-equity funds, investors with good-sized portfolios can buy into companies that have hitherto been the preserve of institutional investors and pension funds. That’s only one of the benefits. Private equity, like other alternative investments, also offers the potential for outsized returns to investors who are willing to tie up their money for the long term. Some funds have a five-year time horizon, others 10 years or more. Because the shares don’t trade, investors are spared the roller-coaster ups and down of financial markets – also a plus. Dianne Maley explains.
Value investing and risk: What you will not learn at university
The two key tenets of modern portfolio theory, taught at every university around the world, are that investors hold well-diversified portfolios and that in this setting the only risk that matters is beta risk (volatility-based risk). Value investors reject both of these tenets. They do not believe that astute investors must hold well-diversified portfolios and they reject the notion that beta is a measure of risk. George Athanassakos explains.
Q&A: BlackRock's chief strategist predicts where interest rates, the loonie and the TSX are heading next
The Globe's Jennifer Dowty had an hour-long online chat with BlackRock chief strategist Kurt Reiman. Read the whole chat online here.
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What’s up in the days ahead
The time has arrived to consider building a TFSA that produces enough of a yield in dividends and bond interest to meet income needs in retirement. Rob Carrick this Saturday will show you some options to do just that.
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Compiled by Gillian Livingston
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