In the era of nonstop news and endless financial tickers, we have more investment-related information at our fingertips than ever before.
When a stock sneezes, we know it instantly as our phone alert jolts us into a ready position. As a result, we have access to more company and industry analysis than ever before, and we have it faster than anyone fifty years ago could have anticipated.
And that's precisely the problem.
Television host Charles Payne concluded Friday's episode of his Fox Business program, "Making Money with Charles Payne," by sharing his opinion of today's financial markets. In his view, abundant, minute-by-minute information doesn't always lead to higher levels of investing success.
"The stock market is confusing in so many ways, and in large part, it's that way by design," Payne began. "Think about this; there are so many ways of measuring value. There's all these exogenous reasons for stocks being up or being down that often don't really have anything to do with the stock itself, or even the industry itself."
Perhaps Payne referred to Tesla CEO Elon Musk, whose leaked emails laid out his company's plans to lay off 10% of salaried employees. In addition, Musk wants employees to report to work on location rather than continue working from home. Tesla's stock dropped more than 9% on Friday, presumably as investors got the news-induced jitters. They received the news rapidly and, in turn, reacted just as quickly.
Is it possible that type of news would never have hit investors' eyes or ears in bygone eras? And assuming shareholders did find out, it's possible that the trickling-out of information would not have the same quick impact on the stock's share price compared to everyone being deluged at the same time on their devices.
As a side note, regarding the substance of Musk's plan, wasn't the late business titan, Jack Welch, extremely successful in part due to his implementation of the same strategy? Wasn't it a net positive for his shareholders? And could that portend leaner and more profitable days for Tesla, as the company aims to fight through the difficult economic environment America has battled through during the Biden years?
In other words, do the hysteria, reactionary tweets, and hot takes that have bombarded traditional media and the socials in the few days since Musk's emails became public to match the reality of the announcement?
"A few decades ago, all of this stuff didn't matter as much because the average holding period was five or six years," Payne noted. "Now it's less than five or six months, and I gotta tell you something. Under the right conditions, like the whipsaws we're seeing these days, the holding period could be like five or six days. Wouldn't surprise me if it was actually five or six hours soon."
Payne brought up a recent report from Morningstar titled U.S. Stocks are Trading at a Rarely Seen Discount.
He quoted from the article saying, "Even with the market's bounce, the selloff provides a chance to invest in significantly undervalued stocks. Since 2011, on a monthly basis, there have been only a few other instances in which the market has traded at such a large discount to our intrinsic valuation. The current level of undervaluation is the greatest discount to fair value since the emergence of the pandemic in March 2020 and the growth scare that sent stocks lower in December 2018."
"I think it's a breath of fresh air. It's not just because it's bullish, but because they're talking about intrinsic value. Not the notion your portfolio should be down because of the next headline, or even down because there's some kind of temporary thing that's going to impact the value, but intrinsically what this thing is worth longer-term," Payne commented.
Payne knows what Warren Buffett knows and what Jack Bogle and Benjamin Graham knew. Strong, well-run companies with real value are a strategy for investing success.
Not that this is the only strategy. But Payne's point is that staying focused and undeterred when bait-clicky media headlines appear in your feed nonstop is a foundation for long-term investing success. Put the blinders on, block out the noise and stick to your strategy with valuable companies.
"I get the idea of trying to beat the market every day. It makes for good TV," the sagacious Payne summed up. "But pace yourself. You've heard that a lot today. Pace yourself because investing can be a lot more simplistic. Think about the intrinsic value, and that's what you should be focused on. Don't let these markets whipsaw you."
No comments:
Post a Comment