Cool, calm and collected
On Thursday, I updated the list of our stocks looking at them from the perspective of the import tariffs. It shows that the trade tariff war started by Trump will have only a minimal impact overall.
Of course, that's only looking at the direct impact. If this trade war triggers a recession, then all companies will suffer.
I’m not worried about that either. Our companies were selected for their resilience; they can handle a hit. But we do need to realize that if this scenario plays out, it won’t be a smooth ride.
Even though the sharp decline and the fact that it happened three days in a row is unusual, we still need to keep things in perspective. The markets may be much lower than they were a week ago, but if we look back a year, it’s not that bad. Even including today’s 6.5% drop, the DAX is still 6.1% higher than it was a year ago and 86% higher than five years ago.
The S&P 500 (not yet open) is 1.4% lower than a year ago. If the futures are anything to go by, that will rise to about 6.4% lower by the end of the day. Still, despite this sharp drop, we’re up 103.9% over five years.
On the other hand, we’re seeing a total sell-off in the market right now. Everything’s being dumped, regardless of fundamentals, valuation, or outlook. These are exactly the kinds of markets where we want to be buyers — even if it might still be a bit early.
Unfortunately, I don’t have the luxury of a large cash position; that’s what happens when European small and mid-caps have been cheap for so long. But that doesn’t mean we shouldn’t stay alert during big market moves like this, and take a rational look at how we might optimize our portfolio.
Don’t get me wrong: I could go on a long trip and sleep soundly at night without worrying about my current portfolio. Still, there are stocks that I think will be slower to recover, or that we can buy back later at similar prices, long after other stocks have already made strong gains.
One example among the holdings is Hal Trust, which has dropped a bit less for now, but I don’t expect it to recover as quickly as, say, Sofina.
That’s why I’m going to try to optimize the portfolio a bit. Since I see this as a full review, I’ll put together a complete message about it for subscribers as soon as possible. To make time for that, the lesson from our introduction to value investing will be pushed back by a week. Like I said before: investor first, publisher second.