As Warren Buffett says, "be greedy when others are fearful."
The coronavirus pandemic is a significant health crisis, but from an investing standpoint, we see world-class companies now at their most attractive valuations in years. Three things weâre thinking about as we manage our Flagship strategy:
1) We own durable, defensible companies poised to weather any downturn. If you look at the 20 Titan Flagship stocks, you'll struggle to find any whose long-term earnings power seem at risk. For example, Apple's ecosystem won't erode just because iPhone sales are weak this quarter. This is in sharp contrast to, say, the cruise line industry (which we do not own) whose companies have material risk of permanent capital loss.
2) Weâre different in that we short the market with a portion of your capital so you can earn profits when the market declines. This is what we call our "hedge." Our strategy is basically saying: "we want you to be long our 20 world-class companies, but with reduced exposure to a prolonged market shock." It's one of the reasons why hedge funds are famous for outperforming during tough times.
3) The valuations of many of our stocks have fallen to their lowest levels in years, providing what could be the buying opportunity of a lifetime. Many Titan companies could actually get stronger through a downturn. For example, digital-first platforms like Visa and Microsoft seem unlikely to have lost 30%+ of their long-term earnings power like their stock price declines suggest. These companies' services seem even more likely to be used in a work-from-home world. Much of our portfolio appears to now offer bargains like these in plain sight.
Long story short, we think it's "go time" for long-term investors. We don't know when a bottom will come, but it will, and our durable portfolio of companies is selling for extremely attractive valuations for long-term investors. See full disclosures.