Investing in 2022 has been about as fun as squaring off against Bobby Flay in the kitchen or getting dismantled by Paul Hollywood in a tent somewhere in England. The new year started off negative and has ridden a series of downturns throughout the year with inflation and the rising risk of a recession emerging as problems to solve. All the while, many small businesses are simply desperate to hire workers. It is safe to say that the economy is giving some mixed signals to investors.
We have grown accustomed to blaming things on the Covid-19 pandemic, and we should probably toss a confusing economy on the pile as well. My favorite way to illustrate the intersection of Covid and the economy is like putting an injured patient into a medically-induced coma. Governments around the world shut down their economies back in 2020 in the effort to stop the spread of an uncertain disease. We can debate the effectiveness of that strategy, and how you feel about it likely depends on your health and how you make a living. As the world has emerged from its medically induced coma, it has experienced some side effects of living in a deep state of unconsciousness. Real life patients lose the ability to breathe and need significant physical therapy to deal with the effects of living in such a state. The coma may allow the patient to live, but there are consequences of the path there.
I’ll never forget in March of 2020 my family had gone south towards the Florida panhandle for spring break. Covid was starting to rear its ugly head and, over the course of that week, went mainstream. We stopped at a hotel along the way and pondered our future without toilet paper. Nearing check out time, I looked my sons in the eye and said, “This hotel has toilet paper, find it.” I felt like a general sending warriors out into the battlefield to solve a problem. They did not disappoint.
Just as the ICU staff must triage the patient waking up from the coma, our global economies remain symptomatic. The good news is that the problems are most likely treatable with time. Successful investing is all about time. Watching the news too much will remind you of all the bad things in the world today. However, it won’t remind you that people are innovative and adaptable. The builders and problem solvers of the world don’t stop and feel sorry for themselves as circumstances change against them. They keep working and get creative and find ways to move forward. You want to invest your money alongside the builders and problem solvers of the world, which is exactly what we spend our time researching. Finding a dominant, cash producing company whose products help solve life’s problems makes the short-term volatility irrelevant. Your greatest opportunity for making money will always be when the waves crash over these companies, and they cannot even be seen from the shore. But when the tide recedes, they will re-emerge never even having lifted their heads to take notice.
The opinions expressed are those of PYAW’s Investment Team. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. Forward looking statements cannot be guaranteed.
PYA Waltman Capital, LLC (“PYAW”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about PYAW’s investment advisory services can be found in its Form ADV Part 2, which is available upon request. PYA-22-18