Our friends at Litman/Gregory recently shared the following outtake from Bob Turner’s February client commentary. Turner, lead portfolio manager of Turner Concentrated Growth (TTOPX), wrote that his view of the prospects of the stock market reminded him of an experience 15 years ago at a Philadelphia Eagles football game:
Seated in front of me at the game were three motorcycle-club members, their club’s logo emblazoned on the back of their jackets. They were big, loud, and drinking heavily. Seated beside them was a young man whose laid-back manner suggested a California surfer who had some familiarity with the recreational uses of marijuana. No fool he: his attitude toward the three motorcycle guys was utterly respectful and deferential. At the end of the third quarter, the three motorcyclists vacated their seats temporarily, presumably to take a bathroom break and buy more beers before last call.
While they were gone, two preppie-looking guys who appeared to be of college age descended from an upper section of the stadium to claim what seemed unoccupied seats. The surfer sized up the situation, looked at the two preppie interlopers, and said in a deadpan tone, “Dudes, you’re about to make the worst mistake of your lives.” The preppies initially looked at him with puzzled expressions, but they got up and left, perhaps motivated by some divinely sent forebodings of trouble and bodily harm.
The motorcycle-club members did indeed return to their seats shortly thereafter, unaware that, to everyone’s great relief, an affront to their fraternal honor had been averted, an affront that almost certainly would have inspired a bruising retaliatory response on their part.
So in closing, I offer the following advice to those of you who may be thinking of bailing out of the stock market or giving up on a growth-stock manager like us: ‘Dudes, you’re about to make the worst mistake of your lives.’
As we see it, it would be an enormous error to forsake the stock market or us now. By just about any criteria you choose — whether it be valuation, investor sentiment, technical readings, past patterns of performance, you name it — stocks look as compelling as they’ve ever been in modern times, in our view.
I agree with Mr. Turner’s view. Now is not the time to give up on stocks. It would be a huge mistake to abandon the stock market at this point in the cycle. Stocks today are compelling long-term investments by many measures. Investor sentiment today is very low. Investors are gripped by fear and some have panicked leading them to give up on stocks completely.
The extreme downtrend we are currently experiencing in the stock market is not unlike previous downturns throughout history. The stock market has been through periods of high inflation, rising energy prices, bursting of the technology bubble, terrorist attacks, wars, and other crises. Yet, through all that, the long-term upward progress of the stock market has not been derailed. Today, we are faced with uncertainty and turmoil in the financial services industry. I don’t believe that we should let uncertainty scare us. Successful investors do not let fear force them out of the market.
