Risky capital. The value of investments and the income from them can rise as well as fall and are not guaranteed. Investors may not be able to recover the amount they originally invested.
Of note in this crisis is the level of variability in financial performance between industries and companies. Some companies were hit hard, while others were able to accelerate and gain market share. This reinvigorated the ongoing debate about “growth and value” and there were many attempts to call the top of growth and the bottom of value, but these calls are profound in our view. Structural changes that affect cash flow in the medium term were generally incorrect because they did not understand that.
Not surprisingly, the economic outlook remains uncertain, but it’s an opportunity rather than a problem with this strategy. Companies that can differentiate and are exposed to long-term, long-term trends still have great opportunities, but struggling companies are under increasing pressure on their balance sheets and cash flow. This variance of returns between and within sectors can be sustained.
History shows that the crisis accelerates changes in industrial trends, market share, and consumer behavior. I thought this was the case with COVID-19, but I was still amazed at the speed and scale of financial performance variability across industries and companies.
Importance of corporate financial strength
For us, the financial strength of the company was one of the important considerations when valuing stocks. Companies with strong balance sheets and high profit-to-cash conversion rates generally respond much better to this crisis and need to invest in their products and products or compete more effectively. You can evolve your business model. Good things tend to happen when combined with the dynamics of an industry with attractive financial strength, attractive product offerings, and a proven management team. These are the companies we believe will be in a stronger position as this pandemic accelerates “corporate Darwinism” on an unprecedented scale.
Conversely, given the technological turmoil, regulatory changes, and / or rising changes, too many companies are often needed to compete more effectively in large, mature industries. It has long claimed that it is effectively starving investment. Consumer behavior. Often, they are hostage to paying unmanageable dividends, at the expense of the long-term growth potential of their business. Even before this pandemic, we’ve seen a lot of attention-grabbing profit warnings and dividend cuts, but the crisis has weakened weak business models under-invested with unsustainable levels of debt. I really made it clear. In some cases, there is a long-term impairment of value.
Find what is differentiated
We strongly believe that there are significant opportunities left for well-funded companies that can differentiate themselves by offering compelling products. Take, for example, the Games Workshop (top 10) that was able to increase sales and profits through this crisis. They have been very successful in investing behind product offerings, increasing their online presence and raising the bar for new customers, which should lead to higher levels of repeat orders. Other companies that we consider suitable to benefit are driving long-term, long-term growth trends such as digital marketing, data analytics (such as YouGov) and cloud-enabled communications (such as Gamma Communications) and / Or the company you are exposing. Conversely, there is increasing pressure on balance sheets and cash flow for companies struggling in structurally challenging industries. These trends are expected to continue.
Danger: The particular company identified and described above does not represent all companies purchased or sold, and the specified and discussed company may not be profitable or profitable.
Digital transformation grows during COVID-19 as companies continue to invest in digital capabilities to drive demand, gain market share, adapt to changing consumer behavior, and remove costs and complexity. One long-term spending area where rates have accelerated significantly. operation. This remains an important focus for all boards around the world. Growth prospects have improved, especially in digital payments, software as a service, online learning, and cloud-enabled audio and visual communications, and in recent years we have deliberately pursued exposure to these trends and have recently increased exposure. I will. Video games are another industry we believe has improved growth prospects, increasing the value of content, increasing player install bases, and long-term monetization of player time and in-play. Increased has. The industry has a positive outlook as major US tech companies launch video game streaming services and acquire Game Studio. The UK owns some attractive companies at the forefront of this rapidly evolving but growing industry.
Lots of high uncertainty and compelling opportunities
The level of variability in financial performance across many industries and companies created by this crisis is very exciting for fundamentally active investors. We will do everything we can to help BlackRockThrogmortonTrust take advantage of these opportunities, both long and short. point of view.
This material is not intended to be trusted as forecasting, research, or investment advice, nor is it endorsing, proposing, or soliciting the adoption of trading or investment strategies for securities or financial instruments. The opinions expressed are current as of October 2020 and are subject to change as circumstances change thereafter.
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There are many uncertainties, but there are plenty of investment opportunities
https://www.whatinvestment.co.uk/lots-of-uncertainty-but-an-abundance-of-investment-opportunities-2618847/ There are many uncertainties, but there are plenty of investment opportunities