Complacency

Updated: Feb 25, 2021

This word needs to be used more often, it is a dangerous term in the investment world in my opinion. As an analyst we are always reading and digesting news flow on a daily basis whether it is on our stock picks, political commentary, economic commentary, other investors Tweets and analysis, etc. We have to remain level-headed and never become complacent. The second we become complacent and have no "worry", the market will slap you in the face and catch you off guard. Utilizing central bank buying as your core bull thesis is complacency in my view, acting as if nothing else could possibly go wrong in the market (such as an increase in trade war tensions, because from what I have read Biden wont be too much easier on China). Earnings are coming in better than expected, as we discussed in December this was a potential bull catalysts for continued upside in equity markets in 2021. You can view the Factset earnings insight report here.


My website should be used as a crutch, a data point, where I get paid to be a level-headed thinker and provide research and insights that other people do not have time to focus on. I want Fiducia to think at a different angle, and become thought provoking. Build quick and simple reports for you to spend 5, maybe 10 minutes max to read and gain knowledge or test your thinking capabilities. I am 2021 bull for reasons other than the Fed, yeah it is nice they have risk-assets best interest, but businesses are still doing well and that is why I am staying invested. Zebra just had an incredible report where you can read my brief summary here.


Zebra has their toes in everything as you can read from my first research report. Their end markets are diverse and give me good insights and feel into the economy and how things are getting back on track. My boring printer company seems to be doing very well! With record quarterly sales, EBITDA, EPS, FCF and exceeding their own outlook I see now reason why the multiple will not expand more over the next few years as they deliver solid beats across the table as shown below:

Do these great reports make me complacent? No, I was actually expecting a "meh" report, and it turns out it was my favorite report to read.


There seem to be pockets of the market that seem stretched (SPACs, real estate pricing is interesting, bonds yield next to nothing..), and I am not in the business of predicting bubbles. In fact, I spend no time trying to figure that out because at the end of the day we invest in markets for the long-term and buy strong fundamental businesses. So for anyone who sits there and tries to tell me we are in a bubble I will take that data point with a tiny grain of salt and continue my due diligence on great businesses.

The market is not being very nice to businesses with great performance, on average. Zebra was an exception being up almost 10% and I think it was the magnitude of the quarterly beat as well as strong guidance. I skim these Factset earnings insight reports once a week to gather data to make decisions, and give you my analysis.


Below is a chart from Yardeni.com comparing the present NASDAQ to 1998.

Given the stark differences between then and now, I am a believer we have much higher to go in terms of broader market performance. You can find that link PDF here.





Remember as an analyst we have information thrown at us daily between stock picks, macro data, business data, talking heads on CNBC and Bloomberg, Twitter, and your next door neighbor. Being able to parse out the noise from the fact and focus on what matters.


Focus, have a nice day.


Fiducia B


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