Compounding in Great Businesses

What’s an intelligent investor to do now? Buy downtrodden cheap stocks? Or chase high-flying growth stocks at rich prices? Or maybe just sit in cash hoping the market crashes (and hoping you’ll have the courage to buy stocks as they’re plummeting … before the Fed re-inflates them). Or maybe there’s a better strategy?

To help us think through these questions, Fielder Capital is pleased to host a fireside chat with Yen Liow, founder and portfolio manager of Aravt Global, a New York based hedge fund. Yen is one of the most talented investors that Steve Korn and I know in the business. He has made a science of searching for “compounders” – durable growth businesses in strong market structures led by exceptional leaders.

We’re honored to host Yen for a webcast to discuss what he’s learned over the years - why he focuses on buying and holding compounders and how he identifies them.

Date: Tuesday, May 25th

Time: 11am Eastern

We believe that Yen’s approach to investing in compounders is especially apropos for today’s environment. Here’s why …

What if Everything is OK?

What if everything turns out OK? Or even terrific? Not because of the Fed or Washington’s policies, but in spite of them? Today I catch myself asking that question a lot. Because everyone I know is so negative today (from one thing or another).

As a budding, young stockbroker in the 1990s, I remember how pervasively negative the politics, the media, and as a result, my clients were. Not that there weren’t legitimate reasons to worry. There were. These magazine covers perfectly reflect the angst of the early 1990s . . .

(Time Magazine from the early 1990's)

But in the end, all of this negative news wasn’t enough to matter. The decade that followed brought the greatest boom in innovation of my lifetime. And markets followed. Between January 1992 and January 2002, the S&P 500 more than tripled (reinvesting dividends). And note that that period includes the internet bubble “pop” in 2000.

Today there is plenty that keeps me up at night. At the same time, I am awed by the serious brain-power and serious money dedicated to life sciences, new energy, blockchain, and new materials. And that’s just the sexy stuff that gets all the press. Technology is also enabling business model innovation in more mundane corners of commerce. Uber and Airbnb are great examples there. It may well be that the best investment opportunities are found among these less glamorous (and less obvious) places.

Maybe – just maybe – we are on the cusp of another great leap forward? What if innovation and economic growth surprises to the upside? What if this progress is so exponential that even the meddling mandarins in Washington, Brussels and Beijing cannot do enough damage to stop it? Maybe everything turns out pretty darn great. If that’s the case, count me in. I want to own a piece of it.

We need to be on guard against the dangerous muscle memory that bad periods induce. It was really hard to have a bullish outlook after the Great Malaise of the 1970s … or after the internet bubble popped … or after the financial crisis. But those periods ended up greatly enriching a minority of optimists. We should thus remain vigilant against the cataracts of 2020 impeding our ability to see the green shoots of prosperity.

What if Everything Is Not OK?

Sometimes pessimists are right. What if things don’t go well? What if Washington really does ruin the party? If economic stagnation is our future (or worse, stagflation), maybe our best defense is a strong offense. Sun Tzu in The Art of War counsels that “Attack is the secret of defense.” How do we best translate that to investing? We at Fielder believe it means owning a select group of great businesses run by truly great people (acquired at sober prices). In a stagflation scenario, that may be our best hope to outgrow the malaise.

How can we do this as intelligent investors and not foolish speculators? For that answer, we are fortunate to be able to turn to Yen Liow. Aravt, the named of Yen’s firm, refers to the elite soldiers of Genghis Khan. They too believed that the best defense was a strong offense.

We hope you can join and learn with us from our chat with Yen.

Yours in the Field,

Frank Byrd, CFA

IMPORTANT DISCLAIMERS:

This note is for educational purposes only. It is not a recommendation to invest in any particular security or strategy, since anything mentioned herein may be completely unsuitable for some investors. Speak with your financial adviser before investing. Fielder cannot promise any investment result. Every investment strategy has the potential for profit or loss. All investing involves risk including even the complete loss of invested principal.

The above information was prepared in good faith by Fielder for general education purposes. Nothing herein constitutes an offer to sell or the solicitation of an offer to purchase any fund or account managed by Aravt Global. Any such offer or solicitation may be made only by means of the delivery of a confidential offering memorandum or other offering materials (the “Offering Documents”), which you can request directly from Aravt Global at (212) 599-8218.

While the information presented herein is believed to be accurate, Fielder Capital Group LLC (Fielder) makes no express warranty as to the completeness or accuracy, nor can it accept responsibility for errors appearing in the document. Fielder is under no obligation to notify you of any errors discovered later or of any subsequent changes in opinions. Nothing herein should be construed as a recommendation to buy or sell any of these securities. It should not be assumed that any of the securities, transactions, or holdings discussed will prove to be profitable in the future or that investment recommendations or decisions Fielder makes in the future will be profitable or will equal the investment performance of the securities discussed herein. Fielder or its employees may have an economic interest in securities mentioned herein.