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Investing in Wartime... and more
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Let’s start off on a light note, before turning to darker subjects…
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Investing during the Russia/Ukraine war
The stock market best resembles a rollercoaster these days, careening up and down with every new report out of Eastern Europe. Companies are pulling out of Russia left and right and governments the world over are levying sanctions against prominent Russian politicians, oligarchs, and industries.
Supply chain problems that were once mere annoyances could soon become a matter of life and death in some parts of the world. According to the International Food Policy Research Institute, Russia and Ukraine combine to export 12% of the world’s food calories.
In particular, wheat and corn may get very scarce (and expensive) in the months ahead.
And, of course, everyone knows what’s going on with gasoline prices.
I know it seems a bit ghoulish to discuss how the heartbreaking and horrific humanitarian crisis caused by Russia’s invasion of Ukraine affects the investing world. But, rationally speaking, it’s during these turbulent times that investors must show resolve and not be swayed into emotional decisions that damage their long-term plans.
It’s a difficult (and off-putting) subject, but one with an easy answer: Don’t change anything about your investing approach and mindset.
The companies I’m predisposed to invest in — blue-chips with strong balance sheets and growing dividends — are exactly the ones best suited to weather volatile situations.
No panic selling or speculating on commodities (like oil or wheat) here. I’ll leave it to others to sift through growth companies trading at 100x earnings in search of the few destined to defy the odds and provide outsized returns.
That might limit the upside of my investments, but it makes it much easier to sleep at night.
My advice: Stick with good, old-fashioned value investing and remember that, in the long run, the good news always outweighs the bad.
Moves made in haste, particularly in response to emotional news of the day, are unlikely to work out in your favor.
You’ll no doubt be shocked to hear this, but I have a Warren Buffett quote for this occasion:
“Over the long term, the stock market news will be good. In the twentieth century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.”
One small addendum: The past few weeks have only reinforced my preference to invest in American (and British) companies only.
Pity those poor investors who hold stock in Russian companies and now face a total wipeout through no fault of their own. Who could have known that, in the span of a few weeks, Russia would be ejected from the global financial system and the trading of Russian ADRs would be halted?
So I just sidestep this whole geopolitical rigamarole by sticking with American stock.
Coincidentally, this also explains why I avoid Alibaba — even though it has dropped into deep value range.
PARA jumped more than 10% on Monday, possibly on the perception that the company is positioning itself as an attractive acquisition target for another streaming service.
Whatever the reason, it’s been a long hard slog for Paramount bulls and it’s nice to see the market occasionally throw us a bone.
Also, on Tuesday, Paramount CFO Naveen Chopra spoke at a Deutsche Bank conference and strongly defended the company’s content library.
“I think there are a lot of companies out there [that] would love to have our portfolio of content and, importantly, well-known IP.”
Paramount’s well-known IP — and a massive library of legacy content built up over nearly 75 years in the television biz — are a huge advantage in the streaming wars. While some rivals (namely Netflix, Apple, and Amazon) need to build a library of content from the ground up, Paramount sits on a TON of legacy content.
Another interesting facet from Chopra’s talk: Paramount+’s investment in sports programming (NFL, UEFA Champions League, Serie A, etc.) is really paying off. In the United States, sports viewers “turn into our highest long-term value subs, especially when we get them into that second piece of content,” he said.
The week is still young, but it’s been a good one for Paramount so far.
Disclosure: This is not financial advice. I am not a financial advisor. Do your own research before making any investment decisions.