Beyond The Headlines
Long Shelf Life
Amid this year’s market’s ups and downs, a friend asked me if I was watching the daily market news. I said that I was not. The daily media reports often share extreme views, and the more dramatic they are, the more airtime they get. He was intrigued and curious about how I knew what to do then. I said that we rely on our research, which leads to insights with long shelf life. We can’t find those in the daily news. Let me explain.
There is no shortage of information, data points, and opinions. I think that at no point in time could more people easily reach a bigger audience in less time than today. Everyone with a smartphone is a journalist these days. Our attention span has never been shorter. We swipe, click, and refresh our little smartphone screens with every blink of an eye. We have developed cat-like reflexes browsing through thousands of pictures, headlines, and comments instantly.
As disciplined, patient investors, we don’t gain much from this fast-speed news and data flow. We see ourselves more as business owners. We are curious about the long-term direction of the investments we make. What matters to us most are insights with long shelf lives. I came across this term on various occasions. I found it to be the perfect description of what we do.
Suppose you were to place insights on a scale from the short-lived ones, perishable to the ones with very long lives. In that case, I’d start with a momentary stock sell-off in the early hours of the day and end with a business we own establishing a long-lasting leading market share at the other. If you turn on the news, you’ll see a few dozen opinions about a sudden stock price move. It’s exciting and gets the viewers’ attention but adds no value to our process.
It’s fairly easy to discount and ignore the truly short-lived noise; it’s a little harder to get beyond that to longer-lasting insights. The true success lies in distilling the insights with long shelf lives. These insights will be true 5-10-15 years from now or even longer. A big part of the investment news attention is around quarterly earnings. Are they better than expected or worse? The stock prices react on the day the earnings get reported. The price rises or drops, and someone on TV has a comment or two about it.
We follow quarterly earnings, too, but our goal is very different. We focus on recurring insights — big underlying trends. We want to understand if the management is frank with us, do they underpromise and overdeliver or the opposite. We’d rather have them tell us how it is. On calls with management, we always emphasize that we have no interest in quarterly beats or misses; we want to know where the business could be in 5-10-15 years. We basically ask about long shelf life insights. Are we still on course, no matter how much noise a particular quarterly earnings report brings?
The real challenge in analyzing the insights is the change. Even if we find something that was true for a hundred years, change might come and turn our long-lasting insight obsolete and irrelevant. Kodak ruled the world of photography for a century. It was even exploring digital photography before many others, yet it couldn’t preserve its business model and leading market position when the change happened. The film camera disappeared from shelves and pockets forever.
The kind of insights we look for and the kind of tests we put them through are not something you can find in a newsflash report with a few buzzwords with a well-timed commercial that follows. Those are the insights we find looking closer, asking questions, and conducting our own research.
Investors’ interest in long shelf life insights is fading, while the affinity for perishable news flashes has never been higher. This leads to more focus on short-term returns, which takes the attention away from 5-10-15 years, and more toward the next few weeks and months. It’s a peculiar chicken and egg phenomenon. There is no room for long-shelf insights in an investment process focused on monthly returns. The fewer people care to look beyond the next quarterly earnings, the more long-term opportunities there are for investors like us.
The information provided in this article represents the opinions of Sicart Associates, LLC (“Sicart”) and is expressed as of the date hereof and is subject to change. Sicart assumes no obligation to update or otherwise revise our opinions or this article. The observations and views expressed herein may be changed by Sicart at any time without notice.
This article is not intended to be a client‐specific suitability analysis or recommendation, an offer to participate in any investment, or a recommendation to buy, hold or sell securities. Do not use this report as the sole basis for investment decisions. Do not select an asset class or investment product based on performance alone. Consider all relevant information, including your existing portfolio, investment objectives, risk tolerance, liquidity needs and investment time horizon. This report is for general informational purposes only and is not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally.