Look at investing during Covid-19 in the context of the business and not the stock

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Look at investing during Covid-19 in the context of the business and not the stock
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Gerry Frigon, President and Chief Investment Officer at Taylor Frigon Capital Management, whose growth strategy has experienced the best two months in its history, shares his approach to investing during Covid-19:

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Q2 2020 hedge fund letters, conferences and more

Look at investing during Covid-19 in the context of the business and not the stock

  • Recent market volatility is testimony to the importance of staying fully invested in times of extreme volatility and crisis.
  • Trading-based strategies are hazardous to most investors, and that was proven handily this year.
  • Our view has always been that it is crucial to look at investing in the context of the business and not the stock, or the stock market.
  • Our TFCM Core Growth Strategy experienced the best two months in its history and finished the first half of 2020 up over 23%.
  • This was the result of painstakingly applying our narrative-based investment approach.
  • Many of our clients have asked us what specifically drove this significant outperformance.
  • We believe what we are witnessing is a recognition, in difficult times, of real and sustainable businesses in core technology, medical technology and financial technology.

The economic and market environment

  • As for the overall economic and market environment, we believe the world overestimated how many businesses were “shut down”.
  • We spent a significant amount of time speaking to company management teams during the dark days of the downturn and, in general, they were reporting that they were still functioning.
  • The fact that the hardest-hit businesses were those that were the most consumer-facing, and thus visible to the average person, gave the impression to most observers that things were far worse than in reality.
  • This is not to suggest that the downturn was not significant, it absolutely was and still is, but it was not quite as bad as was expected -- and that is the primary reason that the markets have reacted so positively and swiftly. In our view, the reaction has been quite rational.

Looking Ahead

  • Going forward, we believe there are important challenges to overcome.
  • The massive amount of government spending gives us serious concern, not to mention the more philosophical, yet pertinent questions surrounding the role of government in society.
  • These issues go beyond the scope of what we address in our commentaries, and yet have real implications for the free enterprise system in which we live and which are required for our companies to thrive.
  • These days, it is more important than ever to have a very solid sense of the trends that will drive business in the coming years.
  • It is imperative that investors pay attention to those who run the businesses in which they invest to be certain they are up to the challenges facing them in the twenty-first century.
  • Now more than ever, predicting the business is far more important than predicting the market.
  • Here's a link to the Core Growth Strategy Performance

About Gerry Frigon, President & Chief Investment Officer at Taylor Frigon Capital Management

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GERARD J. FRIGON is the President, Chief Investment Officer of Taylor Frigon Capital Management LLC and is the Managing Member of Taylor Frigon Capital Advisors LLC, General Partner to Taylor Frigon Capital Partners LP, a private investment fund which invests in private companies and small emerging public companies.

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Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver

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