FNArena’s Weekly Insights – March 17 2020

Bear markets are brutal. They take no prisoners. Shoot first, then shoot again, and maybe, just maybe, that’s when they might start asking questions. Bear markets punish mistakes instantly and irrevocably.

Bear markets are also excellent teachers, at least for those investors and analysts who are ready to learn invaluable lessons. For years now we have all been reading analysts and funds managers predicting the next economic recession annex global bear market for risk assets would herald the end of growth and the money moment for largely ignored value stocks.

Guess what just happened in the past few weeks? Value stocks have been ab-so-lu-te-ly trashed to smithereens. Sure, many of them will come good and present excellent buying opportunities, but probably not just yet, except for that special kind of investor with an iron stomach who can confidently focus on the future, and ignore wild share market gyrations in the meantime.

Instead, many of the stocks that have relatively held up well throughout this global share market meltdown (let’s call a spade a spade) are the ones most hated by your typical professional fund manager; “expensively” priced stalwarts such as CSL ((CSL)), Xero ((XRO)), and Woolworths ((WOW)).

There is no secret ingredient waiting to be unveiled here: these stocks represent less risk than your average bank, oil & gas producer or mining services provider. To be fair, many of the previously popular High PE names have not been spared either post January. While, understandably, if you really want to check up on true share market carnage, try travel agents, airlines and tourism operators.

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