Mr Market, so Buffett says, has incurable emotional problems; at times he feels euphoric and sees only favourable factors affecting the business and at times he feels depressed and sees nothing but trouble ahead.
Whilst the development of Coronavirus around the world provides an unexpected shock to the global economy, Mr Market had a particularly emotional month in February delivering the worst week for equities since the Global Financial Crisis. At the same time the Director-General of the World Health Organisation, ended the month giving the speech that ‘our greatest enemy right now is not the virus itself; it is fear, rumours and stigma. And our greatest assets are facts, reason and solidarity’.
We hope to take advantage of Mr Market by investing with the same values described by the WHO Director-General.
As investors of businesses rather than stock indices though, as the fund manager of the Coleman Street Investment funds it is important that I maintain a focus on strong underlying performance from the names that I hold, such as Genus whilst also adapting expectations for businesses who have been impacted by the virtual shutdown of much of China, such as Burberry.
Whilst we will neither sell every share at the highest price that it trades nor buy every share at the lowest price (although we certainly will try), we will continue to look to buy businesses whose long term fundamental characteristics are sound and exciting.
Our healthy scepticism around the bullishness of Mr Market year-to-date meant I had a small overweight cash position. Whilst this was nice to have as the markets suffered a troublesome week, it is golden when opportunities present themselves to buy fundamentally good businesses at attractive prices.
James Godrich, Fund Manager
James Godrich is the manager of the CSI multi-asset funds, the Coleman Street Investment funds.