‘Details create the big picture’ – Sanford I. Weill
The legendary Sanford I. Weill, the ex (pre global financial crisis) chief executive and chairman of Citigroup, is absolutely correct in his quote above. ‘Big picture’ views on growth, exchange rates, trade policy, inflation, sector performance and the like come from understanding little bits of detail and piecing them together like a detective. This is why even a fund (like our own Dynamic Opportunities Fund) which selects thirty something individual shares from a potential list of a few thousand has to take account of big picture matters.
The easiest way to do this is a little, often. Typically the first hour or so of my day – even before the flood of corporate earnings start to come out from Europe – I spend exclusively on macroeconomic issues, trends and themes. Trying to spot the top four or five themes of the day or the previous twelve hours is more useful than just checking how the markets or doing or where exchange rates or commodity prices are. Out of these issues, trends and themes come the insights which assist with our individual stock selection, specifically offering the first filter in the process in how we cut down from the potential list of a few thousand stocks to our preferred thirty or so.
Earlier in the week I was interviewed by Jenny Hammond of Asset TV (you can find the link to the full four minute recording here) and such musings covering politics, economics, data and international developments are typical of what we do. We have built up our investments in Continent Europe over the last couple of months anticipating that the fear factor around the future of Europe is currently overstated. The detail therefore on this last weekend’s developments in the German and Italian political scene therefore matters along with the later in the week interest rate decision and related commentary from the European Central Bank (ECB). Meanwhile trade policy cuts across almost everything given its clear links to global growth and hence corporate earnings. Although we did not have time to state this in the above link, for us the impact of negative trade commentary and rhetoric could continue to overhang the US dollar…which has positive investment implications for Europe, the emerging markets and the energy sector as long as trade constraints stay more as rhetoric and less as as action. Details and constant monitoring of the issues clearly continue to matter…and hence we continue to monitor.
Turning to Dynamic Fund holdings during the last week we exited both the Old Mutual and Tesco positions in full after both shares hit our targets and additionally took some profits inBarclays after a well-received set of quarterly numbers pushed up the shares. Aided by big picture insights combined with specific information from recent earnings reports we bought new positions in the medical technology company ConvaTec and the retailer Dunelm as well as the US energy name Apache as well as adding to a couple of existing positions Saint Gobain and General Mills.