Here’s a great interview with Chris Davis of Davis Advisors on the Meb Faber podcast discussing a number of topics including finding opportunities in the current environment, saying:
“As Human Beings, We Don’t Welcome Fear And Panic…As Investors, We Welcome The Bargain Prices That Those Emotions [Tend To] Produce”.
During the interview Chris spoke about the most exciting types of businesses in this environment. Here’s an excerpt from the interview:
And then the third lens is the one that’s the most exciting in this environment. And these are the companies where the stocks have gotten killed because nobody knows what they’re gonna earn in the next month, the next two months, the next quarter, the next two quarters, even this year.
But there’s enormous confidence in their resilience. They will be able to get through this period. Unlike category one companies that are gonna have to finance and you don’t know what the terms of that financing will be. In the financial crisis, banks that were in the TARP program had to give up 20% or 25% of their equity. AIG gave up 90 or 95 and Fannie May gave up 100. So if you’re forced to be bailed out, you don’t know what the terms are. It may work out, it might not. We’re not in that game.
But this third category of companies are companies where you know there’s that resiliency. Think of United Technologies, think of Berkshire Hathaway, think of the banks. I mean, they could not be in a better position for this crisis versus the last one. They’re just sort of leaning in. So that’s sort of, as we’ve come into this period, that’s been our mindset. And so we’ve called this sort of a high conviction downturn because we’ve had a lot of conviction in how the companies are positioned. And the financial crisis was not like that. The financial crisis, the entire system could’ve shut down. Wells Fargo could’ve been nationalized. I mean, lots of things were happening that were, I’ll say as an investor particularly in that sector, completely disorienting.
9/11 had less economic impact but it was psychologically terrifying in a way that the financial crisis was not terrifying for the average person on the street. But we were New Yorkers so that was very deeply jarring. This has been a much more high conviction period. We feel the portfolio was sort of prepared. So we’ve had a lot more equanimity and sort of been able to maintain that sort of perspective through this period.
You can listen to the entire interview here:
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