In his latest interview on the Masters In Business Podcast, Steven Romick discussed how he achieved outstanding results buying into fear during the pandemic. Here’s an excerpt from the interview:
RITHOLTZ: You are down 34 percent will do that, right?
ROMICK: Some of the business we owned were people threw out for dead for a period of time. We own companies like AIG that started the year at around 50 and at the end of 2019 going into 20, it peaked at mid-50s and an intraday in the third/fourth week of March 2020 it was trading down at under $17 a share, with book value being up closer to where the price was at the beginning of the year.
So huge, huge discounts and people believe that they… the company was clearly on its way out of existence. And we didn’t believe that, and we took the opportunity to increase our position but it was still… I mean it admittedly was discomforting at that point in time not only for us, because who likes to see their stocks drop that much, but certainly for our investor base.
But at the end of the day we understood that many of these businesses we own, it was just a blip. It was just a price at a point in time with fear hitting the market and it wasn’t that these businesses weren’t going to do well once we got through to the other side, and businesses like AIG are going to be fine.
It’s businesses like Marriott. It’s business truly stopped, and we were buying Marriott as the stock was coming down. You buy a stock at 80 and then it goes into the 60s, it’s not again the most comfortable thing to watch happen but we are very confident that as we got through the pandemic people once again would travel.
They would get on airplanes. They would go to hotels, and a company like Marriott, that is more asset light that some of the hotel businesses, would perform quite well.
So buying something at 60, I’m sorry at 80 as it drops down another 20 percent to 25 percent from there… again as I said was discomforting but at the same time, you look where it is today where its 140 plus. We clearly weren’t wrong but it took a market at that point in time is… it took a lot of those businesses down with it.
So we took advantage of the opportunities at that point in time and increased our invested exposure by about 10 percentage points and pulled down some of that cash you are referencing.
You can listen to the entire interview here:
Full transcript here:
Steven Romick: Masters in Business Transcript
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