We're just 11 trading days into 2023 so it's much too early to identify any trends, but stocks are already off to a "topsy turvy" start.
As of yesterday's close, the Goldman Most Short Basket, a group of the most shorted stocks in December, is up 16% year-to-date!
One example within the group is Bed Bath & Beyond (BBBY). The once dominant retailer in home goods reported a worse-than-expected $393 million loss in the third quarter ended Nov. 26 — pushing its losses in the fiscal year above $1.1 billion. Sales tumbled 33 percent from the same three-month period last year. Executives are warning that bankruptcy may be unavoidable, but many experts wonder whether the 52-year-old retailer will survive at all.
BBBY is up 72% year-to-date compared to 4% for the S&P 500.
While our investment team spends a lot of time on research, I'm reminded of a favorite Warren Buffett quote:
"The most important quality for an investor is temperament, not intellect."
When things are "topsy turvy," it's best to get back to basics. I enjoy reviewing the following principles at the start of every new year.
7 Investing Principles of Warren Buffett
1. Focus on quality companies:
Buffett believes in investing in companies that have strong financials, a proven track record of success, and a competitive advantage within their industry.
2. Look for undervalued companies:
Buffett is known for seeking out companies that are trading at a discount compared to their intrinsic value. He believes that buying a good company at a cheap price can lead to significant returns over time.
3. Diversify your portfolio:
Buffett believes in spreading investments across multiple companies and industries to reduce risk and increase the chances of success.
4. Be patient:
Buffett is known for taking a long-term approach to investing, holding onto stocks for years or even decades. He believes that good companies will eventually succeed, and that patience is key to building wealth over time.
5.Avoid market speculation:
Buffett believes in investing in companies based on their fundamental value, rather than trying to time the market or speculate on short-term trends.
6. Look for companies with strong management: Buffet believes that a company's leadership is crucial to its success, and he looks for companies with strong, competent management teams.
7. Don't be afraid to buy when others are selling: Buffet often buys when others are selling, taking advantage of market panic to pick up undervalued stocks. He believes that this contrarian approach can lead to significant returns over time.
A fun fact:Berkshire Hathaway will earn$4.84 billion in dividend income this year, coming from 6 stocks.
Chevron: $964,107,966
Bank of America: $908,909,765
Occidental Petroleum: $901,062,858
Apple: $842,008,404
Coca-Cola: $704,000,000
Kraft Heinz: $521,015,709
While speculation can be tempting in the near term, investing in quality pays over the long term.
What's your favorite investment principle of Warren Buffett?
By Andy Wang , Managing Partner at Runnymede Capital Management
