At this point in time, every equity investors’ is to try and predict the impact of COVID-19 either on the markets in general or, for the more intrepid, on specific stocks.
I very frequently get the question: ‘What’s going to change in the next 10 years?’ And that is a very interesting question; it’s a very common one. I almost never get the question: ‘What’s not going to change in the next 10 years?’ And I submit to you that that second question is actually the more important of the two because you can build a business strategy around the things that are stable in time.
However, as the famous Jeff Bezos letter to shareholders in 1998 pointed out, the question to answer is not what will change but what will not.
In that old letter to shareholders, Bezos goes on to say this: “In our retail business, we know that customers want low prices, and I know that’s going to be true 10 years from now. They want fast delivery; they want vast selection. It’s impossible to imagine a future 10 years from now where a customer comes up and says, ‘Jeff I love Amazon; I just wish the prices were a little higher,’ [or] ‘I love Amazon; I just wish you’d deliver a little more slowly.’ Impossible. …When you have something that you know is true, even over the long term, you can afford to put a lot of energy into it.”
It’s the same with investing: If you are investing in a business that is going to become uneconomic – or at least suffer a big shock – based on anything that may turn up in tomorrow’s news, then the problem is not with that business but in your approach of investing.
So, what are the characteristics that make a stock event proof, politics proof or more generally, news-proof? is the long story actually, and not something that I can sum up in a few sentences.
By the way, if you feel that a company is going to be doing badly because the COVID-19 happen, and therefore you feel the need to be able to predict the COVID effect in order to take a call on the stock, then you already know that you should not touch that stock.
Just ask yourself the question “what is not going to change in the next 10 years?” & in response, invest only on stocks that fit.
