Doremus, the communications company that understands the business of business, has conducted interviews and focus groups with portfolio managers and equity analysts to ascertain how their jobs have changed.
The ongoing study began six years ago. However, in recent years the groups in the study described the stock market as “more volatile” and offering “more uncertainty” than ever before. This has affected how they view their jobs and has also influenced their investing behavior.
Here are some of the 2006 results:
My job is harder … but more gratifying
Picking stocks today is universally believed to be a lot harder than it was six years ago, but much more gratifying in this highly volatile market. It’s where heroes are made, and broken.
As one analyst put it, “When the pie is expanding, everybody gets their piece. When it stops, stock-pickers get to differentiate themselves.”
In a shifting marketplace, everything makes you want to revise the call you just made.
It’s a temptation, they say, to revise a call but one they must resist to maintain their credibility. As one portfolio manager put it, “you need patience, humility and conviction.”
Long-term investing is a luxury
While most would prefer to exercise long-term investing for their clients, they also realize that such investing is a luxury in today’s volatile market. As one portfolio manager put it, “At my core, in my heart, I believe in long-term investing. As far as running a portfolio today … you can’t.”
The constant among them is that their behavior has changed as a result of recent market conditions.
• The portfolios they manage are more geographically diversified, demonstrating exposure across global economies with investment in companies that benefit from participation in global markets.
• They are more careful … and a lot quicker to take a profit than they had been in the past. They set tighter parameters for how far a stock dips before calling it quits … because you JUST DON’T KNOW.
• They will buy a company, but also take a harder look for strength within that company’s sector.
What They Advise:
When asked what they would tell someone just starting out in their business, they offered the following advice:
There is a blizzard of data out there. You can make any call you want. So do your research, make your calls and stick to it.
Get to know a handful of stocks and groups well. Stick with them.
Trust your instincts. They are the emotional residual of experience.
Don’t be arrogant. Take short-term profits in a run-up. Don’t be afraid to stay on the sidelines as equities re-price. In irrational markets, working the price differentials can pave the way to long-term earnings.
In volatile, sideways markets, the quality of leadership can be a better indicator of stock price trends than earnings performance.
Doremus is known for its understanding of complex, considered decisions, multiple target audiences, and identifying the best communications channels to magnify budgets at all levels. Over 100 years old, with offices in the key business centers of the world, Doremus is constantly evolving to meet the marketing communications needs of business. Doremus is a member of the Omnicom Group.
Omnicom is a leading global advertising, marketing and corporate communications company. Omnicom’s branded networks and numerous specialty firms provide advertising, strategic media planning and buying, direct, and promotional marketing, public relations and other specialty communications services to over 5,000 clients in more than 100 countries.