May 18, 2022,
Today's market action took us back to June 2020 price levels. It made the top ten list of all time point drops at number 9 as you see in the table below. On the bright side, it was not even close to an all-time percentage drop because the index value has grown so much over the years. Days like this get us closer to the capitulation required to bring investors back into the market.
A New York Times Op-ed by Warren Buffett from October 16, 2008 (article link). In it, he reminds us of a very simple rule: “Be fearful when others are greedy and be greedy when others are fearful.”
At the time the Op-ed was written, the stock market, as measured by the S&P 500 Index, closed at 946.43. Buffett, by no means, on that date was calling it the bottom of the market. In fact, the S&P 500 Index would go on to decline an additional 30% by March 9, 2009 (676.53 close). Buffett understood that timing the bottom was less important than buying when there were great businesses at attractive valuations.
For reference, an investor who invested cash on October 16, 2008, would have seen a 30% decline within 144 days of that initial investment. However, after todays close, that investor would have almost quadrupled his money. That is better than 12% compounded for the past 13.5 years.
Today, we are not trying to predict the market bottom. In fact, we never have a crystal ball to predict short-term or long-term volatility in the market.
We do however, report that many of our portfolio companies are trading at valuations which we believe are both attractive, and we believe set investors up for strong long-term returns, 5 years and beyond. We understand the difficulty in investing during these times of uncertainty. However, as Buffett reminded us in the 2008 Op-ed:
“What is likely, however, is that the market will move higher, perhaps substantially so, well before either sentiment or the economy turns up. So, if you wait for the robins, spring will be over.”