Northstar quarterly market reports
The Northstar Market Report provides powerful empirical evidence as to why we are confident that our investment philosophy and process, closely followed, will deliver market beating returns for our clients over time. This work again points to controllable factors - markets move wildly, falling in and out of love with different sectors and companies, but we have a defined formula that works and we stick to our guns by only owning quality companies when they are incorrectly valued by other investors. We discuss stocks in this report, delving into our investment cases for specific securities which we own.
CURRENT QUARTERLY REPORT
2023 – Quarter 4
THE BIG PICTURE
A tidal turn for emerging markets
In this article, I raise the unthinkable: emerging market indices could be on the verge of outperforming developed markets.
FROM THE ANALYSTS
Investing for long-term outcomes: macro economic factors and the “chessboard problem”
Investment outcomes associated with short term returns (cyclical) and long-term returns (compounding) are nowhere near even. Despite alpha from compounding being higher, more enduring, and less volatile, investing in highly cyclical companies for mean reverting returns has great appeal for reasons of instant gratification (a strong psychological force). Since returns from compounding are non-linear, that is, do not go up in a straight line, investors surmise that a bird in hand (cyclical, mean reverting returns) is better than two in the bush (compounding). Investment markets always pose the following question to investors, “would you rather take $1m right upfront or a penny on day one doubled every day until day 30?”. Doubling every day for 30 days would yield $10m while doubling every day would yield $1m in 27 days. So, taking $1m upfront would make you look like a hero for 27 days. However, you would rue your lack of patience to net you $10m in the last three days of the month. That’s why temperament has an exponential impact on investment outcomes (relative to other sources of alpha generation, namely, analytical, and informational advantages). Temperament allows us to forgo upfront gains (quarterly and even annual gains) in favor of compounding outcomes that may only show up further out on the horizon of transient factors affecting the economy/industries.
FROM THE ANALYSTS
Is a rand hedge stock strategy viable?
As South Africa’s medium term outlook has deteriorated, many investors have become increasingly vocal about having higher exposure to rand hedges. But does the available pool of locally listed rand hedges allow for a consistent and successful rand protection strategy? Historical returns and correlations do not seem suggest so.
STAFF MEMBER PROFILE
Staff member profile – Jorge Haynes (COO – First Avenue)
When did your interests in financial markets start?
During high school, seeing television programs and movies about Wall Street and watching the financial indicators being read on the news I developed a curiosity around what all this meant and how it worked. This piqued my interest to learn about it and I realised that people make a living investing, which was different to normal jobs, like lawyers, doctors etc one is told about at school. What further interested me later, was learning about human behaviours that drive the markets and world around us.
QUARTERLY REPORTS ARCHIVE
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