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TopGun Investors Predict Recovery Within 90 Days… Brendan Wood International Poll

March 17th, 2020 by TopGun Press

TopGun Investors Predict Recovery Within 90 Days… Brendan Wood International Poll

For Immediate Release – New York, NY, March 17th, 2020 (TopGun Press)

Eighty eight percent of the Brendan Wood Investor Panel see markets back at January highs. Sixty two percent expect this to happen before June 15th, 2020 and Eighty Eight percent before September 15th, 2020.

“ The shareholder confidence numbers on a stock by stock basis are as high as ever. Some companies are obviously more vulnerable to virus issues than others, however selling pressure on funds affects stocks across the board. Professional investors are already picking and choosing high quality names at low prices. The panic is deeply felt by individual investors, most susceptible to media. Involuntary sales due to margin calls are another factor, according to trading brokers in our panel”, says Brendan Wood, Chairman, Brendan Wood International.

Investor Responses:

1) Are you planning to be a net buyer in the near term 3 months? (Net buyer means own more $ in equities than you do today.)

Yes = 92%
No = 8%

2) Will you be buying using cash reserves or switching existing positions into higher quality names that were overpriced but have become cheaper?

Cash Reserves = 41%
Switching Existing Positions into Higher Quality Names = 51%

3) How long do you think that decreasing real spending, lower earnings and supply chain issues directly caused by Coronavirus will prevail as deterrents to investing?

1 Month = 0
3 Months = 62%
6 Months = 26%
1 Year = 12%

4) Will markets/prices come back to January 2020 levels? 0-100%

Yes = 88%
No = 12%

5) How long will this recovery take?

1 Month = 8%
3 Months = 62%
6 Months = 30%
1 Year = 2%

6) How do you rate the future effect of a change in the US administration from Trump to a democrat in November as a market performance risk 0-100%? (Risk of a negative impact on prices)

Yes = 78%
No = 22%
Average Level of added risk = 55%

TYPICAL INVESTOR COMMENTARY:

“Anything you bought today by the end of the year you’re going be pretty happy with the prices you paid today. But that’s between now and the end of the year, which is a long time. We are basing that on the virus getting a little clearer in terms of the impact and hopefully having some sort of way to combat it. It’s going to be I say, April/May, late May or early June before this starts to show signs of being beyond the worst of it type of stuff. I think by November, December or September we start to see a lot of this recover. Universities and schools starting again I don’t know, I think hearing our State say it might not open again this year when a lot a lot of places have taken a two week or three week break. In terms of investing, there is no real place to hide.  _________ for example is one of those names you go to for quality and stability. Same with the gold producers. At the end of the day, they are still equities, right, no matter what you say about them, they still are equities and people will sell equities. People sell when they can at times and not when they should.”

“By the end of the year, current prices will look good. But, that’s between now and the end of the year, which is a long time. We’re basing that on the virus getting a little clearer, in terms of the impact and, hopefully, having some sort of way to combat it. It’s going to be April, May, late May or early June before this starts to show signs of being beyond the worst of it. We think, by November, December or September, we start to see a lot of this recover. In terms of investing, there is no real place to hide. _______, for example, is one of those names you go to for quality and stability. Same with the gold producers. At the end of the day, they are still equities, no matter what you say about them, they are still are equities and people will sell equities. People sell when they can, at times, and not when they should.”

“In six months, things are going to be in a much different place. The change to our democracy is going to be massive and COVID-19 is going to be a big, big factor in the US election and how it plays out. What does the world need right now? I think it needs more co-operation between countries and I think Trump is viewed as a very America first, antagonistic president. So, how would that be viewed globally if he was defeated in November? I think it would actually be a bit of a positive for the equity markets here. I wouldn’t have said that three months ago. But, given where we are right now, I think a lot of people are kind of fed up with the spinning. They’re more apt to go along with that when you’re seeing good economic performance. It will probably be too early to tell because how this plays out over the next few months will be such a big component of how he performs in the election. So, you’re hearing comments like taking the Fed rate to zero yesterday morning. And, the comments Trump makes after that could be a positive for his election push and it will. So, a lot going on right now, but it’s too early to tell.”

“Gold went up into the event similar to 2008 and investors will sell, take their profits as they have losses in other places and margin calls. The post period ends up being extremely bullish for the 24 months afterwards. If you look at coin dealers they are all saying we are going to limit you because our demand is so high and we don’t have stock, etc. The other thing too is they might have higher cost inventory and don’t like to sell it either. The premium is over spot price on silver even though silver has tanked. At the end of the day gold is the monetary metal of choice and silver is a poor investors’ gold. I don’t think gold will keep going down and will find its footing. I would say the low end is in the range of $1380 on a wash out and that’s where it started from about a year or so when it broke out, but I actually think your looking at significantly higher gold prices. A week ago it hit its high at $1700 but like I say, the dash for cash and if you are at a desk at a hedge fund, bank or somebody else you are going to get a tap on your shoulder from your risk manager who is going to tell to flatten your positions, they have to change their asset mix. That’s a lot of what happens in these scenarios. In addition to leveraged futures which lead to selling and tanking of gold prices.”

“Its tough to say so I sort of think we, investors, were dumping all asset classes with unlimited quantitative easing or free money/lower interest rates or whatever you want to say. When you got a little hurt then central banks would just step in and so right now there is just nothing. Essentially the central banks shot all their bullets until there were no more options.”

“I was actually reading something and you know sometimes to get back to peaks it can take anywhere from 1-4 years and so I actually think this time around it will be a bit longer, perhaps not 4 years but I do not think we will have a v shape type of recovery.”

“I think people are sort of wounded and maybe people have less appetite for risky assets because a lot of the money managers have never lived through a market like this one.”

“I was actually reading that a democratic president would not be such a bad thing in terms of crisis. I was actually reading some messages, whether its true or not, some republicans are encouraging their people to go out and eat and restaurants sort of contradicting what the CDC is saying. I do not know who knows but the next election will surely be interesting to see how it develops, everyone agreed that Trump was going to win by a landslide. I do not think that is the case anymore.”

“Everything is down so there is a lot of stuff to buy. It’s unusual. We’re sorting through where to take action and where not to. Every time you find something, then you find something else because it’s down up to 60 percent and it’s a good company. Generally speaking, companies that were good in January are still good today. However, there are exceptions to that rule. Obviously, airlines and other sectors that will be materially affected by the business impacts associated with Coronavirus typify those exceptions. And, then there are also those companies with debt. Most companies are companies that we were very interested in three months ago and are now more interested in them because of the lower stock price. For example, we have wanted to own _____ for a long time, but didn’t because it was a bit pricey. It’s now very reasonable. That’s the kind of company that we would take a 10-year view on. We would view it as a permanent holding. If it goes lower, we will look at selling something else so that we can buy more _____. We were not fully invested before the market tanked. We had 5 to 10 percent cash to deploy. Once we are fully invested, we will have to start swapping in and swapping out companies. So far, we have had lots of fun. Is it possible that things worsen? Yes, but we don’t think the impact of Coronavirus is going to be huge in North America. There may be a small, technical recession of a couple of months. It most certainly won’t be a financial crisis. If there is something that turns it that way, we’re not aware of it. Coronavirus will have a negative impact, but it is mild, relatively temporary and has created an opportunity to buy some of those companies we’ve wanted to own for a long time and now can.”

“We don’t really think it matters who is in the White House. Even if Bernie Sanders was elected President, we don’t think there would be enough support across the American political spectrum to get his agenda implemented, thus hurting the financial markets. It would be scary and there would be uncertainty. And, some stocks would be hit in the short-term and valuations would compress, but we don’t believe it would amount to anything material in the next five years. If Sanders became President, some multiples may go down and stay down for a while, but it would not impact the business itself.”

“We will be buying in the very near term. We will be using cash to get in cheaper, and switch into some quality names that are now much more affordable. We believe stock prices will come back. Everything should be clear by the end of this year, and when the outbreak ends we will get a good sense of the calendar for the timeline of markets going up.”

We think there is going to be disruption created by the Coronavirus in the financial markets, but we don’t think that it will last longer than two quarters. So, that could be a technical recession. The world was looking pretty good at the beginning of 2020. If investors value certain companies on 2021 numbers and, assuming everything gets back to normal, they should be a screaming buy. There is a lot of fear out there right now that some companies are just not going to make it through this period because of quarantine-like activity. There are a lot of negative headlines and the market feeds off of that. There’s more passive money than ever and, if everyone is selling their ETFs or selling their stocks completely or indiscriminately, it’s not fun when it happens. When it comes to investing, we don’t try to time the market. We stay invested in the companies that we think have the best opportunities to perform at that particular point in time. What we are really looking for right now is high quality companies that we think have been unfairly sold off. Telecom companies have performed well, but they have been down further than the market in recent days, which seems kind of crazy.”

“Our view is we will get through the current Coronavirus matter. We are confident that things will look a whole lot different in two to three months from now. The greatest challenge facing the technology industry is sales, in the near-term, because of the Coronavirus.”

We’re low turnover generally so we aren’t very active but we are looking for opportunities where stocks have been sold off disproportionately to the change in fundamentals.  We’re heading to the positions that we have high conviction around and where we don’t see any change in fundamentals, they’ve just sold off with the market.”

“Is it just a short term gap period, where it’s like, things were doing pretty well and actually, China was looking like it was turning? This goes all the way back to maybe February 1, maybe mid January, when that was the case, and then they had their thing and then more things, and then it just blew up to where it is now. It is stunning when you see the relentless passive selling, it’s been pretty crazy, anything goes, any yield stock, any defensive and it’s just weird. I saw today utilities down 20% across the board and I’m thinking this is just people trying to turn stuff into cash. I’m 99% sure that this will go away and we will return to being like normal people again. People will start eating in restaurants again and people will start going to their office again, you’re not going to be afraid to say hello to your neighbor. If it was just February or March of any other year and there’s a bad cold and flu season, you’re still doing your regular activities and there’s people in your office that are hacking and there’s people on the subway sneezing on you. This is the way of  the world and if you were to contract this new virus, you would feel a little bit sick for a few days and then whatever. I mean, we’re basically just trying to control the transmission of it. It’s not, from what I can tell and from what I see and read more, much different than the ordinary flu. There is just so much media on it. It’s so incredibly powerful and it’s exhausting too. So to me, it’s still not really the virus itself, it’s the response. It’s scary, it’s in the media and it’s creating an issue with pretty much every stock out there. I also would not discount the Saudi thing this week with OPEC. That was like an extra ton of gasoline on the fire, literally. It’s horrible and the timing was incredibly deliberate.”

“I think at this point the best stocks had been so expensive for so long, such as the really special ones and then there’s been no bid for anything that’s already bad. The stuff in the middle was always kind of sheepish but nobody was overly excited about it and right now the best stuff is definitely more than reasonable. Then there’s some stuff from the middle bucket that is so ridiculously cheap. Something like _____ is maybe outperforming the market. My sense is there’s a lot of passive now, so the market was down. Composite was down. Quality wasn’t really down much more so it kind of looks like investors were just looking for liquidity. It could just be a bunch of index sales.”

The recent market drop is not like the financial crisis of 2008 because the stock price movements have been more intense and concentrated. The financial crisis of 2008 was bad and a total structural break. This market drop is a medical problem. A lot of individuals had Coronavirus symptoms this flu season and probably had the Coronavirus and did not know it. The passing rate is probably understated. It is a bad flu; nothing more.”

“I believe investors will be buyers, one way or another, in the not too distant future. The investment community is looking for charity on the government response and Coronavirus prognosis. The Fed and Central banks’ responses are already baked into stock prices. Investors want to understand the rules of the game before re-entering the market. Cyclical stocks would be the ones to buy because the stock prices were pegged to a recession.”

“On a short-term basis, there is a risk with a change in the US government from Republican to Democrat. I am not sure on a long-term basis. One of my long-term problems with the economy is wealth distribution. A lack of inflation, GDP growth and interest rate growth will, by effect, cause a more centralization of wealth because individuals spend less and corporate capital spending will become less important. There will be a decreased amount of large projects. If a corporate takes half of the money allocated to capital expenditure and completes buy-backs, the money is not being recycled back into the economy. Capital expenditure creates jobs and increases GDP growth. The multiplier of the dollars is much higher. This is one of the major roots of the inflation problem. We can not fix this problem with fiscal policy.”

About Brendan Wood International:

Brendan Wood International (BWI), formed in 1970, is a private partnership generating independent performance audits throughout the world. Brendan Wood debriefs large institutional investors worldwide on a daily basis. There are 2000 investors in the investor panel collectively managing + $40 trillion invested in the 1400 companies on the BWI Index. Relying on real time intelligence, the firm advises public companies, institutional and activist investors, investment banks and broker dealers on strategy, performance and recruitment of TopGun talent. The firm’s partners have formally presented at 1000+ C level strategy meetings and corporate off sites in fifty cities. Brendan Wood founded the exclusive TopGun Club, a performance based institution.

Related Links:

www.TopGunPress.com
www.brendanwood.com
@
BrendanWoodIntl

Contacts:

Jordan Novak
Partner
Brendan Wood International
+1 416 924 8110
jnovak@brendanwood.com

Amanda Knott
Managing Director
Brendan Wood International
+1 416 924 8110
aknott@brendanwood.com

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