Recently, Carnegie Investment Counsel Portfolio Manager/Regional Director Scott Inglis was a guest of Behind the Numbers, which is a podcast about the “real stories” behind business performance and valuation. Inglis talked with the host, valuation expert and bestselling author Dave Bookbinder. Scott provided detailed insights around demystifying noise in the market place”. Here’s an overview of the conversation.
Inflation is on the minds of many and there is no shortage of price increase anecdotes around the country. From commodities like iron ore and copper doubling in price, to paying MSRP for a year-old car, these observations of rising prices are coloring perceptions about general affordability, the dollar, the central bank and investments.
Whether we are experiencing inflation is not up for debate, however, the prospect of sustainable inflation is definitely debatable. Is it the ‘80s all over again? Can we objectively look at the pandemic-induced supply disruptions, a confluence of weather anomalies, lean manufacturing driven supply chain decisions and a Texas freeze, and call it a structural and sustainable inflation? Not really. At least, not yet.
Are we headed into a time of inflation? Many people and economists are debating this issue right now. In the “real world,” we’ve seen inflation in interesting areas such as Pokémon and NBA Top Shots trading “cards,” which had seen a spike up in prices earlier in the year. Housing prices are certainly rising. Plus, inflation is finding its way into commodities such as food inputs like soybeans, corn and more. Certainly, gas prices are higher at the pump than a year ago. And does it mean inflation is coming because of crazy high auction prices for things such as Jack Dorsey selling his first tweet ever as an NFT (non fungible token) for over $2.9 million?
When we think about investing in equities here at Carnegie, we think of the companies we invest in as businesses. If I polled 5 random people off the street and asked them to list 5 good companies, depending upon their age, sex and race, I would probably hear names like Apple, Facebook, Google, Tesla and Netflix. While these companies have performed admirably in the last few years, we never lose sight of our pursuit in finding great businesses with sustainable business models or what Warren Buffet likes to call a “moat”. What if I told you that one of the best sectors to invest in over time is a collection of boring, slow growing businesses?
As a firm with roots in Cleveland, the city is abuzz with excitement surrounding the Cleveland Cavaliers run to the NBA Finals. It is great to experience the excitement that cities like Cincinnati and Philadelphia have enjoyed in the past and our hope is that this team will end Cleveland’s 51 year title drought. The Cavs will need to play great team basketball to beat the Golden State Warriors but when it comes to investing; sometimes it’s best to separate certain parts of the “team” or businesses. This is often referred to as spin-offs on Wall Street.