What's the Story Behind Your Investments?
There's a story behind every investment
Do you want to know the “story” behind your portfolio?
We frequently espouse the virtues of buying and holding stocks for the long run. Often, our advice is accompanied by some relevant data point, chart, or a colorful graph. But what is the story behind these numbers?
The Wall Street Journal wrote a great article on April 17th called “Shoes to Masks: Corporate Innovation Flourishes in Coronavirus Fight”. On the surface, it is about how businesses are adapting and helping in the fight against Coronavirus. But the real story is the ingenuity of American businesses and the innovative spirit of American capitalism.
Here are some current examples of businesses innovating to serve their community (via WSJ):
- True Value Co. refitting the company’s factories to mass produce hand sanitizer
- Moderna Inc., a Massachusetts based biotech company, beginning human trials on a vaccine
- Abbott Laboratories rolling out tests that can deliver results in under 15 minutes
- Apple Inc. and Google developing software that would alert users if they came in contact with someone infected with the virus
- A University of Wisconsin engineer teaming up with Ford Motor Co. to begin producing face shields for Wisconsin and Michigan hospitals, and now rolling out a “pop-up supply chain” that can help hospitals around the country
- A family-owned children’s shoe company in Pennsylvania producing protective masks, first for health-care workers and now the broader public
According to Jeffries, an investment bank, there are now more than 200 experimental drug treatments for coronavirus under development worldwide. In part, this is possible because the biotech industry has raised record amounts of capital in recent years through venture financing and public offerings.
Why is this important to my investment accounts?
So, what does this have to do with your portfolio? Everything.
Amid all of the noise that we see and hear in the news, it is important to remember that stocks are not simply pieces of paper. They are ownership in a business. Within the diversified stock fund that you hold, you are an owner of hundreds or thousands of underlying businesses. Real businesses with real employees that sell real products to real customers.
Our economy is taking a severe hit right now, and there is real pain being felt by millions of Americans. There is no question about that. But while this is happening, the businesses you own are adapting, innovating, and adjusting to this new reality. This dynamic response lays at the heart of American capitalism. It will help find the solutions to the current crisis, and it is planting the seeds for the next phase of economic growth in our county, whenever that occurs.
In the long-run, stock prices are driven by the profitability of their underlying businesses. That profitability will obviously go down as our country hibernates. But in the long run, the businesses you own will adapt, survive, and, eventually, thrive again.