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Michael Parker, CFA

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Driven by Fundamentals

Posted by Michael Parker, CFA on 4/29/20 1:12 PM

Our institutional approach to asset management affords invaluable insights to the granularities of how businesses deploy capital. This in turn informs our conclusions on issuers better poised for disproportionate value creation, which is the crux to alpha generation in our actively managed strategies. This exercise becomes even more imperative during times when macro clouds impair ground visibility. In today’s case, the global scramble for pandemic mitigation can obfuscate how troops on the ground are reassembling to capture massive demand shifts underway. Without careful study of these bottom-up efforts, critical components to our eventual economic recovery would be overlooked, leading to avoidance of upside participation for investors.

As part of our customary quarterly review process to the SWS Growth Equity strategy, which we benchmark against the Russell 1000 Growth Index, we delve into the fundamental justifications of our portfolio’s top contributors and detractors. The following two stocks are samples of the best and worst performers during 1Q2020, extracted from our strategy’s full quarterly review, available for download here.

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Topics: Investing in the Future, Current Events, Asset Management

Sifting Through Uncertainty Rubble

Posted by Michael Parker, CFA on 4/23/20 2:33 PM

The following is an excerpt from our SWS Growth Equity quarterly update, our internally-managed strategy based upon an institutionally-designed investment process.

Our Market Take
Our daily lives are fully consumed by all aspects of the same risk causing disruptions in the equity markets. This is yet another "first" for our modern era, as prior systemic disruptions were largely perceived to be confined to financial services balance sheets (2008/2009) or among technology cohorts (2001/2002). Every single human on this planet is aware of the daily sacrifices necessary to navigate today's dislocation. This makes the task of sifting through news even tougher, as we must live through the same noise that's clouding our vision of our path through it. Yet these are the precise conditions of uncertainty that every dislocation of the past has marked its bottom in terms of equity prices, as we highlighted in our first piece in early March.

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Topics: Investing in the Future, Current Events, Asset Management

Sizing the Stimulus to its Adversary

Posted by Michael Parker, CFA on 3/27/20 11:02 AM

As we move from stage one of the pandemic response—a blunt force shelter-in-place mandate across major US geographies—to stage two of increased response precision, it's critical to assess how the magnitude of the financial response relates to the level of economic impairment. Both sides involve moving targets, but we have enough evidence to increase our degrees of confidence in drawing market conclusions. That said, there's no way to candy-coat it—we missed the call of a precipitous drop in equity market pricing. Now, the key is shrugging off analysis paralysis as we enter the eye of the COVID-19 storm. The particular challenge to the Level 5 hurricane that is this pandemic: its market impact arrived 4x faster than any prior recession since the 1960s (as we outlined here last week). As every prior downturn has taught us, we need to move past the headlines and study the second and third derivatives. In our constant exercise of gathering and assessing evidence, it's increasingly apparent that the main drivers of economic output are not permanently impaired. Undoubtedly, they will show deterioration in the coming weeks and quarters, but it's imperative to consider these scenarios relative to what the market has reflected in its (34%) price correction.

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Topics: Investing in the Future, Current Events, Asset Management

Context to the Current Crisis

Posted by Michael Parker, CFA on 3/10/20 4:46 PM

Although it’s only been a little over a year since our last 20% market correction diagnosis—which everyone forgets occurred, and we covered here—we turn to the 2008/2009 financial crisis for lessons of thinking through the noise. It’s not easy to forget the pain inflicted, but it is easy to overlook how the equity market’s bottom formation occurs long before any semblance of improvement in fundamentals. Blame for today’s dislocation falls squarely on the shoulders of COVID-19 contagion fears, further exacerbated by a political cycle anxious to assign blame and an oil pricing war stemming from OPEC defections. As before, globally coordinated efforts to resolve the source of the current disruption will be required. However, we are confident that the ultimate magnitude of the required COVID-19 solution will pale in comparison to the trillions of dollars that were needed to bolster our financial institutions' foundation post-financial crisis. We're even more confident that an equity market bottom will form far sooner than a recovery in the underlying causal data, as was the case during March 2009. In the final analysis, we conclude that the current set of unique challenges are not insurmountable based upon available evidence.

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Topics: Investing in the Future, Current Events, Asset Management

CES 2020: What We Learned, What's Coming

Posted by Michael Parker, CFA on 1/31/20 8:10 AM

The following is an excerpt from our SWS Growth Equity quarterly update, our internally-managed strategy based upon an institutionally-designed investment process.

Our routine due diligence efforts continue to reveal evidence supporting the thesis of a bifurcated market, one where growth indices encompass a larger number of companies that are more adept at leveraging innovation to capture market share in comparison to the value cohorts. For anyone with hopes of keeping pace with the broader market, we see this as a mandate for having a growth mindset. Our recent due diligence trip to Consumer Technology Association’s CES conference highlighted many examples of this unfolding.

 

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Topics: Investing in the Future, Technology & Investing, Current Events, Asset Management

Strategy Fact Sheets
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SWS Growth Equity (April 2020): Access Here

 

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SWS Dividend Equity (April 2020): Access Here

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SWS Balanced Income (Mar 2020): Access Here

Strategy Resources
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Growth Equity 1Q2020 Update: Access Here

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Dynamic Growth Opportunities 4Q2019: Access Here

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Dynamic Growth Opportunities 3Q2019: Access Here

Other Research
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Unleashing Asset Allocation Benefits (Mar 2019): Access Here

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4Q2018 Market Update: Access Here

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Volatility in Context (Dec 2018): Access Here

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3Q2018 Market Update: Access Here

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2Q2018 Market Update: Access Here

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Growth Becoming "The Market" (Jul 2018): Access Here

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The Current Opportunity (Apr 2018): Access Here

In the News
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How Technology's Massive Impact on Investing Can Help Shareholders

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The Financial Revolutionist: Investment management's "galling reality."

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FA Magazine: Running Leaner And Meaner With Tech

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