How to Find Investment Opportunities in Any Economic Cycle

Show Notes

There is no silver bullet when it comes to investing. What works well in one economic cycle may not work well in another. That's why it's important to be flexible and adaptable. In this video, we'll share some tips on how to find the best investment opportunities in any economic cycle.

On this week’s episode Tom, Dan, and Jacob talk about the quality growth at a reasonable price strategy, it’s application in our world with AI, the menu of investment options today, building easy thing versus building hard things, how generational buying opportunities come around not as often as you think, and why nothing ever gets cheaper.

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Suggestion

There’s no silver bullet.

There is not one strategy that works well through all economic cycles.

Here are the last 7 years*

2022 – Commodities – 22%

2021 – Commodities – 38.5%

2020 – Chinese Equities – 29.7%

2019 – US Equities – 31.6%

2018 – Cash – 1.9%

2017 -  China Equities – 54.3%

2016 – High Yield Debt – 14.3%

Good luck picking the winner at the start of each year. It’s impossible really.

We are avid hunters for growth, where capital is flowing and what companies, sectors, markets are moving up and two the right. We love growth. It’s probably the best business advice one can receive, just grow. Growth works in your personal financial life as well. Growth almost always fixes financial problems.

But, don’t over pay for it.

Case in point, we avoided the IPO craze of 2021 like the plague. Why? The growth was crazy, some of these companies were growing at 50% per year. Stuff of an entrepreneurs dream. But so was the price that people paid for these companies. They bought the growth at ridiculously high prices.

As you allocate, consider the growth and the price of the investment.

This middle ground has been what we feel is a great way to take advantage of growth while maintaining discipline on the valuation that we are paying for companies.

What Went On

• Google’s Sundar Pichai talks Search, AI, and dancing with Microsoft
• A menu of investment opportunities
• Easy to build, but hard to sustain
• There will be no generational buying opportunity every month
• Does anything get cheaper?

Quote of the Week

“What gives you opportunities is other people doing dumb things ... In the 58 years we’ve been running Berkshire, I would say there’s been a great increase in the number people doing dumb things, and they do big, dumb things.” - Charlie Munger, 2023