Cover story
10 / 11
Of the hundreds of tech stocks that
collapsed when the dotcom bubble
burst, just a handful of survivors –
along with new entrants into the
market – were responsible for the
rebound and extended rally in the
sector
challenged and the pandemic merely appears
to have hastened their demise. Searching for
investments in these areas means that not only
do you need to be careful as regards the level
at which you buy in, you need to be even more
disciplined when it comes to selling out.
This is why Douglas Kearney, investment
director at Intelligent Pensions, is sceptical of
bottom fishing as a long-term strategy.
“Do you want to put your money in Marks &
Spencer or Amazon? I know where I would go,”
he says. “Now, could Marks & Spencer have a
burst and be good for a year or two? Yeah, it is not
impossible. You can take a chance with an outsider
and it may win the race, but I think I’d rather put
my money on the horse with shorter odds.
“And that’s how we see the world: there are
plenty of short termers who say they can
make money from that. I’m sure they can, but
we’re not smart enough for that. I’m not being
patronising, but to do that you have to be right
at the coalface and have the information to
move on it. There’s a lovely phrase a manager
There are numerous
examples in the past where
investors have piled into
battered stocks and sectors,
then put their feet up and
waited for the rebound –
which never materialised.
The most recent of these
came in the financial crisis,
when Lloyds and RBS both
fell more than 90 per cent
from their 2007 peak. Yet
even if you had invested in
RBS at the very bottom of
the market on 20 January
2009, you would only be up
35 per cent, 11 years on. Had
you invested a week earlier
or later, you would still be
down significantly. Lloyds
has fared comparatively
better, but most investors
who bought in since its
post-financial crisis low are
sitting on losses.
Duncan MacInnes, comanager
of the Ruffer
Investment Company, says
this does not augur well for
industries that have had to
rely on government support
in the economic shutdown.
“We may be moving away
from an environment where
it is all about the primacy
L
TRUSTNET