Think Quality.
If anything defined the Covid-19 investing landscape from April 2020 until the end of 2021, it’s that the biggest winners were stocks or assets that defied traditional quality metrics. Instead, investors forecasted a future landscape substantially different from the past which traditionally rewarded companies on attributes such as growing cash flows, balance sheet strength, and attractive returns on capital. While the S&P 500 Index has fallen 12.6% for the year through July 31, 2022, the real damage has been done in some of those speculative assets that outperformed quality companies during the last 9 months of 2020 and in 2021. Meme Stocks, NFTs, and Crypto currencies, all declined significantly as the air came out of the areas that benefited from an environment primarily focused on outsized returns with a blatant disregard for the accompanying outsized risk that is inherent during a speculative period. In addition, those assets rely most on rosy forecasts of the future that are difficult to quantify. Bitcoin ended 2021 over $46,000 per coin and sits closer to $24,000 per coin on July 31st, down over 45%. NFTs, or non-fungible tokens, are digital images of an asset that procures unique ownership of that image. The Bitwise Blue-Chip NFT Collections Index has fallen nearly 50% this year. The Solactive Roundhill Meme Stock Index has also declined 50% this year.

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