We don’t currently own Nike; however, this is not due to some patriotic position for or against the company’s recent ad campaign featuring Colin Kaepernick. Instead, it is based upon an unprejudiced review of Nike’s valuation, financials and its paltry 1% dividend payout.
It is often easy to let one’s biases creep into investment decisions. We all have biases, but from an investment perspective it is important we attempt to disassociate ourselves from such positions – as difficult as that may be at times. This is especially true in today’s political environment wherein we are continually bombarded with opinions from “experts” on CNN and Fox News on both sides of the aisle.
With the political environment heating up, I thought I’d share some excerpts from a previous blog and my soon to be released book regarding my thoughts on mixing politics and investment decisions.
As a patriot, you can be concerned about the beliefs that form your political leanings. As a capitalist and investor, you can’t let your political leanings influence your investment decisions.
Whether the White House is occupied by a Republican or Democrat has little effect on the number of hamburgers consumed in China. Money can be made regardless of the current administration, economic conditions or world events.
Those who overreact to short-term events by making preemptive, emotionally charged investment decisions are more likely to be hurt than helped. Having the discipline to stay focused on the long-term drivers of investment performance is key to successful long-term investing.
I’m often asked which party is better for the economy and to which party I belong. As to the latter question, I generally quip that I am a Federalist and my party died with Hamilton’s demise on the banks of Weehawken, New Jersey. To the former question, I believe that though elections are of vital importance to the direction of our nation, the person elected has little long-term impact on our resilient American economy.
Great American companies will continue to grow regardless of our country’s politicians – even should our nation move toward a European socialism. Terrific international companies such as Nestle, Unilever, Royal Dutch Shell, Diageo, Siemens, GlaxoSmithKline and others have performed exceptionally well under socialist rule as capitalism finds an outlet somewhere in the world where companies may flourish.
As a patriot, I am concerned about political matters and the important issues of our time. As a capitalist, however, I don’t let my political opinions influence our investments as I understand that innovative companies will thrive somewhere in our global economy. As I often state at our investment committee meetings, “What impact does an election (or any other exogenous event) have on how much Nestle chocolate is consumed in Latin America or Pepsi Colas drunk in Africa or India?”
My friend Todd Young, with whom I went to school at the Naval Academy and served in the Marine Corps, was elected Senator from Indiana in 2017. As much as I believe strongly in Todd’s honor, intelligence and passion to serve our country, his election will, in reality, have little long-term impact on the global earnings of the companies in which we are invested.
The handwringing and worry associated with political elections can cause investors to make foolish decisions which are harmful to their health and wealth. For this reason, I recommend investors remain calm during election periods: avoid watching news channels as study after study has displayed that investors perform poorly when acting on short-term news. Better to enjoy a good economic or history book, or if you must, to at least enjoy the political season for the circus it is!
"I am quite sure now that often, in matters concerning religion and politics, a man's reasoning powers are not above the monkey's."