When a client brings on new capital, many managers put the pedal to the metal and invest all of the funds immediately regardless of the state of the market. This is because they are buy-and-hold investors that believe these investments will eventually reach their true value over the long-term. While investments do usually trade towards their intrinsic value, they also undergo volatile periods where market pressures force a stock to go either far above or below this intrinsic value due to fear and greed. We at Friesen Capital Management rather believe that timing of entry & exit into the market are crucial to one’s success.
There are many ways to manage risk with respect to your energy investments. A recent interview with Martin Pelletier, one of the principals at TriVest Wealth Counsel, highlighted what to look out for when investing to help him manage risk with respect to energy investments. This is of increasing importance as the energy market is currently experiencing a pullback off of the highs set in June.
Research analysts, portfolio managers, and traders alike use valuation metrics to assist them in analyzing if a stock is undervalued (trading below what it is inherently worth) or overvalued (trading above what it is inherently worth). This assists them in the decision to buy or sell a company at a given time. While we are believers in this kind of fundamental analysis, we also strongly believe that one should be cautious of such metrics and should not use them by themselves in their decision making process. This is because they don’t provide us with sufficient information about what we’re really trying to achieve.