I’ve never been a gambler. Not that I have anything against it. I simply don’t enjoy putting money at risk when the outcome depends on luck. Even with things like March Madness or friendly wagers on sporting events, I’m not inclined to participate. If I can’t be reasonably sure about the result, I’m not interested.
The financial markets, however, have always attracted gamblers. That’s been true for centuries, and it’s still true today. In fact, newer trading platforms are attracting younger investors by emphasizing their similarities to sportsbooks, odds markers, casinos, and the like. And there is an unfortunate truth about the markets—if you treat investing like a game of chance, you’re more likely to lose than to win.
In contrast, as investors, we can put something in our favor. Good businesses are easy to spot. I don’t want to diminish the work my colleagues and I do—understanding the companies you own requires real analysis—but the core characteristics of a strong business are straightforward. Companies that are the best or only provider of what they do. Companies that grow year after year. Companies that treat their employees well and contribute to their communities. Companies that innovate, that are profitable, and that maintain financial strength. These are the hallmarks of quality.
There’s a saying in our industry that a good business doesn’t always make a good investment. That’s true. But it is also true that good businesses often make good investments. And the market gives us a place where we can buy them. But unlike the gambler who might be more focused on what the investment does over the next day, week, or month, our focus as investors should be on the underlying business and whether it continues to advance its own interests over decades.
Consider some of the largest and best-run companies in the United States. Leading the charge into artificial intelligence are firms like Nvidia, Google, Microsoft, Tesla, Amazon, Apple, and Meta. These companies are reporting record revenues and investing heavily to support future growth—yet the market has been skittish. On the other end of the spectrum are companies that form the backbone of the U.S. economy: Pepsi, Costco, Netflix, Johnson & Johnson, and others. They too have delivered solid results, only to be met with a collective market yawn.
Why? Because the noise level has risen. When one worry fades, another takes its place. Investors have cycled through concerns about oil prices, wars and geopolitical tensions, foreign alliances, tariffs, inflation, interest rates, and more. Stable economies, stable politics, and stable foreign policy tend to support markets. Chaos and uncertainty do the opposite. All you have to do is look at the daily headlines referencing the Middle East to know how quickly and dramatically conflicts affect the price of oil and the stock market.
Still, good businesses remain desirable. That doesn’t mean they will make anyone wealthy overnight, but over full cycles they tend to deliver strong results. I wish I could say that once today’s economic and geopolitical issues settle down, the markets will calm down, but that’s unlikely. The noise will continue, and so will the volatility, especially as market gamblers try to profit from short-term price swings.
What I can say is this: Nvidia will continue selling the chips that power artificial intelligence. Pepsi will continue selling the soda and snacks you’ll enjoy at your next ballgame. Costco will continue struggling with too many shoppers on the weekend and not enough parking. My daughter—along with most college-aged Americans—will keep eating at Chipotle. And many of us will stream our Friday night movie from Netflix, Amazon, or Apple. There will be bumps in the road. Great companies are best equipped to endure challenging times. And those companies—the companies you own—are likely to be stronger five years from now, ten years from now, and beyond.
~ Travis Raish, CFA