Despite the performance of tech companies that has seen the NASDAQ index in the US up well over 30%, Courtiers CIO, Gary Reynolds, says the Courtiers Investment Team won’t be blown off course and intends to stick to buying the sort of stocks “we’ve been buying for all our lives.”
So even though the MSCI World Value index, which is a proxy for the type of stocks which Courtiers favours is up just 3%, Gary’s not for turning. “Courtiers is a value investor because that’s the best way of investing for the long term.” This means sticking to companies that have got healthy balance sheets, generate cash and are not trading on stretched earnings. “That’s all we do. We do it relentlessly. We don’t change and we don’t chase returns.”
Courtiers is mainly concerned with getting returns for investors “that need their capital forever,” Gary explains. “What they don’t want is us rocking up and telling them we’ve just blown their capital by investing in a lot of small cap startups or overpriced tech companies.”
By adopting a disciplined value approach “you produce the returns that your clients and investors need to achieve their objectives and you do it with a lot less volatility than if you chase racy stocks.”
Indeed, anyone coming to Courtiers “wanting to get a piece of that action for the next six months” will be wasting their time, “I’m not going to buy those type of stocks.”
Just as he’s wary of siren calls saying, “buy big tech at 30 or 40 times earnings” Gary’s sceptical of those who say “it’s going to be different tomorrow”. The market believed it back at the height of the dot-com bubble in 1999-2000 “when everybody thought tech was going to change everything”. In the event, all it did was chase prices up even more resulting in the subsequent market crash.
For those who are comfortable with Courtiers’ value approach and are looking to invest for the long-term “now’s a great time to invest”, says Gary. Not only are our value stocks cheap compared to the market, they generate cash and they’re profitable. “It looks pretty good to me at the moment,” says Gary, who reveals that all his long-term term assets are in Courtiers Funds. “It’s called old-fashioned skin in the game and I think it’s the only way you should ever run money.”
Gary says the nature of investment management and the markets means there will be periods like the past four or five months when Courtiers “is not going to outperform”. Different investment styles have their period in the sun. He points out that earlier in the year, the Investment Team collected six Lipper Fund Awards for its performance. “The good news” is that when you get a radical swing or rotation like this towards growth stocks, “there’s a good chance with mean reversion” – the tendency of markets to revert back to their long-term average – that it’ll swing back the other way towards value stocks.
This is what occurred with Courtiers Funds in 2021 when after falling behind the market by June, a dramatic turnaround saw them outperform their peers by the end of December. So, though the first half of 2023 hasn’t been the best for value investors like Courtiers, Gary predicts that when he stands up at the next Client Seminar in December “things will look significantly better for us than it does today.” In the meantime, the Investment Team will carry on relentlessly doing what it always does – protecting clients’ wealth for the long term.