Certainty might also be bad for the market (NOTW#37)
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It was not a great week for the market due to more uncertainty, or was it certainty this time that made markets drop? Whatever that may be, Bank of America saved us with an indisputable stat. I talk about this in the market overview.
Without further ado, let’s get on with it.
Articles of the week
I published two articles this week. The first one was Judges’ first earnings digest as a portfolio company. Judges reported what they had already anticipated in the last trading update, but cash conversion was a pretty positive surprise. The call was exceptional, and I share why my conviction has been reinforced after the earnings.
The week's second article was part 2 of the miniseries about a recessionary and tariff-driven world. I explain how the remaining 9 companies in the portfolio would fare in such an environment. I also share three conclusions about the exercise.
A Recessionary and Tariff-driven World
Welcome to part 2 of this two-part series to understand how my portfolio (i.e., the Best Anchor Stock portfolio) would perform in a recessionary and tariff-driven world. If you want to understand what I will look for in this exercise and why I am doing it, please refer to
I’ll publish a great podcast episode next week about the lifesciences industry, so stay tuned for that. The transcript will be available for paid subscribers. You can follow the podcast on Spotify and/or Youtube. If you are a fan of the podcast I would also appreciate that you leave a rating on Spotify so the podcast gets to more people!
Market Overview
It was a pretty bad week for the indices. The S&P 500 was down more than 3%, whereas the Nasdaq was down more than 4%:
The “good” news is that, however bad this may sound, the S&P 500 is still not in correction territory. Pinpointing the exact reason for the drop is pretty much impossible, but I can bundle it under one word which you’ve heard before: uncertainty…or was it certainty this time? Trump imposed 25% tariffs on car imports to the US. This might have spooked the market as the tariff “threats”, which are set to go live on April 2nd, might have become a tad more tangible. I won’t share my political views here, but it seems evident that a trade war will not benefit anyone. I refrain from talking about the fact that someone close to the government owns a domestic car manufacturing company that somewhat benefits from these imports (albeit part imports negatively impact everyone in the industry). Copart is a portfolio company that benefits from more expensive parts (the stock was marginally down on a very red day).
Many car companies (mostly manufacturers) evidently did not take this news well, bringing me to another point: I struggle to understand how someone studies all the great businesses out there and decides to invest in car manufacturers. Sure, there are exceptions like Ferrari (which I don’t consider a car company). Still, in general, it’s a tricky business to be in, for several reasons like high capital intensity and low differentiation (not a great combo for tough times!). Of course, many of these companies trade “cheaply,” but this is as “cheap for a reason” as you can get in financial markets.
That said, we shall not worry! Bank of America came out with a tremendous chart that should ease all investor fears: the last 9 years ended in 5 delivered positive returns, and we are in 2025!
Of course, this is satire. I am amazed at how someone would come up with this chart and actually think it was a great idea to post, but this is what financial markets do (sometimes). What does the market have in store for us this year? It definitely doesn’t look pretty barring a change in the uncertainty level, but who knows? The stock market always finds a way to surprise!
What do you think the industry map looked like this week? A vast sea of red? Well, you’d be partly right, but several companies did well:
The fear and greed index remained in extreme fear territory:
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