In North Carolina, we have had a wonderful Spring; massive hay yield and 6 new calves just this week; a bumper crop, if you will. The yield (appreciation + cash flow) has been equally large.
Bond investors generally focus on value, credit quality, and an underlying revenue stream, asset quality etc. Equity investors generally focus on the expectation of growth. Organic growth (earnings, sales) has not been a bumper crop this year. Earnings are down year over year. Earnings are not only not growing, but contracting. PLEASE note where we are Re: valuations: http://goo.gl/IW2G0c Hint: not so subtle warning
“Everyone has sexy dreams, but as a developer it’s important to maintain a long-term, monogamous relationship with math.” - Sarah Kobos. This one works for bond guys/gals too!
Bond investors are often pigeonholed as pessimistic. There is some truth in this stereotype, but it is more likely a healthy skepticism of what it takes to create a sustainable and durable business. Growth is great - but it can also kill you (i.e. internet bubble, housing, shale boom).
We do not take pleasure in being proven right this year (See our market commentary from this March - goo.gl/Y84cKz); we merely seek a sustainable and safe path for our only conflict - our customers (not our bank).
As usual, thank you for investing with Forest Capital! For additional information on portfolio positioning, please contact Forest Capital directly at firstname.lastname@example.org.