I love spring. In my home state of Georgia, there is a significant event which marks the season every year: The Masters Tournament, the annual golf tournament that transcends the game. One does not have to be a golfer or a golf fan to be a fan of the Masters; like the Super Bowl, Wimbledon, and the Kentucky Derby, it is bigger than its sport.
I don’t have the time to play as much golf as I used to, but I still enjoy watching the Masters. This year I missed most of it due to other obligations, so I caught up in the evenings by watching highlights and listening to the golf punditry. Rory McIlroy won his second Masters in a row. He leapt out to a 6-stroke lead after the first two rounds. While there have been six other players in Masters history with 5-stroke leads at the same halfway point, the 6-stroke lead was the largest. Of those other six players, all but one had gone on to win, and Rory was one shot better than all of those. The pundits all agreed the tournament was over and spent most of their time asking each other if anyone other than Rory would ever win The Masters again.
Then Saturday happened and Rory came back to earth. His 6-shot lead disappeared, and he would enter Sunday’s round tied for the lead. Every pundit who was all in on Rory just the night before now picked someone other than Rory to win. I was trying to watch purely as a golf fan, but I can’t help being an equity analyst at heart. I sat there thinking, “Nothing has changed, Rory is going to win.” Only one time in Masters history had anyone had a lead close to Rory’s and lost. Rory is one of the greatest golfers of this generation; he wasn’t going to lose.
Rory went on to win. Ultimately he won by one stroke, but he had a comfortable lead coming down the stretch that allowed him to bogey the last hole and still win his second Masters. All the pundits praised his resilience, ignoring the fact they had turned on him just 24 hours earlier.
What does this have to do with the market? Everything. This is human nature. When a stock is going up every pundit out there will tell investors how wonderful the company is and how it will grow forever. When the same stock has a setback, the same pundits will then tell you it is time to jump ship and bet on some other company. Then the original stock will bounce back, and the pundits will return to singing its praises as if they never doubted it for a second.
There is a reason that major golf tournaments are played over four 18-hole rounds for a total of 72 holes, and that prudent investing is done over the long term. Over that long haul, everyone will experience ups and downs. There will be hot streaks and cold streaks. That is how life works: everything comes in waves. What matters is having the discipline and resilience to keep going, knowing that in the end, if one has done all the right things, then the result will be a good one.
Things are never as good or as bad as they seem – whether it’s 6-stroke leads, attacks on Iran, AI, whatever it may be. Unfortunately, most investors are like those pundits who couldn’t abandon Rory fast enough – they get excited when things are up and abandon ship when the downturn comes. The winners are the disciplined ones who choose their investments carefully from the bottom-up and then have patience. Winter always comes, but it is also always followed by spring. I love spring.
Warm regards,
Chuck Osborne, CFA
