Investment Climate: January 2021
As the pages on the calendar turn from a tumultuous 2020 and into 2021, most are hoping for a return to normalcy and some restitution of life as we once knew it, all the way back in February 2020. With all that has transpired in 2020, that seems a lifetime ago. We will not spend time musing about the COVID debacle, except to refer readers to our blog post on March 23, 2020 (coincidentally the day the market bottomed) and say that we think we have been vindicated in our warning that we needed to be careful that the COVID “cure” was not worse than the disease. Millions of small businesses and the lives of those who owned and are employed by those businesses have been decimated. And while the actual disease is clearly deadly for some, statistics show that most are able to fend it off; not so much for the millions of small businesses who will never return.
It is in this vein that we reference the unbelievable performance we experienced in our growth strategies this past year with a tone of humility. We do not revel in thriving while others suffer. That said, it was the diligent effort put into finding businesses in which to invest our own and our clients’ hard-earned capital that came through in spades this past year. Our focus has always been to invest in businesses that will be resilient in all economic environments. This approach is clearly the reason we were able to have an extraordinary 2020. Our Core Growth Strategy was up roughly 80% in 2020, the Aspire Small Cap was up about 43% and the Israeli Innovation Strategy was up over 111%! These were all record numbers for our firm and the careers of our firm’s professionals, a time that spans almost four decades.
We are being asked every day what to expect going forward. While we thoroughly expect corrections to happen, and as we have written before, corrections in the modern era are violent and swift, we have no idea when those corrections will occur. And we don’t worry about them. Our growth portfolios are full of companies that are very early in their growth trajectory. As our clients know, we have transitioned out of a number of more mature businesses over the last few years, realizing significant capital gains, and while taxable accounts have had to withstand the nasty capital-gains tax that comes with that, the proceeds of those sales have been invested in “up-and-coming" businesses that are the reason for the performance we have experienced. And being still relatively young companies, we expect many years of positive performance from those businesses.
We believe our narrative-based investment approach, which seeks to identify the trends that will drive economic growth in the coming years, has proven resilient. Those narratives are centered around technological innovation in areas such as business efficiency software, mobile communications and connectivity, home-based healthcare services, medical technology and financial technology that allows people and institutions to transact business more safely and effectively, just to name a few.
All is not rosy, however. The rhetoric from the policymaking class suggests higher taxes and more regulations are coming. All the more reason we say that it is crucial to focus on businesses rather than markets, as always. And most importantly, we continue to trust that savvy entrepreneurs will drive forward in spite of what the politicians and policy-makers do. This is the approach that works, and we’re sticking to it. Happy New Year!
Disclosures: Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Taylor Frigon Capital Management LLC (“Taylor Frigon”), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from Taylor Frigon. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. Taylor Frigon is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the Taylor Frigon’s current written disclosure Brochure discussing our advisory services and fees is available upon request. If you are a Taylor Frigon client, please remember to contact Taylor Frigon, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services.