In January this year, cyclical companies assumed market leadership from high quality companies.  Yet our portfolio kept up admirably with this regime until June.  Since then, resource equities have put on a spectacular show of pace.  As these companies do not lend themselves to quality, we do not hold them bar BHP Billiton.  Naturally, we have underperformed the market by some degree this year.

The environment today is reminiscent of 2006 when resource equities again forcefully replaced high quality companies in pushing the stock market to levitation levels it could not sustain for more than 2 years. Today, as it was in 2006, a safe and secure global macro environment has caused investors to dispense with certainty in pursuit of extraordinary gains.  This has made high quality companies as attractive as they were in 2001, and 2008. The playing field is now more attractive than it has ever been…if you can take your eyes off the score board enough to see that.

We explore this topic in more depth in the 17th edition of The Burgundy,  Please click here to access the publication.