To Inform:

A couple of years ago I wrote a Wealthnotes piece titled, “The Trees Keep Growing” (you can read it here). In it, I related my experience visiting a handful of commercial timber sites managed by an investment fund. At the time, markets were digesting a handful of hot inflation reports and realizing that interest rates were going to be a major source of indigestion in the coming quarters. My point was that despite the gyrations in short-term market headlines, for long-term investors, the focus should be on what investments can do over long periods of time and that, like trees, they can navigate the short-term hurdles thrown at them.

Black Cherry seedling planted April 2023

Some of you who know me well know that I embarked on a side project last spring, planting several thousand trees on a small plot of land I own with my wife and kids. After a busy summer of not tending to them (the trees, not my family), I visited my plot of land last evening and was reminded of the article I wrote a couple of years ago. Since planting my own trees, the stand has had to survive an acute drought (late spring 2023), deer browse, rodents gnawing, a tornado, and weed competition. In other words, a lot of short-term “volatility”. Despite these challenges the trees have kept growing. To the right is a picture of a wild black cherry (Prunus Serotina) that is now more than seven feet tall. It’s been through a lot in its short life!

We’ve experienced a bout of market volatility again in recent weeks. Not quite on the order of what we experienced in the difficult stretches of 2022, but enough to remind people that markets aren’t without droughts of their own. This time around the cause doesn’t seem to be inflation or higher interest rates, but geopolitical tensions and foreign central bank policies. That said, I remain firmly convinced that, as ever, if one can ignore these short-term gyrations their investments can do just fine.

One example of this in recent days is an Ohio-based industrial company owned in many accounts we have the privilege of managing for clients. This company has a number of different business lines serving a diverse range of end markets. As volatility picked up this month and culminated Monday in one of the worst days for markets in several years, the stock price tested lows not seen in months.

Just a few short days later, in their 2^nd quarter earnings report, the company posted the latest in a string of solid results and the stock was up 10% on the day. Barron’s magazine feted the company’s success with this headline: “This ‘Stodgy’ Industrial Just Keeps Making Money”. I don’t know if stodgy is a compliment or not, but if stodgy is a way to describe a company that has generated positive free cash flow and profitability in 30 straight years then I’ll take it!

The piece I wrote in 2022 concluded with the sentiment that bouts of volatility are like the “controlled burns” in forestry. Clear out the brush to allow the strongest timber to survive. Whether you’re a client of ours invested in any number of investment strategies we manage or are reading this and curious about what we do, know that the Investment Team here at The Joseph Group feels confident that the investments in our portfolios – the things you own – are investments that we believe can navigate the ups and the downs markets send our way. We hope this gives you a measure of confidence that, like a stand of nice timber, your portfolio and ultimately the soundness of your financial plan can keep growing.

Written by Alex Durbin, CFA, Chief Investment Officer