The bottom up trade in our markets has never had it better. Individual stocks have shown the ability to buck overall market trend and deliver superior returns. Over the past two years, investors’ entire focus has been on finding the right stock that will show a big move. As one stock after another was discovered, slowly the stock ideas started reaching mature valuations.
Yet, the monies haven’t stopped chasing the same stocks that have been fully discovered. Institutional compulsions imposed by incessant liquidity are forcing the same stocks to be continually bought. This explains the market’s steady rise and very short lived corrections. The hurry to build significant quantities in good stocks is seen even at the IPO stage. The anxiety to buy enough quantity in a stock is significantly contributing to price moves.
There is little sense of fear. Professional managers are more worried about deployment than about the downside. They don’t want to be caught missing out on near term performance. Measurements are being made on weekly basis to judge investment performance. The behaviour of most market participants reflects what is best suited for short term investing.
Nobody wants to be a contrarian in this market. That’s a very material observation.
“Know what you own, and know why you own it.” – Peter Lynch