Just like in sports, a great offense provides a great defense in difficult situations. Military forces constantly drill, drill and drill for contingencies. This keeps them well prepared for multiple circumstances. When adversities arise, standard responses have already been established and everyone is prepared.
I often write about the favorable qualities of Costco (COST). Costco has been moving steadily in developing their ecommerce footprint, as well as, many other characteristics, such as product sourcing. It is important to focus on an investment's management and long-term fundamentals.
Too many people use the market as the “truth” to value their investments. While in the long term, the market gets it right. In the short term, the market is all over the map.
The current market environment is breading fear. When a market is overextended, even small shifts in items can "bring down the whole enchilada". It is sort of like playing jenga. A small movement can cause havoc!
This is when you want to know that "your" management is operating the company in a consistent and thoughtful way. Both Walmart and Costco, have prepared for many potential storms that could blow in on the horizon. It is akin to the steps an investor takes to manage risks in their portfolio. Strategically, both companies have taken the time and effort to develop their sourcing strategies. Sure, this can cost them because they have to have presence in multiple markets. But, just like insurance, the cost of the protection is a wise investment. You don’t want to be penny wise and dollar foolish.
This is why I keep my primary focus on the internal fundamentals of my investments.
Good fundamentals, consistently applied will usually trump the market juggernaut!
