In this second piece of our three-part series, we cover mistake No. 2: attempting to time the market.
In part one of the series, we looked at how focusing on metrics like return on equity and return on invested capital are key to long-term investing.
Attempting to time the market
Successful market timing can boost short-term returns, but it is fraught with risks and challenges — boosting returns in this manner consistently is incredibly difficult, if not impossible. While some investors may get lucky, achieving ongoing success is a different matter. Research linked in our piece, Three Mistakes to Avoid as a Long-term Investor: Observations from 35 Years Managing Money, reveals the significant underperformance of investors who missed the 10 best trading days each decade versus those who adopted a buy-and-hold approach.
Our approach
For us, investing is about identifying great companies with enduring competitive advantages with the goal of achieving consistent and favorable outcomes for our clients. Rather than rely on chance, we dedicate significant time to studying companies and emphasize meticulous research, rigorous analysis and strategic decision-making in our process.
We also hold our positions for extended periods. Over time, we believe quality reveals itself, and based on our experience strong companies tend to outperform the broader market. Holding for the long-term also highlights the powerful potential of compounding, which can be a critical component of wealth creation.
Finally, holding quality companies during periods of market volatility can create opportunities for us to buy undervalued stocks, which we believe will ultimately benefit our investors.
In part three of the series, we examine the third mistake: focusing on the stock, not the company.
For a more in-depth discussion of our quality strategy and examples of our emphasis on long-term investments rather than short-term market darlings, please visit our post, Three Mistakes to Avoid as a Long-Term Investor: Observations from 35 Years Managing Money.
To learn more about our 35-year journey, read our press release.
For a list of the Jensen Quality Growth Strategy’s current holdings, please visit www.jenseninvestment.com/growth-composite-holdings.
Past performance is no guarantee of future results. Certain information contained in this material represents or is based upon forward-looking statements, which can be identified by the use of terminology such as “may,” “will,” “should,” “expect,” “anticipate,” “target,” “project,” “estimate,” “intend,” “continue” or “believe,” or the negatives thereof or other variations thereon, or comparable terminology. Due to various risks and uncertainties, actual events, expectations or results may differ materially from those reflected or contemplated in such forward-looking statements.
The prices of growth stocks may be sensitive to changes in current or expected earnings, or may experience larger price swings.
The information contained herein illustrates a facet of management’s investment process; however, management’s plans and policies in this respect may change in the future. In particular, economic, market and other conditions could cause the process to change from the descriptions contained herein. This information is current as of the date of this material and is subject to change at any time, based on market and other conditions.
Jensen Investment Management, Inc., is an investment adviser registered under the Investment Advisers Act of 1940. Registration with the SEC does not imply any level of skill or training. Although taken from reliable sources, Jensen cannot guarantee the accuracy of the information received from third parties. Graphs, charts and/or diagrams cannot, by themselves, be used to make investment decisions.
© 2023 Jensen Investment Management
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