Dec 08, 2022
As year end is approaching, strategists from the big sell side houses are traditionally making their predictions for the stock market for 2023. The usual narrative we read is based on the possibility of a recession, its impact on earnings growth of the companies and hence the direction of the stock market. The only problem with that reasoning is that there is absolutely no relationship between 1 year earnings growth and 1 year direction of stocks. Mr Market is a much more complex discounting machine and its direction is dependent on a multitude of factors. At ECP, we base our investment decision on the long term normalized cash flows individual companies are able to generate based on their competitive advantages, which we believe is a much easier and rewarding task for investors.