My bookmarks

Pins are saved using cookies. Deleting them from your browser will delete your preferences.

Menu

Stay Focused on the Long Term

19 June 2020

When stocks suffer a significant decline in near-term earnings or cash flows, not unlike the current period, investors may instinctively worry about whether they should sell.

However, cash flow modeling demonstrates why you may want to hold on to a quality portfolio for the long term.

 

  • The chart above demonstrates that a hypothetical investment whose earnings or cash flows decline 40% in the first year may not see a large reduction in value over a long-term time horizon.
  • This scenario could potentially play out this year, as earnings in 1H20 are under significant stress for many companies. In our view, this data shows that focusing on high-quality companies— ones that we believe have durable business models that produce stable long-term cash flows in the long run and have strong management teams, competitive advantages and innovative products—may overcome short-term earnings or cash flow stress.
  • While a significant decline in aggregate earnings can be scary and potentially move stock prices violently, we believe that a portfolio of strong companies may retain its value over time as the market recognizes the stability of companies’ cash flows in the long term. 

Download Alger On The Money

La Française Group provides access to the expertise of a number of asset management companies around the world. To provide you with the most relevant information, we have developed an interface to present the full range of products available for your investor profile and country of residence.
Please indicate your profile
1
Country
2
Language
3
Profile
Your country of residence
Your language
Your profile
<p class="new-disclaimer__legal-notice">Before consulting this website, for your protection and in your interest, please read the “<a href="en/legal-notice/" target="_blank">disclaimer</a>” and “<a href="en/regulatory-information/" target="_blank">current regulations</a>” carefully. This information explains certain legal and regulatory restrictions which apply to individual and professional investors according to local law. By accessing this site, in my non-professional or professional capacity, I acknowledge that I have read and accept the terms and conditions of use. Pursuant to the application of the European Markets in Financial Instruments Directive (“MiFID”), please state to which category of investor you belong&nbsp;:</p>
<p class="new-disclaimer__legal-notice">Before consulting this website, for your protection and in your interest, please read the “<a href="en/legal-notice/" target="_blank">disclaimer</a>” and “<a href="en/regulatory-information/" target="_blank">current regulations</a>” carefully. This information explains certain legal and regulatory restrictions which apply to individual and professional investors according to local law. By accessing this site, in my non-professional or professional capacity, I acknowledge that I have read and accept the terms and conditions of use. Pursuant to the application of the European Markets in Financial Instruments Directive (“MiFID”), please state to which category of investor you belong&nbsp;:</p>
By continuing browsing on this website, you accept the use of cookies and other tracing devices s as to allow you to receive information suited to your profile, facilitate information sharing on social networks, guarantee the best browsing experience possible and to create statistics. To find out more, we invite you to consult our Privacy and Cookies policy. Find out more.