No doubt this is a volatile period in global and domestic equity markets. I expect that to continue for the remainder of 2015, which means the right response is to concentrate portfolios in high quality and certainty.
Unfortunately, the presence of extreme volatility almost ensures there isn’t much certainty. That is clearly true at the macroeconomic level, but at the company specific level you can still find some certainty.
Quality not quantity
To my way of thinking, this is the time to reduce the number of stocks in portfolios. It’s a time to let your winners run, or even buy a little more of them. On the other hand, the recent bounce driven by short-covering in low quality, uncertain, cyclical companies is most likely giving you a chance to get out. The key to successful investing remains to let your winners run and be a ruthless cutter of losers. That is particularly so in the current environment. Today I am going to write about a large cap Australian winner that I forecast to continue to be a winner: Macquarie Group (MQG).