Weighing The Risks

Chris Davis of Davis Funds - What To Think And Do With Market Volatility

Episode Summary

This week, Rusty Vanneman and Nick Codola talk with Chris Davis, Chairman and Portfolio Manager at Davis Funds. In this episode, we will discuss how to deal with overall market volatility. In addition, we take a closer look at what financial advisors and investors should be thinking and doing in these volatile economic times.

Episode Notes

This week on Weighing the Risks we are joined by Chris Davis, Chairman and Portfolio Manager at Davis Funds. Chris C. Davis joined Davis Advisors in 1989. He has more than 37 years experience in investment management and securities research. Mr. Davis is a Portfolio Manager for the Davis Large Cap and Financial Portfolios. He is a member of the research team for other Portfolios. Mr. Davis received his M.A. from the University of St. Andrews in Scotland.

Key Takeaways

[04:16] - Chris’ professional background and more on his work at Davis’ Advisors
[08:03] - How does Chris define risk and how does he think advisors and investors should think about it?
[11:30] - Given the backdrop of enhanced volatility, how should investors weigh and think about the headlines versus the fundamentals of a company?
[18:27] - What are some key indicators that Chris monitors for the health of the financial sector, as well as the broader economy? Also, the yield curve recently inverted. Is that a warning sign or another false signal?
[24:16] - Might cryptocurrencies and stable coins disrupt credit card companies and how they generate fees?
[34:47] - What does Chris think is in store for the financial sector for the rest of the year, as well as the years ahead?
[39:55] - Does Chris have any advice that he thinks advisors and investors should really think about right now?
[47:01] - Base case economic outlook and how probable Chris thinks this is
[50:35] - Bad case economic outlook and how probable Chris thinks this is
[55:43] - Good case economic outlook and how probable Chris thinks this is
[62:37] - Are there any other risks that Chris thinks investors and advisors should be considering right now?
[66:45] - Does Chris have a book recommendation for this particular time in the markets and economy?

Quotes

[09:33] ~ “If I was to put it purely in financial terms, to me risk is the permanent loss of purchasing power over the contemplated investment time horizon. So, it’s that permanent, and substantial, loss of capital. We measure that not just in terms of the dollar amount that we start with, but the purchasing power of that. That’s not been a relevant distinction in the last twenty or thirty years of low inflation, but I came of age in the 70s where your purchasing power might have been degrading 13-15% a year. So, we really think about that idea of the degradation of purchasing power, overtime, as really sort of the central tenant when we make an investment decision…” ~ Chris Davis

[33:41] ~ “I think this march of technology in financial services is super exciting. My prediction in the short-term, and I’ll say short to mid-term - in the next five years, is that it makes the largest companies more valuable and more profitable. It increases scale advantages, which didn’t exist in financial services for most of the last fifty years, there’s real scale advantages now…longer term I think there may be bigger risk [though].” ~ Chris Davis

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