July 1, 2016

Brexit, so what? Buying Sainsbury's

Everybody is freaking out because of Brexit. The markets are crashing and the banks are recommending a flight to safety. The world’s largest asset manager, BlackRock, sent Obermatt's CEO Dr. Stern an email with a recommendation to buy short-term bonds and low-volatility stock indexes. Many will follow their advice, which he finds crazy.

Why should you do what everybody does and avoid volatile stocks to buy "safe" assets? If everybody does this, the safe assets will become too expensive and thereby unsafe or risky.

Safety in investing is first and foremost a function of price. Those who pay too much purchase assets that are unsafe and carry a higher risk - no matter if it is a stock, gold or real-estate.

Dr. Stern's portfolio shows that stocks aren’t unsafe, even in light of Brexit. He lost only 2% with his European stocks when the European stock index EuroStoxx50 lost almost 4% in Swiss francs. His investment strategy, therefore, doubled the performance of the market. More in the video.

Because the advice in light of Brexit makes so little sense, he is buying the British retailer Sainsbury's, even though none of the so-called experts would recommend doing so. But why should Sainsbury's be a risky investment? After all, we know that Brexit has already happened. The exit scenario is already included in the Sainsbury stock price. Therefore, we are getting the stock cheap.

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