Take 18 - Random Investing Notes
A collection of insightful investment pieces to broaden and elevate the investing mindset. Includes: 1) Norway’s Sovereign Wealth Fund, 2) Macro Against Sectors, and 3) Long-Term Focus
Norway’s Sovereign Wealth Fund
🇳🇴 Origins of Norway’s Wealth
Norway has the largest sovereign wealth fund in the world—valued at $1.7 trillion.
This was built from surplus oil revenue, combined with disciplined financial management and long-term planning.
History shaped its caution: after centuries of limited independence and economic struggle, Norway adopted prudent policies post-World War II.
🛢️ The Norwegian Oil Fund (GPFG)
Official name: Norwegian Government Pension Fund Global (GPFG), also called the Oil Fund.
Created in 1990 to preserve oil wealth for future generations.
Invests across four asset types:
71.4% Equities
26.6% Fixed Income
1.8% Real Estate
0.1% Renewable Energy Infrastructure
🌍 Global Investment Strategy
Fund owns stakes in 8,659 companies across 63 countries.
55.9% of equity investments are in the US; 90.2% are spread across 12 major countries including China, India, Japan, and Germany.
🔍 Insights for Investors
Norway’s transparent, globally diversified portfolio is a valuable screening tool for international investors. Check it out at: Investments | Norges Bank Investment Management.
Investors can use the Oil Fund’s holdings as a shortcut to identify top companies in emerging markets like India and Singapore.
Macro Against Sectors
The table below outlines different macroeconomic regimes and the corresponding leading sectors or investment styles that tend to perform well under each condition. Here's a breakdown with more details:
Growth + Low Inflation: When the economy is growing and inflation is low, sectors like Tech, Consumer Discretionary (e.g., retail, cars), and Industrials (e.g., manufacturing) often lead. This is a good time to invest in innovative or growth-oriented companies.
High Inflation: During periods of rising prices, Energy, Materials, and Financials (especially value stocks) tend to do well. Value stocks are typically undervalued companies that can benefit from higher interest rates. Consider these sectors if inflation concerns grow.
Slowdown/Recession: In tough economic times, defensive sectors like Healthcare, Utilities, and Staples (e.g., food, household goods) perform better as they provide essential services. These can be safer bets during uncertainty.
Stagflation: When growth stalls but inflation remains high, Commodities, Energy, and Gold-related stocks often shine. These can act as hedges against inflation and economic stagnation.
Loose Liquidity: When money is easily available (e.g., low interest rates), Tech, Growth stocks, and High-leverage sectors (e.g., companies with significant debt) tend to thrive. This environment favors riskier investments.
Understanding these macroeconomic trends can help you align your portfolio with current or anticipated conditions. If you expect a recession, shifting toward defensive sectors like Healthcare or Utilities may help mitigate risk. That said, market timing is notoriously difficult—so a diversified approach across sectors remains a smart strategy. I explored diversification more deeply in Take Seven of this series.
Playing the Long Game
Stock markets ebb and flow like tides. Embracing downturns can lead to opportunities. Despite major global financial crises from 1996 to 2020—including the Dot-Com Crash, 9/11, and COVID-19—the S&P 500 rose by over 1,100%. As long as the US Dollar (USD) maintains its status as the global reserve currency, these tides will continue and so will the exponential growth.
Long-term investing yields significant rewards, even through turbulent periods. Bull markets are always much longer than bear markets. But the key is to invest in HIGH-QUALITY companies or ETFs.
François Rochon is a Canadian investor and founder of Giverny Capital, a Montreal-based investment firm renowned for its long-term, quality-driven approach. He champions what he calls the Rule of Three, which helps investors stay grounded amid market volatility. According to this rule, you should anticipate that:
One year out of every three, the market will decline by at least 10%.
One in three stock picks may disappoint or underperform expectations.
One year out of three, your portfolio might lag behind the index.
Past Editions
Includes: 1) Revisiting CRE, 2) Investment Returns since 1985, and 3) Recessionary Impacts.
Includes: 1) Limiting Losses, 2) Stop-Loss Orders, and 3) Debt vs. Equity.
Includes: 1) Credit Ratings, 2) Pricing Power, & 3) The Renewables Dilemma.
Includes: 1) Stock Checklist, 2) Dividend Strength Data, & 3) Lessons from Warren Buffet and Mark Leonard.
Includes: 1) Power of Dividends, 2) Stocks with China Exposure, 3) Tips to Managing Portfolios, & 4) Accepting Volatility
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