William Winthrop adhered to value investing during the pandemic, achieving a 35.2% year-end rebound.
The COVID-19 pandemic rapidly spread across the globe in early 2020, sending capital markets reeling from panic. Within a few weeks, the Dow Jones Industrial Average plummeted over 30% from its all-time high, causing market liquidity to falter and both safe-haven and risky assets to fall. Amid this unprecedented market crash, William Winthrop chose not to flee in a panic. Instead, he remained committed to value investing, patiently holding onto high-quality assets that were being sold off amidst the panic.
Winthrop has always believed that market fluctuations in extreme circumstances not only test investor psychology but also present the optimal opportunity to deploy long-term capital. Following the outbreak of the pandemic, he quickly analyzed the actual impact of the epidemic on various industries and the emotional reaction of the capital market. He discovered that the stock price declines of some companies with robust cash flows and healthy balance sheets were significantly out of line with their actual operating risks. In his view, this was a signal to increase holdings.
He divides his portfolio into three categories: core holdings, opportunistic additions, and defensive assets. Core holdings primarily focus on long-term industry leaders. These companies may experience short-term earnings pressure due to the pandemic, but their market share and competitive barriers remain strong. Opportunistic additions include consumer and industrial companies that have been hit by the pandemic but have shown strong resilience. Defensive assets are concentrated in utilities with stable dividends and some gold-related investments.
During the March market liquidity crisis, many investors rushed to sell for cash, further depressing the prices of high-quality assets. Winthrop used his previously maintained cash position and some bond yields to gradually acquire stocks on his watch list. He emphasized, “This was a sentiment-driven sell-off, not a systemic collapse of value.” This approach, based on fundamentals rather than short-term fluctuations, ensured that his portfolio retained rebound potential even at its lowest point.
At the same time, he avoided blindly buying all falling assets. He believed the mid- to long-term impact of the pandemic on industries like aviation and hotels would be difficult to resolve quickly, making it unwise to rush into such high-uncertainty sectors. Instead, he concentrated his investments in medical equipment, cloud computing infrastructure, and consumer staples, sectors that have demonstrated relative resilience during the pandemic.
By early April, while the market remained volatile, some oversold, high-quality stocks had already shown signs of capital inflows. Winthrop’s portfolio began to demonstrate relative strength—the decline was significantly smaller than the broader market, simultaneously sowing the seeds for a rebound. He admitted in client communications that this period of investing was extremely stressful, but it was precisely in times of greatest chaos that discipline and conviction truly came into play. He quoted a phrase he often repeats: “Markets sell when they are fearful, while value investors sow when they are fearful.”
In his investment philosophy, a market crash is merely part of the value investing cycle, not the endgame. While the global nature and uncertainty of the pandemic have altered short-term price paths, they won’t permanently destroy companies with stable profit models and competitive advantages. Winthrop’s contrarian approach during a crisis reaffirms a philosophy he’s held for years: when most people are swept up in panic, true investors look beyond the present moment.
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