By Scott Ronalds

We often remind our clients that they don’t need to do much once their portfolios are set up, as our managers do most of the heavy lifting. While it may sound like lip service, it’s a phrase that carries weight.

In times of heightened volatility, such as the past two months, it involves capitalizing on opportunity. The manager of our Equity Fund, CGOV, noted recently that opportunity has been plentiful as a result of investors fleeing stocks due to negative economic events, margin calls and sheer panic.

A recent article in Barron’s (Buy Stocks, Not Economic Data) sums up nicely how investors are being increasingly barraged with economic data and how it should be interpreted when making long-term investment decisions:

“The fact is that macroeconomic data and policies to influence the economy are having little impact on what's really important to equity investors, corporate performance. Yet rarely has there been more attention focused on macroeconomic data and policy decisions. Clearly, the solution is to focus with blinders on what really matters to equity investors — earnings and dividends, and the price they pay to participate in those sums.”

While the economic backdrop remains uncertain, CGOV is investing in profitable, growing businesses, not U.S unemployment numbers or Spanish GDP figures. In the manager’s words, “We are confident that Ritchie Bros will still be conducting auctions in all economic environments and that Suncor will keep producing oil.” Recently, they have added to a number of companies that have seen their share prices decline based largely on panic, including TD Bank, Home Capital Group, Suncor, Insperity and Novartis. The profits of these companies will face little impact from a downgrade in the U.S. government’s debt or new austerity measures in Greece. CGOV also recently added Mead Johnson to the fund, a dominant global player in children's nutritional products and infant formula. They’ve admired the company for a while and the market pullback has provided a purchase opportunity.

The manager has been able to boost returns by trading around core positions. In other words, adding to holdings on share price weakness and trimming on strength. Or, put more succinctly, profiting from the emotions of others. The chart below illustrates a few examples of how they have been able to benefit from an active management approach of trading around their core positions throughout the volatility of the past few years – the heavy lifting in action.