The Long View Vincent Montemaggiore: ‘The Two Best Defenses Against Tariffs Are a High-Gross Profit Margin and Pricing Power’
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Apr 15, 2025 Vincent Montemaggiore, a seasoned portfolio manager at Fidelity, shares invaluable insights on navigating tariffs and market disruptions. He discusses the importance of high gross profit margins and pricing power for robust investment strategies. The conversation highlights the shift towards European growth opportunities and the significant role of AI in enhancing business efficiencies. Montemaggiore emphasizes maintaining an objective perspective to counter behavioral biases and the necessity of collaboration in investment firms to tackle uncertainties.
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Tariff Defense
- Focus on companies with high gross profit margins and pricing power to mitigate tariff risks.
- High gross margins lessen the impact of tariffs on cost of goods sold, and pricing power allows for offsetting price increases.
Leverage Lessons
- Highly leveraged businesses can become uninvestable if they require capital, as the market can make the situation worse.
- Prioritize downside risk and avoid excessive leverage to ensure a margin of safety.
Combating Thesis Creep
- Maintain a detailed investment thesis journal to stay rooted in your original rationale for buying a stock.
- If the situation deviates significantly from your original thesis, consider selling, even at a loss.