Who’d have believed ‘Sweet Caroline’ holds a value lesson?

Whereas ‘Three Lions’ condenses a full cycle of emotions into less than four minutes of jaunty pop, the Neil Diamond classic manages to distil the essence of bull and bear markets into a single couplet

18/08/2021

Andrew Evans

Andrew Evans

Fund Manager, Equity Value

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Where it began, I can’t begin to knowing ... though, in this case, that’s not quite true. It was at Wembley Stadium, as thousands of England supporters belted out ‘Sweet Caroline’ in the wake of their team’s 2-0 victory over Germany in the first knock-out round of the 2020 Euros, that we first started to wonder, here on The Value Perspective, what value lessons might be taken from the Neil Diamond classic.

We had anticipated further chances to observe the song in a sporting context this summer given how English cricket fans – and indeed cricket commentators – have for some time been wont to burst into the song when their teams are doing well. Sadly, England’s latest showing meant no outing for Caroline at Lord’s so we will have to wait a little longer – or see if a football club adopts the song as the Boston Red Sox have in the US.

Here on The Value Perspective, of course, we have history with song lyrics, forensically analysing ‘Three Lions’ to identify the underlying subtext of a cycle of emotion – from hope to despair and back to hope again – that will be as familiar to investors as it is to England fans. (The up-to-date football version being: “We could actually win the whole thing. No, we lost on penalties – again. Hey, the World Cup is only next year.”)

In ‘Three Lions’, David Baddiel, Frank Skinner and The Lightning Seeds’ Ian Broudie are, by our count, able to encapsulate eight emotions within a commendably tight three minutes and 44 seconds. In ‘Sweet Caroline’, however, Diamond – being more a poet than a songwriter, as someone must surely once have said – manages to distil two contrasting emotions into a single couplet.

Reaching out ...

He may have been writing about a girl – either Caroline Kennedy, if you believe what Diamond said in a TV interview in 2011, or his then-wife Marcia (which he switched for a name that scanned better), if you prefer an anecdote from 2014 – but “Good times never seemed so good” and “I’ve been inclined to believe they never would” could respectively be mottoes for bull and bear markets.

Certainly it is not a stretch to imagine investors in technology, media and telecoms stocks in the late 1990s – or in the so-called ‘FAANGs’ of Facebook, Amazon, Apple, Netflix and Google at pretty much any point in the last decade – humming “Good times never seemed so good”. And around the time of the 2008/09 global financial crisis, you would have found plenty of people very much “inclined to believe they never would”.

You might also think value investors could be forgiven for singing along with the latter line – again for much of the last decade – but we are well aware both good and bad times are facts of market life. If you want to unearth a diamond (and I think we all knew that was coming), what counts is a robust process, consistently applied, that helps to keeps emotion out of investment and firmly where it belongs – in love songs.

Next week (maybe): Is ‘Where it began, I can’t begin to knowing’ a warning against trying to time markets?

Author

Andrew Evans

Andrew Evans

Fund Manager, Equity Value

I joined Schroders in 2015 as a member of the Value Investment team and manage the European Value and European Yield funds. Prior to joining Schroders, I was responsible for the UK research process at Threadneedle. I began my investment career in 2001 at Dresdner Kleinwort as a Pan-European transport analyst and hold a Economics degree.

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