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Stocks
Global markets have sold off pretty hard to start the week.  Most of the narrative surrounds the Chinese property market and one of their largest developers, Evergrande.  China’s government is clamping down on leverage and demanding many industries to buy in, literally, to their social objectives via cash “donations”, cheaper housing, etc.  Both the Shanghai...
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    The image above shows the S&P Growth/Value ratio. As you can see, this ratio has hit a new marginal high, to an all-time record.  This means that the valuation spread between growth and value has never been more extreme.  Interestingly, we saw a similar pattern occur in 2000, right before the Nasdaq began...
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The speculative fever seems to be at full blast as we’ve seen with the wild price moves in stocks such as Tesla, or alternatives such as Bitcoin.  Many people are applying pandemic-inflated growth levels into perpetuity.  One example, I find interesting is Zoom Video Communications (ZM).  The stock rose 400% last year, as the technology...
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I came across a terrific article I wanted to share with you by the asset manager GMO on how extreme the opportunity in value is versus growth.  I’m going to share some of the most important commentaries.   “The performance of Value from 2007 to 2019 was, to put it mildly, uninspiring. This was not...
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The last decade has been a strong one for U.S. equities and bonds.  One primary driver of that performance were low starting valuations, stemming from the Great Recession, which had just ended in 2009.  This was the opposite of the scenario that led to the lost decade preceding it.  I believe many market participants are...
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  I came across a very interesting article written by value investor and market historian Richard Pzena.  As you know, the closest comparison to the current market environment is the Tech Bubble, as the most expensive companies have seen P/E multiple expansion, while value stocks have seen multiple compression.  As you can see on the...
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I’ve talked a lot about how the current market environment has a lot of similarities to the Tech Bubble.  I just wanted to share an interesting chart I found.  September has been a pretty good month for value so far, as it has outperformed growth by over 5%.  Obviously that isn’t a big deal given...
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Over the long-term, the best performing stock strategy has been owning the cheapest companies from a valuation perspective.  Enterprise/value/EBIT, divides the (market cap+debt-cash by pretax operating income.)  An EV/EBIT of 5, means that if you buy a business for $1 million dollars, you are generating a 20% pretax return, or $200K.  That sounds pretty good...
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I hope everyone is holding up okay.  We’ve seen some encouraging employment numbers coming off those massive layoffs, but clearly the economy still has a lot of work to do to get close to recovering from where it was.  This month we should see a new stimulus bill negotiated, which will surely be very contentious. ...
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I stumbled on a fantastic article today that is right on target with what we discussed in our previous article from 6/25/20 related to value investing and mean reversion.  There is a link below, which I think you’ll enjoy but I’ll cover some of the key aspects. These might be redundant if you read the...
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