The image above was presented by famous value investor Richard Pzena.  As you can see, it shows that the best returns from value investing come after periods of stress.  We’ve seen this same phenomena in our portfolios after every major selloff we have experienced over the years.  While this crisis is extraordinary, so it is the opportunity.  We are sitting on dollar bills trading at 50 cents.  We’ve been able to refresh and improve our risk-adjusted opportunity-set over these last few months, giving us an even stronger portfolio of financially strong and deeply undervalued companies.

Many of the stocks we own have dividends from 4-9% that are very secure.  When you contrast that with the 10-year yield at 0.67%, the numbers are stunning.  The average price to normalized earnings is roughly around 4-5, so we are talking 20-25% earnings yields.  You don’t get these opportunities often.  My good friend and author Tobias Carlisle put out a great article discussing the opportunity in value stocks, which I wanted to share with you.  I hope that you find it good reading during this long weekend: