Southeastern Asset Management: 10 Reasons to Be Bullish on Stocks

In their quarterly update to shareholders, the folks at Southeastern Asset Management offer ten reasons to be bullish on stocks:

• "The earnings yield of the S&P 500 relative to Treasurys has made equities the most compelling since the mid 1930s.
• "The annual 10 year return for large company stocks has turned negative – something that has occurred only two other times, in 1938 and 1939, since tracking began in 1926.
• " The VIX, an index measuring expected volatility and therefore fear, hit an all-time high in November.
• "Significant margin calls and capital calls from various types of private funds have caused widespread selling of equities.
• "Advisor sentiment measuring bulls versus bears has fallen to the lowest level in over two decades.
• "The amount of cash being held on the sidelines by individuals has grown to a sum significantly greater than the total market cap of U.S. stocks.
• "Investors have bought Treasurys with no return, an indicator of the fear of other investments.
• "Institutional managers have held high cash balances in spite of acknowledging equities’ undervaluation.
• "Warren Buffett and Prem Watsa, two of the best fundamental investors, have made significant moves into equities.
• "Insider buying at companies has been rampant."

The accompanying table, highlighting earnings yield of S&P 500 vs. yield on 10-year Treasury at prior market lows, is particularly compelling. . . .

Comments

[Moon Kil Woong:]

Great everything is bad, so it can't get much worse right. Let's see I heard that in June, July, August, September, November, and now.

Vix volatility hit a high in November. Your returns if you bought then almost nil because the market just dropped back down after the bounce. Warren Buffet made moves into equities when in like June if I recall, then desperately posted pro stock garbage a few months later (big surprise). As mentioned by several people his pro-stock stance was mollified by his urge to be cautious as well (give the man credit where it's due).

Going long in this market in 2009 I would say is a wrong choice for 90% of clients. The fact 90% of brokers advise buying just shows that their loyalties don't lie with their clients, it lies with their pocketbook which is getting thinner by the month. Which is why we are in the bear in the first place. Jobs and salaries are declining, cash is disappearing, assets are being depreciated. These are not buy indicators until they at least stop dropping. If you are prudent you wait until they show a sign of actually reversing. Sure you give up a small bounce but if it is a cyclical change it is one that signals an upside for years not a few days. Better safe than sorry.

2008 Dec 31 02:52 AM

[ain't no fo...:]

Good list of possible "pros" but your attached SPX yields and consensus earnings estimates would be a lot more reassuring if they weren't put together by Zacks... now where did I hear that name? Uhh, ratings agency? And how are they compensated???????????...

2008 Dec 31 11:58 AM

[blisterchicken:]

Can't wait to see what free energy does to the global economy. ):-O

2008 Dec 31 12:32 PM

[VintonCounty:]

Morningstar reports that Longleaf Partners Fund's (LLPFX) total returns trailed its category peers, large blend funds, by 6 and 5 percentage points annually over the trailing 3 and 5 years, respectively. It was a little worse relative to the S&P 500's total return. Are you sure you want to pay attention to the opinions of its managers?

Jan 04 02:33 AM

[the ilster:]

2 words Bull Trap

Jan 08 09:41 PM