Benjamin Mackovak's  Instablog

The market’s meteoric rise off the March lows has made life for the value investor increasingly more difficult as we are faced with unpersuasive valuations coupled with a very uncertain economic environment. Gone are the days of picking up quality businesses trading at 20% free cash flow yields. However for those willing to take a contrarian stance and do the work, opportunities still abound in the market. One such opportunity that I am particularly excited about is First Industrial (FR).

Company overview:

Over the past two months the stock market has seen an explosive rally of roughly +40% from trough to peak. The rally was ignited by technical buying off an extremely oversold condition, however the move grew legs on the back of government policy announcements such as a ramp-up in quantitative easing, positive comments from the banking sector, and a deceleration in the deterioration of many macroeconomic data points. This “improvement” in macroeconomic data was championed by stock market bulls as an early sign of an economic bottom because after all an object in motion typically decelerates before it can actually reverse. Of the four influences listed above, the macroeconomic data points offered the only tangible fundamental underpinning for the rally (technical buying, printing money, and P.R. spin campaigns from the banks do not result in sustained economic growth).