Fund Holdings, Insider Ownership, Long Only, Value
Contributor Since 2016
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I have been writing pretty regularly about the fact that I believe that today is a time for caution for equity investors. Now is a time for careful stock picking, not blindly dumping cash into an index fund.
That isn't my unique viewpoint. That is the conclusion that I have reached by listening to what the world's greatest investors are doing and saying. The same group of investors who warned us of the tech bubble in the late 1990s and the housing bubble after that.
Dan Loeb is the latest Superinvestor to express a conservative view on the market today. In his Q3 letter to investors indicated that he has the following issues on his radar screen:
Today, we are focused on a few key areas:
- Understanding the global shift from monetary to fiscal policy: monetary policy's effectiveness is waning, which will impact bond yields. This influences our overall views of market valuation as well as sector allocation considerations.
- Will fiscal expansion become the new world order? While it seems logical and timely, it is challenging considering the very high debt to GDP levels globally. However, fiscal expansion could be an antidote to rising populism around the world which might smooth the way towards stimulatory infrastructure measures at home and abroad. One caveat is that not all countries have the flexibility to pursue such measures.
- While China has fallen temporarily off the radar screen, we still see reasons for concern. The stabilization in economic activity has come at the cost of increasing leverage and a potentially overheated housing market. Political change next year may also result in increased volatility.
- We are clearly in the late stages of a business cycle following an eight year (tepid) expansion. While we do not forecast a financial crisis or a recession, a clear path to growth seems elusive. Consumers have been reducing spending and businesses have never regained their pre-2008 capital investment levels. We might soon long for 2% GDP growth.
- Earnings have stalled for a few years and while this can be partially explained by falling oil prices, a strong dollar, weak global growth, and flat margins, earnings estimations may be inflated at these levels.
As I wrote to our subscribers this morning....this is a stock pickers market. Now is the perfect time to be following what the greatest stock pickers like Loeb are doing.
That is all we do at the Superinvestor Bulletin. Every single idea that we put in front of our subscribers is a significant portfolio weighting in the portfolio of at least one world class investor.
We are building a portfolio built from the best ideas from the very best investors. Investors who have compounded money for decades at annualized rates that far exceed the overall market.
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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.