The Brooklyn Investor

So, continuing with the theme of energetic investing, I made a decision to check out Pzena Investment Management again. I’ve been watching it for a while and have posted about it before, however the superstars are coating up more than before. I believe the sentiment against active investing is at sort of a peak. I don’t usually like buying themes, though. Those things never seem to work out. But sometimes, there are themes that look sort of interesting only because sentiment appears to be leaning too hard one way or the other, and there appears to be interesting investment ideas.

I don’t like when things line up too much in terms of investment styles because that can indicate a lot of individuals also recognize and it might not work out. But things got more in-line this week with the surprise election of Trump. Of course, everyone thought Clinton would win (but she didn’t), and many thought that the marketplace would crash if Trump was elected (but it rallied, even though the crash callers were sort of right for a couple of hours).

This has business lead to an enormous rally in the stock market with financial finally showing some real strength. Even the Berkshire Hathaway graph looks funny, like it was going to be something or LBO’ed. Even Stanley Druckenmiller sold his gold and experienced stocks on Trump’s win. It’s true that in conditions of trend, DC will move from over-regulation probably. And banks will most likely not have to worry about Sanders/Warren bank-destruction.

Many may not like Trump, but in the end, he has his ego at risk and he could be a negotiator therefore I would not be amazed if he got a lot of things done. A lot of things people shall not trust, like moving environmental/green initiatives back again. But these can be very pro-business, pro-investment.

Anyway, I usually wouldn’t expect a lot of change from an election, but this time the Republicans control congress (Republicans don’t really control Trump, though) so there may be much more change than normal. Before we start on PZN, they updated their statement on the value cycle so let’s look at that. Here’s the hyperlink with their 3Q commentary. And each time I read that stuff, I looked at the shares I own, watch or whatever, and what I noticed on my spreadsheets just didn’t match what people were saying about the marketplace. I’ve posted about that overtime.

  • AIS (Thailand)
  • China’s ride-hailing ruler also fascinated Apple largesse
  • Low quality of investments
  • Proposed savings strategy (required savings rate/month)
  • 5: Stay in School
  • Agency cost
  • Invest More – Save and make investments more from your task or entrepreneurial projects

I was always scratching my head. And I came across these reports and I had been like then, of course! The market is bifurcated. FANG shares and many others were going through the roof, and got super-high valuations, but many others normally were just priced. Not cheap Maybe, however, not expensive either.

And actually, many were cheap (especially financial). Anyway, let’s take a look at a few of the updated graphs. Now that’s an incredible chart. Would you like to be long that chart or brief it? Some will argue that appears like the P/E chart just. If you want to short this chart, why wouldn’t you want to short the P/E chart too (short stocks).

If you look carefully as of this chart, to the chart mean-reverted as recently as the mid-2000’s (actually hitting the low bound of it, unlike the P/E or CAPE charts). Which means this graph is way more likely to mean-revert than fresh P/E or CAPE graphs. I’d much rather short this chart than a raw P/E or CAPE chart.

And to try out this, you certainly want to look long value shares, or enter a long/brief strategies based on valuations (see my prior post about the Gotham Funds or OZM). Pzena shows the same charts/tables for Western European and Japanese stocks and shares and it is very interesting too. I will not paste those here, though, so go see for yourself.