Updated June 30,  2023

Much has changed in three years. It wasn’t that long ago we were in lockdown with many folks wondering whether the world could weather the storm and whether the markets would ever recover.  Governments spent money like we were at war, which in some quarters, it seemed like we were.  Our investment team reached for the textbooks to try to understand how low we might go, and it turns out history is a pretty good guide when it comes to whether markets get panicky and sell stocks too cheap once and a while: they do, and we want to take advantage of that. 

Since our job is to deliver a more than fair long-term return for our clients, let’s face it, we are always on the lookout to buy stock at what we think is an unfair price for the seller.  Sorry!  Since we do compete with everyone for information, many of whom have vastly more resources than we do, we are at best on an equal playing field for subscription-based kind of intel and may in fact be making the same long-term estimates of intrinsic value. Of course, we do have pretty good models, but when there once was a time that was a bit of an edge, these days, everyone has one. 

 So, how have we outperformed?  It is true that we are often in sync with the “average” sentiment of the market, but usually not for very long.  By waiting to buy stocks when the market cares more about short-term risks than long-term opportunities, we take advantage of sellers willing to sell for less than is fair value in the long run.    Using this approach, we are proud to say our Small Cap Value strategy in March was named a “Manager of the Decade”, for the third straight year, for the decade ended Dec 2022, by investment database firm PSN/Informa for another top 10 performance in its asset class. In Q1 2023 the strategy was named a top ten performer in its asset class for the 18th consecutive quarter (4.5 years).  

Looking forward it appears that more than half of economists now believe that we will Not have a recession. Our own research suggested more than a year ago that the recession had likely passed.  We had two consecutive negative GDP quarters, and it now seems somewhat likely to this writer that eventually the NBER will call that period a recession well after the fact – it’s happened.  We thought the rapid rise in prices was as much of a response to supply chain dislocations, price hikes you want, as much as it was to rapid money supply growth.  Rate increases made sense, even pre-covid, from ridiculously low historical levels.  So, the market has been wrong for several years about the likelihood of a recession and so has been undervalued due to perceived short-term risks that are fading.

We have recently harvested some winners as some sectors of the economy look rosier to the market and we have reinvested the proceeds into stocks where the market doesn’t yet see a long-term opportunity, and we think we do. With employment strong inflation falling and an election year ahead, we think the market could have a pretty good period ahead.  Thank you for your interest in our strategies.