Gary Mishuris on sticking to the investment process

You have to have the temperament to be successful in this business.  And so if you start worrying about what clients are going to think or what someone else is going to think, you're going about it all wrong.

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Where I can succeed is where a lot of other people I see folding to the pressure and saying, "the market's changed, value investing doesn't work."  I can actually stick to a process when it's really painful to do so.  Most people can't.

~ Gary Mishuris, interview with Dan Ferris, Stansberry Investor Hour, April 15, 2024

Savita Subramanian on the brain drain from active equity investing

My thesis is we've seen a brain drain from active public equity investors to private equity or passive.  That public equity component has been squeezed out by either reaching for growth in private equity - and that's where people are looking for their long-term fundamental exposure - or they're getting low-cost and moving to passive index funds for exposure to the S&P 500.

I think there are massive inefficiencies in the public equity market right now that haven't necessarily been sussed out by expert stockpickers.

~ Savita Subramanian, "Markets Aren't as Efficient as They Seem. Look Closer.," Barron's, February 17, 2024

Patti Domm on the decline of active investing

In 2000, pensions had about 80% of their equity allocation in active public equities.  That has shrunk to about a third of overall equity allocation, with holdings in private equity and passive investments also at about a third each, [BofA Global Research strategist Savita] Subramanian says.

The mutual fund world has also seen big changes.  The number of funds in U.S., long-only, large-cap funds has dropped by 40% since 2013, found BofA Global Research.

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The average number of sell-side analysts covering an S&P 500 stock has fallen by 15% from a peak at the start of 1990, according to BofA.

~ Patti Domm, "Markets Aren't as Efficient as They Seem. Look Closer.," Barron's, February 17, 2024

Burton Malkiel on the AI revolution is different from the internet bubble of 2000

AI has the promise to make enormous advances in productivity and could be as important as the Industrial Revolution.  And if Nvidia grew its earnings at the rate expected by security analysts in 2024, it would be selling at only 33 times forward earnings.  No wonder its supporters consider it a cheap stock.  Nvidia today doesn't resemble Cisco in January 2000 [which sold at a triple-digit multiple of both trailing earnings and expected results for 2000].

~ Burton G. Malkiel, "Yes, Tech Stocks Really Can Keep Going Up," Barron's, March 9, 2024

Fred Hickey begins buying gold stocks

I bought a slug of Newmont Mining shares at $23.60 that I still happily hold today.  The antithesis of a tech stock, this giant gold mining company is a bet on the end of the 20-year bear market in gold.  It is a bet on an anticipated plunge in the dollar.  It is a bet against Greenspan and the Fed, who I fear will flood the system with money as the stock market and economy continues to contract.  It is a bet against undisciplined fiscal spending and budget deficits.

~ Fred Hickey, The High-Tech Strategist, August 3, 2002

Kevin Duffy on economics and investing

Our ideal economy would safeguard the property of its people, limit the meddling of its government, appreciate the efforts of its entrepreneurs and refrain from watering down its currency.  Sadly, no such state of nirvana exists.  We are all grading on a curve.

~ Kevin Duffy, "Western Media Hates China: For contrarians, what's not to love?," The Coffee Can Portfolio, April 15, 2024

Kevin Duffy on Nvidia's $2.2 trillion valuation

As we speak, Nvidia commands a market value of $2.20 trillion, roughly 3.5 times the annual sales of the entire semiconductor industry. 

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As the table below shows, the 40 or so analysts who follow Nvidia expect the company to sustain 65% operating margins this year and next, more than twice the average of the past five years. The bear case rests on capitalism’s knack for hammering down excess profits. If 2025 revenue comes in 15% light with margins closer to 40%, analysts will be forced to cut their earnings estimates in half. Add some valuation compression and Nvidia could easily lose its trillion dollar market cap status. 

As Bob Farrell, a keen observer of investor sentiment, would say, “When all the experts and forecasts agree – something else is going to happen.”

~ Kevin Duffy, "Bubble? What Bubble?," The Coffee Can Portfolio, April 15, 2024