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Innovation, Disruption, and the Illusion of Value

by: Lawrence Hamtil  on Friday, August 18, 2017

Ten years ago, investors interested in the rapidly growing mobile device market were presented with two options, "Company A," which was the dominant player in terms of market share, and "Company B," which was a known player in the technology sector, but a newcomer to the mobile phone industry.  For value investors, the choice seemed to be clear as Company A traded at a steep discount to Company B no matter what valuation metric was used: Read More

The Real Benefit of Low Vol Strategies

by: Lawrence Hamtil  on Wednesday, August 09, 2017

In recent years, much has been written about the rising popularity (as measured by fund flows) of low-volatility portfolios with investors.  All sorts of explanations have been offered for this phenomenon, almost all of them specious.  For example, a popular theory holds that investors are now using low-volatility equity portfolios as 'bond replacements,' given anemic yields on traditional fixed-income.  More reasonably, another theory simply states that investors are engaging in performance-chasing, as returns on historically less volatile sectors such as utilities and consumer staples have been quite healthy over the last few years.  Whatever the explanation for the inflows, one recurring caveat issued by commentators has been that investors in low-volatility funds are trying to have the reward of the stock market without the risks that investing in equities entails as surely at some point volatility would reach even these quiet sectors of the market. Read More

Imagining the Next Bear Market (with Examples from the Last Two)

by: Lawrence Hamtil  on Monday, July 31, 2017

In the midst of a prolonged bull market, investors have been waiting for a long time for the bear market's return.  While it is certain that the bull market will end at some point, it is obviously unclear what shape the bear market will take.   As I have written before, each bear market is unique in its own way, with some being very protracted inflationary or deflationary cycles, such as the 1970s or 1930s, and some being quick and relatively short-lived, such as the crash of 1987.   Read More