The home of stock ideas and strategies that run against the herd in search of undervalued companies cheap or ideas left for dead by other investors but which have the potential to deliver above average returns.
Dan Suzuki: A Regime Shift in the Investment Cycle
Dan Suzuki, Deputy CIO at Richard Bernstein Advisors LLC, joins Real Vision managing editor Ed Harrison for a deep dive re-evaluation of portfolio asset allocations as the global economy is poised to recover from the COVID-19 pandemic economic shutdown. Suzuki suggests that what worked in the last decade – growth over value, U.S. exposure over international, large cap stocks over small cap, and investing in tech dominated companies – may not work in the coming cycle, and such allocations need to be rotated. Filmed April 7, 2021. Key Learnings: Coming out of the economic shutdowns, the market is starting to price in a much faster tightening cycle than the Fed is considering, spurring the need to re-analyze portfolio allocations. A suggested portfolio rotation includes more international exposure over U.S., small cap over large cap and mega cap companies, and a smaller allocation to technology and high-growth sectors.
The Value vs. Growth Stalemate: SPACs, Rising Yields, and Long/Short in a Post-GME World
Tobias Carlisle, principal and founder of Acquirer's Fund, returns to Real Vision to share his analysis on the "growth vs. value" divergence that has been at the vanguard of 2021's equity price action. Carlisle breaks down what "value" means to him using the classic valuation metrics (price-to-book, price-to-sales, price-to-earnings, etc.) as well as more nuanced factors such as balance sheet strength and quality of earnings. Carlisle analyzes how rising yields impact the value spread and shares specific stocks that his portfolio is long or short on. Key learnings: Carlisle sees the recent surge in value as part of a larger narrowing of the "value spread" relative to growth. He notes that "junkier" value has outperformed quality value, and rather than turning his attention to energy stocks, airlines, and cruiseliners, Carlisle is focusing on quality "Tech 1.0" businesses. On the short-side, Carlisle sees lots of excess in SPACs and software-as-a-service companies that have yet to make a profit.
Preston Pysh: Understanding Bitcoin from a Macro Perspective
Preston Pysh, founder of The Investors Podcast Network, joins Real Vision managing editor Ed Harrison to discuss value and valuation in the context of central bank policy at its limit. Pysh shares his journey from U.S. Army veteran to value investor and Buffettologist to crypto and Bitcoin advocate. As a value investor, he found it hard to continue looking narrowly at 'value' when he had serious doubts about the entire currency regime, given today's aggressive monetary policies. Eventually, that led Pysh to Bitcoin as an alternative store of value—and he believes Bitcoin is going to make markets free and open again. Filmed March 26, 2020. Key Learnings: Pysh explains some valuation metrics of Bitcoin and why he looks at it in four-year cycles given the supply halving schedule, which he calls the quantitative tightening cycle. He highlights that a long-term chart of the price of Bitcoin looks similar to Metcalfe's Law, which he uses as a Bitcoin price projection metric.
Narratives around the reflation trade and asset prices are currently pointing towards a full recovery and a period of extended growth as the world exits lockdowns. In this interview with Real Vision managing editor Ed Harrison, Daniel Lacalle, chief economist and CIO at Tressis, argues that this is being fueled by nothing more than hope and that, although this is a recovery, the world will return to the same state of secular stagnation and low growth that existed pre-COVID. Lacalle explains why fiscal and monetary policies, which have not generated inflation, will only make this situation worse, why he thinks there is only a few months left in the reflation trade, and the resulting asset allocation based on his outlook. They also discuss current pockets of value and the sectors that Lacalle considers to be value traps like energy and financials as well as Lacalle’s outlook for the dollar. Filmed on March 10, 2021. Key Learnings: Sectors like energy and financials, which have been benefiting from reflation narratives and trade at low multiples, should not be considered "value". Current negative views on the US and the dollar remind Lacalle of the GFC, but the reality is that the US and the dollar are still the cleanest dirty shirt.
A Credit Update: Will Some Banks "Starve to Death"?
Chris Whalen, chairman of Whalen Global Advisors, returns to Real Vision to share with Real Vision managing editor Ed Harrison his strategic update on the U.S. banking system. Whalen argues that the biggest risk to banks is not credit risk but the Federal Reserve, which has compressed banks' net interest margins and reduced their earnings power. Whalen notes that this greatest threat is for large banks, and he finds much to admire in resilient small banks such as Bank of the Ozarks ($OZK) or Fifth Third Bankcorp ($FITB), which occupy particular niches that allow them to command a much higher spread on their loans than their larger-sized competitors. Filmed on March 4, 2021. Key learnings: Whalen argues that potential actions by the Federal Reserve such as yield curve control or "Operation Twist" pose a greater threat to banks as a whole than does credit risk. Whalen does, however, see looming problems in banks' exposure to commercial credit such as leveraged loans and commercial real estate. Whalen thinks that consumer exposure, such as credit cards and residential mortgages will continue, to fare well.
Moritz Seibert, CEO of Munich Re Investment Partners and co-founder at Twoquants.com, welcomes to Real Vision Jason Shapiro, principal of JS Trading and one of the traders profiled in Jack Schwager's "Unknown Market Wizards." Shapiro traces his journey from being a commercial banker at HSBC to a mover and shaker in the equity futures market. Shapiro shares with Seibert lessons he learned about risk management, position sizing, and portfolio construction. They also discuss how commodity trend-following strategies can produce a series of uncorrelated—and sometimes negatively correlated—convex returns. Shapiro explains his trepidations about speculative fervor but why nonetheless he is constructive on the equity market (at least for the time being). Filmed on February 22, 2021. Key learnings: Since the March lows, almost every risk asset has yielded serious returns: copper, equities, SPACs—the list goes on. Seeing great evidence of speculative fervor, Shapiro discusses how the current moment reminds him of 1999. Yet, his insights on the net speculative positioning of equity futures incline him to remain bullish on U.S. equities.
Are stocks in a bubble? How about bonds? Perhaps Bitcoin, too? Milton Berg, founder and CIO of Milton Berg Advisory, welcomes John Hussman, president of Hussman Strategic Advisors, for a conversation on these important questions. Hussman uses his custom equity risk-premium model to explain why, over the next twelve years, he expects the S&P 500 to return an average of negative 4%. Hussman compares the current moment to various historical periods where the S&P 500 underperformed Treasurys. Berg contends that peak-to-trough declines in equities will always result in long periods during which equities underperform Treasurys, and he notes that even buying high-quality stocks at peaks will turn a healthy profit if an investor have a sufficiently long time-horizon. Berg expounds on a bevy of highly favorable market technicals that indicate this rally could continue for some time. Filmed on February 19, 2021. Key learnings: Hussman argues that the S&P 500 will have a negative return for the next 12 years, whereas Berg maintains that, "bubble" or not, this rally will likely continue, both because the Federal Reserve is not worried about inflation as well several key market technical indicators. Hussman and Berg agree that speculative fervor is very notable in Bitcoin, but note that this does not mean it will go down soon.
What are SPACs? What role do they play in the current investment landscape? What opportunities do they offer investors? And, perhaps most importantly, are they in a bubble? Mark Yusko, CEO and CIO of Morgan Creek Capital Management, joins Real Vision senior editor Ash Bennington to answer these questions and more. Yusko argues that SPACs offer exposure to the growth areas of the future—from online gaming and e-sports to electric vehicles and space exploration—and that SPACs present the path forward for early-stage companies to go public. Yusko traces the different stages in the SPAC capital formation process, which includes pre-IPO, private investment in public equity (PIPE), and post-merger, and he depicts the various opportunities they offer investors, noting that many stages offer bond-like risk but equity-like returns. Yusko describes his latest venture, the Morgan Creek and EXOS Launch SPAC Originated ETF, which seeks to deploy active management and long-term holding periods as a way to navigate a promising space that is nevertheless frothy like so many other pockets of the market. Filmed on February 10, 2021. Key learnings: Yusko explains that SPACs are just a regulatory wrapping—saying that SPACs are in a bubble is like saying hedge funds are in a bubble. Yusko argues that SPACs offer exposure to the companies of the future and that, due to the dispersion between different SPACs, active management and diversification is the best way for investors to play the space.
Howard Marks & Joel Greenblatt: Is It Different This Time?
Howard Marks, co-founder and co-chairman of Oaktree Capital Management, welcomes Joel Greenblatt, founder and co-CIO of Gotham Asset Management, for an exploration on whether market exuberance is rational or irrational. Marks contends that the current investor optimism is largely a man-made artifact of monetary policy in order to stave off an economic recession. Greenblatt argues that mega-cap tech stocks like Amazon, Alphabet, and Microsoft are reasonably valued despite their remarkable price appreciation. Marks and Greenblatt agree that the Fed's promise to keep rates low for many years is a true gamechanger in the valuation of assets, and they discuss whether high inflation could change this. Lastly, Marks and Greenblatt compare different styles of investing and share timeless lessons they have learned over the course of their careers in finance. Marks and Greenblatt discuss ideas from Marks' latest memo, "Something of Value." To read this memo, click here: https://www.oaktreecapital.com/docs/default-source/memos/something-of-value.pdf. Filmed on February 5, 2021. Key learnings: Marks and Greenblatt contend that the prospect of sustained low-interest rates may indeed mean that "this time is different," and that optimistic valuations may be justified by the lowering of the "discount rate" by which future cash flows are priced in the market. Nevertheless, market optimism is very high, so having a sufficient margin of safety when allocating capital is absolutely necessary.
Russell Napier: Growing Wealth in an Inflation Avalanche
If central banks and governments unite to debase their money and depreciate their currency, will the long-awaited inflation finally arrive? And if it does, how can investors position themselves to not only protect their portfolio—but in fact grow their wealth—in this inflationary environment? Russell Napier, preeminent investment strategist, joins Stephen Clapham of Behind the Balance Sheet to answer these two critical questions. Napier makes his case for why inflation is indeed on the horizon, discussing everything from rent controls and yield curve capping to credit rationing and pricing power, and then he and Clapham explore the various investments that have a favorable risk/reward profile should Napier's thesis prove correct. Filmed on February 4, 2021. Key learnings: Napier sees favorable opportunities in companies that can secure easy debt financing, value stocks whose pricing power varies with inflation, and countries with low debt-to-GDP ratios such as Singapore.
Mark Cuban: What the Fed-Driven Bubble Means for the Financial Establishment
Famed investor and entrepreneur Mark Cuban, star of Shark Tank, joins Real Vision founder and CEO Raoul Pal to make sense of the changing market structure and the disruption of the financial establishment. Cuban sees tokenization and blockchain bringing more transparency to the financial industry and remains bullish on Bitcoin as a store of value and reserve asset. He also praises stimulus efforts but sees political partisanship as a major risk to fixing the dichotomy between Main Street and Wall Street. Filmed February 3, 2021. Key Learnings: Cuban follows the HODL ethos of cryptocurrency and shares what’s in his crypto portfolio: BTC, ETH, LTC, AAVE, and more. When it comes to the public markets, he explains why Amazon and Netflix are among the big tech companies with the strongest AI capabilities and they’ve remained two of his biggest holdings for years.