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It is run by Eric Cinnamond , who first made his name at ICMAX Intrepid Small Cap and then, I believe, at ARIVX (which was liquidated b/c he didn't see any good values). Web site is at https://www.palmvalleycapital.com/
From the People tab on this link:
You might look at the Launch Alert for Palm Valley Capital in our July issue.
MikeM's recollection of ARIVX in 2009 is incorrect. Here's a snippet on his asset allocation from our profile of the fund. There are two things that are true about Mr. Cinnamond: (1) he's a spectacular stock picker and (2) he's incredibly picky. When you adjust his fund's performance for cash level, you find his stock picks - on whole - beating the market by 10:1; that is, a fund that goes up 5% when it's 5% stocks and 95% cash implies the stocks rose by 100% while the cash stayed at zero. In normal markets, Morningstar observed that Mr. Cinnamond's funds "trounced nearly all equity funds."
But markets have ceased being normal. The market's become addicted to the Fed put; that is, to the willingness of the Fed to move heaven and earth to keep things propped up. Here's a thought experiment: unemployment is low, the economy is growing, corporate taxes have been slashed, the market's at record highs, CEO comp is at record highs equity valuations are at their second-highest levels ever. What would happen if Powell announced that the Fed was taking the punch below away and normalized the fed funds rate? That would be rise of about a 1% rate to 3.5%, mid-range in their preferred 2-5% window. My guess is blind panic on Wall Street and Pennsylvania Avenue and a 50% adjustment in equity prices.
Absolute value investors, like gold investors, are horrified and find very few values in such markets. So, they hold cash and get derided as idiots. If you think that the current conditions are permanent, value will continue to lag and absolute value will lag dramatically.
Well, yes. His strategy is fundamentally different than this peers. That would have been clear to anyone who read either the prospectus or his voluminous writings. He trailed his peers because he had up to 85% cash, which is consistent with his discipline and his long record. Relative value guys adjust, in the sense of buying the best of a bad lot if that's what's available. Absolute value guys are paid to stick to the discipline: buy if and only if there's a sufficient discount. Since every market goes through a period of overvaluation (the current one arguably since 2011), absolute value guys always have a period of radical outperformance and a period of radical underperformance. On the entire cycle, they typically come out ahead on total return and risk-adjusted return.
We're in the longest bull market in history, with the longest period of elevated valuations, and so the longest period of underperformance by value (generally) and absolute value. That's why there are only a handful of absolute value managers left in business.
As to investors losing money, he was in the black every year until 2014. In 2014, he posted a 2% loss while his peers posted a 3% gain. In 2015, he posted a 4% loss while his peers posted a 6.75% loss. In 2016 they liquidated mid-year with a small gain. The record from inception to liquidation was 4% or so.
When the market tanks, he'll do well. 2019? 2020? 2050? I don't know. Sadly, when the market tanks, average investors panic and run away. They don't invest in funds like Cinnamond's until a year too late when he's beaten the market by 2000 - 3000 bps which means they miss the major gains and are closer to the point that he'll begin moving back to cash.
Why did it take him SIX years to figure out , that he should return investor money ?