It looks like you're new here. If you want to get involved, click one of these buttons!
This concurs with my opinion that big tech is flying towards the sun and if we wait long enough it will crash back to earth. And the Liz Ann Sonders piece Charles referenced recently.Executive Summary
Value investing has a long and distinguished pedigree but is currently in a deep thirteen-year drawdown. We believe this is because value has rotated into a massive losing bet against technological disruption.
*****
...look at the companies you actually get when you buy a value portfolio. Exhibit 4 shows the sector composition of Russell 1000 Value and Growth....Value investors are making an epic 34.7% short bet against the technology sector. Moreover, this bet is more than fully explained by their underweight to the FAANG+M companies. Value has a meager 1.4% position in FAANG+M compared to Growth’s 39.4%. Not only are value investors short tech, but they are short Big Tech. And in a big way. Once we neutralize its anti-disruption bet, we find that value’s lost decade disappears. Value’s drawdown is fully explained by its big bet against disruption.
Buffett gradually evolved his approach beyond that of his mentor. With the help of his partner, Charlie Munger, he realized that Graham’s “cigar-butt” investment style was neither scalable nor sustainable. Meanwhile, the economy was evolving, marked by the rise of the great American consumer brands, such as Coca-Cola, which enjoyed loyal customers and wide moats. Buffett embraced a more holistic focus on brand and management quality. His new blueprint: “Forget what you know about buying fair businesses at wonderful prices; instead, buy wonderful businesses at fair prices.”
Conclusion
Value investing has rotated into a massive bet against technological disruption. This position cuts across diverse industries but can be isolated using machine learning. The anti-tech bet explains value’s ongoing drawdown. We suggest that value investors evolve their framework to accommodate the rising role of technology in our economy. Meanwhile, we believe allocators must invest in developing an informed view on technological trends in order to truly underwrite their value managers.
© 2015 Mutual Fund Observer. All rights reserved.
© 2015 Mutual Fund Observer. All rights reserved. Powered by Vanilla
Comments
None of them make anything that feeds me, cleans me, moves me, shelters me, or provides physical comfort.
The only reason Buffet stopped investing in cigar butts was because he had too much money to invest. Dinky linky. Most of us won't face that problem investing in mutual funds.
Things won't necessarily get better with China if there's a change in administration. It's hard not to notice the way they're treating Australia.
Going forward trade war will likely get uglier as China flexes their influence. Unfortunately that is the downside of globalization.
Buffett turned 90 years old. It seems his successors are making more of key changes. Still he holds lots of financial.