The securities we typically analyze are those that reflect the behavioral anomalies arising from largely emotional reactions to events. In the broadest sense, those securities reflect low expectations of future value creation, usually arising from either macroeconomic or microeconomic events or fears. Our research efforts are oriented toward determining whether a large gap exists between those low embedded expectations and the likely intrinsic value of the security. The ideal security is one that exhibits what Sir John Templeton referred to as “the point of maximum pessimism. ~ Bill Miller
Q3 2022 hedge fund letters, conferences and more
In this week’s Dirty Dozen [CHART PACK], we look at poor short-term breadth signals, better action outside of the US, record low relative valuations, and the best performing market this year, plus more…
- Summary of BofA’s latest Flow Show with highlights from me.
- YoY% home prices have turned negative in a number of DMs.
- The market is pricing in peak Fed Funds rate by early next Spring followed by an aggressive succession of rate cuts (chart via BBG).
- The McClellan Summation and Oscillator breadth indicators are rolling over. The oscillator (light blue line) is one of my favorite short-term breadth measures. The red dots mark every time its turned negative following a +200 reading since the start of the year.
- And our other short term measure of breadth flipped into the red last week, which isn’t a good look for the bulls.
- A number of markets outside of the US have been showing strong relative strength over the past two months. And many of them also have the added benefit of being much cheaper. This chart from JPM shows the EU is at a record low relative to the RoW on a PE basis.
- The same can be said about the UK as well…
- One UK company we’ve covered in the Collective that we like is TrustPilot (TRST), which looks close to completing a 6-month cup-n-handle bottom.
- UBS makes the case for high over low “quality” stocks here.
- MS expects a reopening China to help further drive down input costs and inflation for the rest of the world.
- Forget US equities, look at the action in the German DAX which has shown strong relative performance over the past few months. The DAX put in 9 weekly bull bars, which is an unusually strong impulse. And it’s now in a Bull Quiet regime and entering a compression zone on the daily.
- You have to go to Turkey though to find the best performing market ytd. The iShares MSCI Turkey ETF (TUR) is up +75% so far this year, after breaking out of a 5-year rectangle base.
Article by Alex Barrow, Macro-Ops.
