“Davidson” submits:
Q1 hedge fund letters, conference, scoops etc
Every investment cycle becomes distorted by Momentum Investors. This cycle it is FANG-type issues, Face Book, Amazon, Netflix, Google. At some point during the cycle, those who build indices incorporate them into the key market indices. Yardeni has a piece which shows how the SP500 performance has been distorted.
Performance distortion caused by stocks without earnings/shareholder equity growth is mostly ignored by investors who take performance comparison at face value without consideration to historic value created by many others. Danaher(DHR) provides a good comparison of a long-term well-managed business. DHR’s share-price today is significantly higher than previous market cycle peaks. Companies having similar long-term out-performance comprise roughly 3% of the indices but rarely receive media attention once Momentum Investors dominate the media. Investors always become confused and disappointed by their own performance by comparison to indices in every cycle. The media and social pressure force most investors to make the poor choices to own more of the FANG-type issues having been convinced they are the ‘new growth vehicles’ of the next generation.
While FANG-type issues come to dominate the indices temporarily which skews performance and the media which skews market psychology, it is the DHR-type of company which dominate the index performances long-term. One must revisit and reaffirm one’s perspective throughout any cycle to remain disciplined. Developing a discipline based on fundamentals and reaffirming one’s point-of-view periodically is how one remains focused rather than be pulled unknowingly into temporary and often poor choices made by Momentum Investors.
https://www.yardeni.com/pub/yardenifangoverview.pdf
Just because the price is rising does not make something a good investment even if it comes to dominate everyone’s attention.
