What are the factors that gave rise to investors’ success over the last 40 years? We saw major contributions from (a) the economic growth and preeminence of the U.S.; (b) the incredible performance of our greatest companies; (c) gains in technology, productivity and management techniques; and (d) the benefits of globalization. However, I’d be surprised if 40 years of declining interest rates didn’t play the greatest role of all. ~ Howard Marks via his latest letter, “Sea Change”
In this week’s Dirty Dozen [CHART PACK], we look at investor positioning, 2022 highlights, international small-caps on sale, the BIG opportunity in precious metals, and Apple stock about to prove gravity, plus more…
Q3 2022 hedge fund letters, conferences and more
- The last BofA Fund Management Survey of the year. Summary highlights below.
- 2022 has been a busy year…
- We’ve written about the near record value spreads in small-cap over the last couple of months (links here and here). Putnam published a report recently (link here) highlighting the historic relative value opportunity in international small-caps, writing:
“The price-to-free cash flow multiple of non-U.S. small caps versus U.S. large caps is in the top decile of attractiveness…In 86% of periods (12 of 14) since 2000, when price-to-free cash flow relative valuations were at similar levels, non-U.S. small caps outperformed over the following three years.”
- Tightening monetary conditions work with a long lag… (chart via NDR).
— 5. Here’s the updated composite analog for the SPX in both recession and non-recession outcomes (chart via NDR).
- Gold is cheap via BofA “Net 21% say gold undervalued in Dec, most on record.” The only other two similar readings (Jan 09’ and Sep 18’) coincided with major lows.
- Crescat Capital shared a good update on precious metals over the weekend (link here). Here’s a clip and a chart.
“We are at a key inflection point for the precious metals industry today. The overwhelming social pressure to adopt the green revolution, renewable energy technologies, and electrification has forced the gold mining industry to shift its capital and attention to so-called “critical” metals. Consequently, there has been a declining interest from major mining companies in deploying capital to gold-focused projects. Perversely, this repositioning is a major tailwind for a new precious metals bull market.”
- Gold enters its strongest two-month stretch of seasonality this week.
- Not sure how I missed this, but here’s the WSJ’s September 20 frontpage of their Business & Finance section (h/t to @crescatkevin).
- Also back in September I wrote that the market “Generals were about to be shot” (link here). The long-term charts of the megacap tech stocks have only gotten worse since. AAPL just completed an 18-month H&S top. Chart below is a monthly.
- Meanwhile, it’s still incredibly expensive with a price-to-sales ratio of just under 6x.
- And whales continue to dump their shares en masse…
Article by Alex Barrow, Macro-Ops.
