“Value” At Lows And “Momentum” At Highs?valueplays
This isn’t to say value investors switch to momentum in a bull market, it is to say that as valuations get extended we don’t need to automatically sell due to that sole reason. We can ride the wave with the momentum folk and sell as things begin to reverse. No, you won’t nail the top and will probably sell too soon as people mistake a dip for a reversal but I think just blindly selling a bank at 20X earnings isn’t a great strategy when we have seen they can easily go to 25X or higher.
Something to always keep in mind. Everyone is trying to capture assets and provide advice to outperform. They all claim outperformance but do this by promoting selective periods of the market when they did so.
The truth is, the larger the asset base, the closer to impossible it is to outperform. Firms become the marketplace and cannot maneuver to locate underprice opportunities. The truth is, it is the smaller investor who can outperform because they can shift within the market without overly impacting pricing. They can accumulate at low prices with little fanfare and sell at high prices with zero impact. What the smaller investor needs to do is to develop discipline which is more “Value” at lows and more “Momentum’ at highs.
This does take time as each investor carries individual biases and perspectives which each needs to come to terms with when making decisions. The data is now fully available between Fed Reserve FRED data sets and various sites such as Morningstar and etc. The large firms would have you believe only they have access to the information required when it is available to everyone if they are willing to put in the time. Being smaller than mega-firms, smaller investors should be able to do much better than most touted in the media over the long-term.