RESOURCES NEWSLETTER ARCHIVE
CURRENT MARKET CONDITIONS AND VALUE INVESTING
October 7, 2019
Hey, The Investor’s Podcast Network Community!
It’s been a while since my last newsletter back in mid-August, and for a good reason. Preston and I often jump on calls to talk about stocks we find interesting to invest in, but we’ve had a hard time lately.
I haven’t found anything new. Instead, I rediscovered something I already know. I’m talking about value investing. It might not seem like the obvious choice with the countless articles being written recently about why investing today doesn’t work and how the rules have changed. I can’t say I’m surprised to read the skeptic view on value investing given it just had its 6th worst drawdown ever.
However, something odd happened 4 weeks ago. Value investing had the best day in 10 years (!) and growth investing had its worst day. While it’s too early to say that we now have a change in regime (in favor of value investing), I’ll urge you to pay close attention to how things play out over the next year. I just jumped off a phone call with a friend from our Mastermind Group and one of the leading authorities on value investing, Tobias Carlisle. He, too, has noticed how value investing has recently made a big move, and he told me an interesting fact — when value investing underperformed for 5 years up to the year 2000 (after a crazy bull market), value investing caught up in just 7 months (!).
The turning point of value investing has not historically coincided with that of the overall stock market. For example, value stocks soared in 2000 – 2003 as opposed to the bear stock market, but fell together with the stock market in 2008. Zooming out, it’s interesting to look at the empirical evidence. It shows that the relative attractiveness of value stocks decline when risk aversion rises and, conversely, value stocks are found to thrive in environments with a strong appetite for risk and low interest rates — an environment we’re now in.
So how should you invest if you, like Tobias Carlisle and I, also believe that value investing is set to outperform the overall stock market? Tobias and I had a lengthy discussion about this recently and you can listen to our discussion here.
One of the most popular value ETFs is Vanguard’s VTV, which is managing close to $100B and has a very low expense ratio of 0.04%. Taking a closer look at VTV, you can consider whether you would like to have more international exposure given the high price level of the US stock market (which, in turn, also affects value stocks). Also, you can discuss whether or not you prefer a market-cap-weighted ETF to an equal-weighted ETF, since the latter has historically performed better. However, while you can refine the value process, my main takeaway is to find a solid and cheap value ETF. If you do, I think you will be well-positioned for where we are in the cycle right now.
Speaking of value investing, it is no secret that The Investor’s Podcast Network was heavily inspired by Warren Buffett from the very beginning. Preston and I take any chance we get to meet up with the TIP community in person, to talk about value investing and how we can best help each other. In 2019 alone, I had the pleasure of meeting up with listeners in Manila, Aarhus, Prague, Vienna, and Las Vegas. In 2020, we will still prioritize meeting up with our listeners, so please stay tuned for information about our future events on this page. We already have 3 live events planned for 2020 in the US. All events are, of course, completely free.
Although our main event in Omaha, Nebraska is still 7 months out, I highly encourage everyone who is going to book flights and hotels as soon as possible. We created this free guide for you where you can find more information about the event and answers to the most frequently asked questions. For years, The Investor’s Podcast Network has been the largest organized group at the Berkshire Hathaway Annual Shareholders Meeting, and we also expect around 300-400 people in our community for next year’s meeting.
To clarify, we only facilitate information and gatherings where you can meet like-minded investors. We DO NOT give out credentials to get into the meeting. We also DO NOT have access to special rates for accommodations or any insider benefits. Just like you, we are guests in Omaha for the weekend. We also face the same issues such as getting credentials in time from our broker and finding cheap accommodations.
For any specific questions you might have about the main event in Omaha, Nebraska on May 1 and 2, please do not send them directly to me. Please ask in our forum or request to join our WhatsApp group from email@example.com.
Preston and I can’t wait to meet you there!
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P.S. I’ll be hosting a TIP live event in Los Angeles on February 11th from 6-10pm. As always, it will be a very casual event. This time, it will be at a bar owned by two of the show’s biggest fans — our local TIP chapter president Peter Leung and his wife Jennie. The event is completely free and you’ll just need to pay for your own food and drinks.
I’ve asked two of my good friends to join me at the event and, luckily, they both said yes. Tobias Carlisle from our Mastermind Group is excited to be joining his third TIP event. David Stein, host of one of the world’s largest investment podcasts Money for the Rest of Us, is also joining us. Like Tobias and everyone else going that night, he is all about networking and figuring out how we can best help each other out in the TIP community.
If you would like to join, please just reply to this email and I’ll send you more information about the event. Everyone is more than welcome!
P.P.S. As you may have noticed on our website and podcast, we renamed “The Investor’s Podcast” to “The Investor’s Podcast Network.” This is because we’ve launched 2 new shows owned by the company, but not hosted by Preston and me.
One of our new shows is called Silicon Valley. It is hosted by Shawn Flynn and is recorded live in Silicon Valley. He meets successful entrepreneurs and talks about business and tech. Last week, he interviewed Patrick Lee, the founder of Rotten Tomatoes. Make sure to check that episode out here!
Our other new show is called Millennial Investing. It is hosted by Robert Leonard, who you might already know. Robert has long been writing intrinsic value assessments of stocks with Preston and me, and we’re currently working on one for Berkshire Hathaway, which has long been requested by our community.
In the meantime, please make sure to check out the stock picks that Preston and I found trading at an attractive valuation since my last newsletter in August. I’ve attached their intrinsic value assessments in this email. Also, here is the link to all of our stock analyses.