22 October 2009
High vs Low ........Quality
A careful analysis of the money managers who did well in the rebound from the lows of last March will reveal that these guys made big bets on lousy stocks. Terrible fundamentals. Fleeing institutional investors. Invisible earnings visibility. Technical signals that screamed SELL. Those who bought in March, April and even May were courageous and right. Safe haven investors who were loaded up with SAAP stocks (Safety at any Price) could only look on with envy. Bernstein has come out with their own take and it's summarized here. http://bit.ly/1VG2eH
It's something we noticed back in May and have been following with close interest since. Here are two versions of the performance of High and Low Risk SP500 portfolios (50x50) since late last year. What struck me was how "quality stocks" were actually badly mauled in the late 2008 selloff and they have lagged so much this year. It looks like we are turning around now...but you knew that.