Value Investing, the Mag 7 and Making Sense of a Changing Market with Tobias Carlisle
Jul 25, 2024
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Value investing expert Tobias Carlisle discusses the recent outperformance of small cap and value stocks, the challenges of value strategy underperformance, and his approach to stock selection. He emphasizes patience, skepticism of growth projections, and prioritizing survival in investing. The conversation also touches on the dominance of large tech companies and their future returns.
The recent resurgence of value investing highlights its long-term benefits amidst market shifts.
Balancing concentration and diversification is crucial for optimal portfolio construction and managing volatility.
Tech giants' capital-intensive focus and investments in growth areas shape the evolving market landscape, emphasizing the need for strategic balance.
Deep dives
Discussion on Value Investing
Value investing focuses on long-term strategies and tactics to become a better investor. Recent shifts in small cap stock performance and the resurgence of value investing are analyzed. The market's reaction post-inflation figures led to a surge in value stocks, driven by prior underperformance and a market concentration in certain stocks. The historical context of value investing, emphasizing the importance of constructing a diversified portfolio and maintaining a focus on the underlying performance of businesses over stock price movements, is highlighted.
Portfolio Construction Process
In portfolio construction, the speaker elaborates on his approach of balancing concentration and diversification. He discusses the optimal number of stocks in a portfolio, focusing on the exposure to certain sectors and industries. Through insights from his experiences of being too concentrated early in his career, he emphasizes the need for a judicious balance in stock selection and sector exposure to manage volatility and enhance returns.
Sector Exposure and Market Dynamics
The discussion delves into the sector exposure and the evolving market dynamics shaped by technology and scale. Big tech companies' dominance is attributed to their scale, convenience, and lock-in effects, making them integral parts of daily life. The shift towards capital-intensive businesses challenges traditional perceptions, as companies like Facebook and Nvidia invest heavily in infrastructure and growth initiatives, impacting their future returns.
Future of Business Landscape
Considering the tech giants' increasing capital intensity and investments in growth areas like the metaverse, the speaker reflects on the future business landscape. Insights into Facebook's infrastructure spending for the metaverse and the shift towards cloud services highlight the evolving nature of tech companies. Balancing growth investments with expected returns becomes crucial in determining the future competitiveness and profitability of these tech giants.
Engaging in Diverse Conversations
The episode concludes with reflections on engaging conversations around investing strategies and market trends. The speakers highlight the importance of diverse perspectives, engaging dialogues, and the continuous evolution of investment approaches to navigate the changing market landscape.
Connecting with the Speaker
For more information about the speaker and their funds, individuals can visit Acquirer's Funds or Acquirer's Fund websites. The speaker, Tobias Carlisle, can be found on Twitter at Greenback and his works are available on Amazon. Additionally, insights on value investing and potential stock selections can be accessed at Acquirersmultiple.com, offering free screening tools and informative resources for investors.
In this episode of Excess Returns, we take a deep dive into value investing with our good friend Tobias Carlisle. We discuss the recent outperformance of small cap and value stocks, tackle the challenges of long periods of underperformance for value strategies, and examine how Tobias constructs his portfolios. We delve into his process for selecting stocks, including his focus on companies trading at discounts using the Acquirer's multiple and his approach to portfolio diversification. Our conversation also touches on the dominance of large tech companies and whether their outsized returns can continue. Throughout our discussion, Tobias emphasizes the importance of patience, skepticism about growth projections, and prioritizing survival over maximizing returns when investing.
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