U.S. Portfolio Strategy

Our approach to portfolio strategy is based in microeconomics and seeks to exploit a wide range of anomalies. Our goal is to identify stocks that outperform the market. We believe in empirical evidence and the need for art when interpreting it. The anomalies we try to take advantage of can include misvaluation, overinvestment or retrenchment by management, and excessive extrapolation of trends by investors. We look for situations in which the current state of affairs is untenable and the reward for being patient is sizable. The charts below provide examples of our measures of misvaluation, across the U.S. market and within sectors.

At times, macroeconomic concerns dominate those at the company level, so we periodically do in-depth work on these higher-level issues. Past examples of such topics include the sustainability and consequences of the globalization of manufacturing, housing cycles, credit crises, capital spending booms, the demography of income, the interrelationship between the profitability of the “old” and “new” economies, and the channels through which monetary policy operates and the likelihood that it will achieve its objective.

Valuation Spreads.

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Intrasector Spreads.

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