Not necessarily contradictory but, for index value investors, a tension exists between the discipline of continuous capital deployment and the prudence of valuation sensitivity during a bull cycle (i.e., feels discomfortable to continue investing at ~25x P/E in S&P but hard to time the market).
Yes, I agree. Most quality companies trade well above 20x today unless there are questions about slowing growth or moat erosion. Tough times for quality + value while momentum is leading the market.
I think your point about price momentum communicating important information is an insightful one. As a long-term value investor I fought this idea for a long time, but now with plenty of scars obtained during my 25 years of professional investing I know there is something to it.
The key is to use it appropriately - as a warning to dig deeper, not as a trigger for automatic action.
these reasons, and age, is why i slowly shift to systematic portfolio managers using economic factors with explanatory power. i dont begrudge them low-weighting correlative factors (size, momentum, etc..) for trade-desk execution.
Not necessarily contradictory but, for index value investors, a tension exists between the discipline of continuous capital deployment and the prudence of valuation sensitivity during a bull cycle (i.e., feels discomfortable to continue investing at ~25x P/E in S&P but hard to time the market).
Yes, I agree. Most quality companies trade well above 20x today unless there are questions about slowing growth or moat erosion. Tough times for quality + value while momentum is leading the market.
I think your point about price momentum communicating important information is an insightful one. As a long-term value investor I fought this idea for a long time, but now with plenty of scars obtained during my 25 years of professional investing I know there is something to it.
The key is to use it appropriately - as a warning to dig deeper, not as a trigger for automatic action.
Completely agree. Implementing some momentum factors into the process - initial ideas and ongoing holdings - is helpful as a behavioral check.
these reasons, and age, is why i slowly shift to systematic portfolio managers using economic factors with explanatory power. i dont begrudge them low-weighting correlative factors (size, momentum, etc..) for trade-desk execution.