In their latest Q4 2020 letter to investors, Broyhill provide some great quotes from Sam Zell and discuss why they believe value investing is a decent bet in a world full of bad bets. Here’s an excerpt from the letter:
“What is a cynic?” “A man who knows the price of everything, and the value of nothing.” – Oscar Wilde
According to Oscar Wilde’s definition, there is no shortage of cynics in today’s market. Price is all that matters. Nobody knows value because many of today’s valuation multiples are nonsense.
In one corner, we’ve heard rumors of traders being fired on the spot for even whispering the “F” word – “Fundamentals.” And in the other corner, we have an irrational, speculative casino where bankrupt stocks get bid up on Robinhood and Reddit. It’s a disaster waiting to happen. It will end in tears. Or worse.
This is not the time to chase soaring prices in the hopes they go even higher. When sentiment is stretched and assets are priced for perfection, there is a lot of room for disappointment. Layer on technical factors like quant programs, factor-based models, and forced selling, and we see even greater potential for dislocations in individual securities.
Looking ahead, we think prospective returns for traditional portfolios look low. Unfortunately, returns on cash don’t look any better, and we’re not willing to bet against this avalanche of liquidity only to learn the lesson so many short sellers learned over this past year. Fortunately, we think our prospects are as good as ever, and going forward, we think value investing is a decent bet in a world full of bad bets.
You can read the entire letter here:
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