In their latest 2022 semi-annual report, Tweedy Browne explain why this is an excellent time to be ‘mining for value’. Here’s an excerpt from the report:
While the “zero bound” global economy of the last decadeplus favored passive investment over active investment, growth and technology stocks over value stocks, and US equities over non-US equities, the reverse would appear to be the case today.
An inflationary environment where interest rates ultimately normalize higher, in our view, is likely to favor active investment over passive investment, value stocks over growth and technology stocks, and nonUS equities over US equities.
That said, the near-term investment environment remains extremely challenging as markets come to grips with rising inflation and interest rates and the prospects for what could be a painful global recession.
While valuations have corrected somewhat, with many stocks down more than 25% from their highs, it remains to be seen whether it is enough, in light of the prospect for earnings disappointments on the near term horizon.
Nevertheless, we believe that this is an excellent time to be “mining for value,” particularly in non-US equity markets, which to a significant degree, did not achieve the excesses in valuation experienced by their US counterparts.
Accordingly, we continue to focus on companies that we believe have strong balance sheets and/or the ability to continue to deliver pricing power, and those where there has been recent insider buying in their shares by “knowledgeable insiders.”
Rest assured that we will keep our nose to the grindstone, researching new and existing investments on a stock-by-stock basis, and refreshing our client portfolios for what we believe could be a period of relative prosperity for our style of investing.
You can read the entire report here:
Tweedy Browne – 2022 Semi Annual Report
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