Current update

The year has been dynamic. Legacy positions in non cyclical, high quality companies such as Sanofi, Glaxo, Roche, Kraft etc have now been sold. The current fad is high quality, non cyclical, hence the good prices we got several years ago are now fairly valued. Perhaps we should have held on to enjoy the full momentum of the movement of capital to this strategy as bond yields get so low all the best known and highest quality dividend payers are being bought by these clients. Everyone now seems to say low beta stocks outperform, hence everyone buys them so no performance is left for the future. All great ideas are at best temporarily killed when it becomes the consensus strategy. The consensus cannot beat the average (i.e. the market). We find cyclical companies are now considerably cheaper than non cyclical on average. Macro fears means few want to bet longer than 2013 estimates of EPS. Should these estimates drop, we find stock prices fall heavily. Recent victoms include BG, Burberry, Hewlett Packard etc. We find European companies are cheaper than US equivalents. We find large caps are well priced relative to small caps. We find deep value large caps are most easily found in finacials and technology in the USA. We continue to stay away from direct stocks in emerging markets for the moment.