Position Crowding and Valeant20160130204022

Position Crowding and Valeant

January 30, 2016Research
Position crowding is when a bunch of similar investors own a stock.  When those investors rush for the exits at the same time, the price drops a lot more than expected – perhaps to well below intrinsic value.  Note that we have published several notes on this on the Beachhead site (see Hedge Fund &a...
The Trouble with Oil (Part Two)20160129201734

The Trouble with Oil (Part Two)

January 29, 2016Research
Two weeks ago we wrote a post on oil (The Trouble with Oil Part 1)  – why it matters to equities these days, and how the initial market response (and pundit commentary) seemed to miss some key fundamental aspects of commodity supply and demand.What a difference two weeks makes.  A few updates:Oil is...
Japan & Abenomics redux20160129192454

Japan & Abenomics redux

January 29, 2016Research
Overnight, Japan’s central bank pushed short term interest rates into negative territory and pledged more monetary stimulus.  For a brief overview of Abenomics, please see our video below.In contrast to the positioning we discuss in the video (short the yen, long Japan equities), many systematic hed...
Why Don’t Value Investors Always Buy the Dips?20160120192947

Why Don’t Value Investors Always Buy the Dips?

In the short run, the market is a voting machine; in the long run, it’s a weighing machine.For fun, let’s assume you’re a value investor looking at GM in late 2015.  Like all good value investors, you want to make decisions based on “intrinsic value” – that is, what a company is worth, not where the...
The Trouble with Oil20160116192938

The Trouble with Oil

January 16, 2016Research
In an earlier post, we talked about market volatility when new risks move to center stage.Well, crude oil is center stage, to say the least.  Why?  Oil at $30 per barrel for a few years would lead to (literally) a world of hurt:  widespread bankruptcies in the oil patch, massive write-downs in bank ...
An Excerpt from the Mid-Month Update20160115192619

An Excerpt from the Mid-Month Update

Given the market volatility, we provided a mid-month update to our investors.  The following is a brief commentary on the markets:For purposes of this update, we’ll highlight some ways in which the situation today is very different from 2008:On the positive side, while the Great Financial Crisis nea...
Market Psychology and the Investor Narrative20160107152634

Market Psychology and the Investor Narrative

History doesn’t repeat itself, but it often rhymes.So said Mark Twain, or possibly someone else, depending on whom you believe.You might say the same thing about market drawdowns.  While next year’s crisis won’t look quite like last year’s, they’ll share some common traits.  Hence the rhyming.Let’s ...