In this January 2022 video, Brian Dress, Director of Research at Left Brain Investment Research, introduces a new video companion to the Jarvis Newsletter. He first promotes the newsletter subscription and a limited‑time $99‑per‑month research service offer. He then summarizes the week’s market commentary, highlighting a pronounced risk‑off rotation from high‑valuation growth sectors—especially technology and software—into traditionally undervalued value sectors such as energy, materials, financials and selective retail. The rotation is driven by higher interest rates and inflation, which hurt growth stocks while benefiting sectors that can pass on cost increases. Dress references the “January barometer” theory, noting mixed empirical support but urging investors to watch early‑year trends. He points out that energy exposure in the S&P 500 is low (≈3 % vs. a historical 6‑8 %), suggesting upside potential. He warns against “value traps,” i.e., cheap‑looking stocks lacking accelerating business fundamentals, and stresses the need to identify genuine value with earnings acceleration. He also describes the technical damage in software charts, indicating a bear market for that sector. The overarching investment theme for 2022 is to seek companies in the emerging value rotation that can deliver both earnings growth and multiple expansion, contrasting with over‑priced growth stocks that have limited multiple upside. The video concludes with calls to action for the newsletter and research service.
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Hello everyone, happy new year and welcome to the Jarvis Weekly. I'm Brian Dress, Director of Research here at Left Brain Investment Research. Um, we're trying out a new feature here in 2022. Uh, we've been putting out a newsletter for the last few months called the Jarvis Newsletter. Um, we cover a lot of the key topics over the last week of trading and other market themes that we think are important for investors to understand. Um, so, um, we're going to go ahead and accompany that in 2022 with a video summarizing some of the key points that we think investors should take a look at, you know, as they read the letter. Uh, so let's just jump right into it with a couple of quick announcements. Uh, the first is if you want to get the newsletter in your inbox every Saturday morning, uh, on a weekly basis, head over to www.leftbrainir.com and fill out the form. Uh, give us your email address and we'll send that out to you. Um, and you can get that in your inbox, uh, every week, uh, every weekend as you, um, work to get yourself ready for the next week of trading. And then the second announcement is we have a research service here at Left Brain Investment Research, and we provide about 9 to 10 full-length research reports from our analyst team on a monthly basis. These are the type of research reports we use as we make our investment decisions in-house. So it's usually $299 a month for the basic subscription, but we're running a special event this week for just $99 a month over the next— each of the next 6 months. you can try out the service and see if it's valuable to you as you manage your own portfolio, or if you manage client portfolios. So we encourage you to take advantage of that offer, um, and get acquainted with the type of research that we provide here at LBIR. So with that being said, we'll just jump right into the summary of this week's newsletter, um, some of the key themes that we think you should, you should be looking at, um, as you read the letter and get ready for next week's, uh, investment, investment week. Um, so the first is, is just risk-off. I mean, this is a theme that we've been seeing over the last few months, uh, basically a lot of rotation out of sort of growth-oriented sectors like technology and especially software, and reallocation toward more value-oriented sectors. And what we've identified are energy, materials, financials, and some selected retail. And a lot of this is being driven by valuations. You know, growth stocks are very richly valued in today's market, whereas value stocks have been undervalued or underinvested over the last few years. So there's a lot of movement there and a lot of it's interest rate driven and also inflation. So higher interest rates and higher inflation environment is going to be negative for technology, or so the story goes. Whereas, you know, some of the sectors that we mentioned like energy and materials will actually thrive in higher interest rate or higher inflation environments. So that's what we're seeing in the markets today. And, you know, there's a concept known as the January barometer, and it's a theory that says, you know, the trends that you see in the first week or the first month of the trading year often actually persist for the rest of the year. And we went back and tried to do some research and, you know, run the numbers on the January barometer and whether it was really a strong, strong theory with evidentiary backing. The evidence was mixed for us. But, you know, that being said, it's conventional wisdom out there. So, you know, we think investors should be at least paying attention to the trends in the first week, in the first month of the investing year and being aware that that might be, you know, might portend for how the rest of the year is going to play out. So in that case, in that spirit, you know, keeping an eye on what we saw in the last few, few days, A lot of strength in energy, oil prices went higher. You know, we look at some of the ETFs in the marketplace and really one of the strongest ones was XLE, which, which contains a lot of energy producing companies. You know, we think for 2022, one of our themes again is going to be sort of that rotation from growth into value. You know, a lot of these companies have been under-owned. You know, for instance, oil companies make up only about 3% of the S&P 500. And historically, it's around 6 to 8%. So we think there's an opportunity for a lot of expansion there. Another key theme for this year, kind of going along the lines of the same lines of the value concept is, you know, not every value stock is created equal. There's this concept known as a value trap. We talk about that in this week's letter. You know, companies that look cheap on some valuation metric, be it price-to-book or price-to-earnings, you know, that don't have sort of accelerating characteristics in the business side, that's what we consider a value trap. So as we look to shift a little bit from the growth sector toward the value sector, we're going to be looking for companies that also have acceleration in their business. So trying to separate the value traps from what truly is value is going to be a big theme in 2022. And then the other thing we talked about was sort of the technical damage that we saw— have we— we have seen in the software and technology sectors. If you've been following along or investing in software, you'll probably understand and agree with us that technology and software have been in a bear market for the last few months. And then in the letter this week, we show some charting examples and evidence that there's really a lot of technical damage on the charts of some of these companies and actually on software in general as well. So we cover all of that. And show you what we're looking at here in-house. And again, key themes for this year, we think energy, materials, and financials are really going to benefit from what we think is going to be a rising interest rate environment this year. And a lot of these companies are solid and quality businesses. Price is a function of both earnings growth and in multiple growth. And what we've seen with, with growth stocks is a lot of them are very richly valued. So there's really no opportunity for multiple expansion, though they may grow into their multiples. But what we're seeing in some of these other sectors that I mentioned before is a lot of these trade at below-market multiples today. And we think there's a possibility for these companies to, to expand their multiple and also to have earnings growth. So two ways to win there. And so that's the theme for this, for this year, that rotation from, from growth to value, looking at companies where you can get both earnings growth and multiple expansion. And we talk about a lot more of that in the letter. So again, click the description below. We'll have the link to, to the newsletter. You'll be able to get it into your inbox. And also, please take advantage of that offer for $99 a month for the next 6 months, months to look at our investment research. I think it will really help, be helpful to especially people who are heavily invested in growth stocks, looking for ways to reallocate and reposition their portfolios. So again, we'll be doing this on a weekly basis and we'll look forward to seeing you again next week. Thanks again. Bye now.
