Value in 60 Seconds: How do you find good stocks in a dangerous market? Exec Comp Aligned with ROIC

30 Jun 2023 · 1 min

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1:23

In this concise video, the speaker explains how to identify solid long‑stock ideas when the market feels dangerous and over‑inflated. He argues that Wall Street’s short‑term profit focus creates narrative‑driven booms—such as the tech bubble and the housing‑price myth—that eventually reset, but recent markets have not seen a reset, leading to a top‑heavy environment built on stacked narratives, including expectations of Fed rate cuts. To navigate this, he advises investors to concentrate on fundamentally strong businesses that are still priced cheaply. He notes that his systematic process uncovers many such opportunities, which he showcases each month in an "executive compensation aligned with return on invested capital" model portfolio.

Chapters

How do we find good investments in a dangerous market? How do you get a good long idea? The answer to the question is to understand the context and the context of the market is the Wall Street guys are looking to make as much money as they can in a short amount of time. There've been papers written about how booms happen in the market, but it's typically narrative-based. The tech bubble was a narrative on the fact that internet was going to change the world. And the financial crisis narrative was based on the idea that housing prices could never decline. And what we see is that things go up and they come down and things reset. We haven't had a reset in a long time. We just keep stacking narratives on top of narratives, including the idea that the Fed is going to lower interest rates. That's created a very top-heavy market. So how do you navigate that? Well, the answer is to focus on really good businesses still trading for cheap. And the good news is that we have found many of those with our system. And we highlight a bunch of these every month in our executive compensation aligned with return on invested capital model portfolio.