Update - October 20, 2020
This Legendary Investor Admits We Are Right
A Quarter for the Ages: Logitech (LOGI) opened its books after the close yesterday… and they did not disappoint. Shares of the work-from-home tech leader jumped 17% this morning – hitting an all-time high – as the company reported blowout earnings in the second quarter. We’re up more than 40% in less than four months. The stock is treating us well.
Bill Miller is making headlines once again.
If his name rings a bell, that’s good. He’s an icon in the world of value investing.
I interviewed to work with him more than a decade ago. The view of Baltimore from his office atop of what was then the Legg Mason building was breathtaking.
It was hard to turn the job down… but better things came along.
And besides that, his 15-year streak as a market-beating stock picker had just come to a screeching halt.
The real estate crash did him in… and it took his value-based investment strategy with him.
Zero interest rates, QE infinity and maddening fiscal stimulus were just too much for his calculators to handle. When the printing press is running in high gear, the math just doesn’t add up.
It’s hell on an old-school value investor.
Isn’t that right, Mr. Buffett?
Old School… Meet New School
But Miller is in the news again. This time, it seems like he may have learned his lesson.
He told the investing world this week, “The Federal Reserve’s new approach to inflation is the most important thing to happen to financial markets since the 1980s.”
“I think the change in Fed policy is likely the most significant in over 40 years, and, if sustained,” he continues, “is likely to have dramatic consequences for asset prices.”
That sounds like a familiar tune.
Miller didn’t say it… but it’s great news for value investors.
With the Fed using its funny money to buy everything in sight… Washington fighting over how much money to put in your mailbox… and many folks calling for a big blue wave to sweep its free-spending ways over Washington… everything is cheap these days.
And it’s not just guys like Miller pounding the table telling folks to pay attention to the sordid affair between Wall Street and Washington.
Andy Blocker, the head of government affairs at Invesco, just told folks that it’s now “the government’s job to kind of uphold the economy.”
Right now Washington is focused on COVID-19-based stimulus. Next, he said, it will be infrastructure spending.
Stimulus, he concluded, will be the dominating factor on Wall Street until 2022.
Ha. I’ve got bad news for him.
Washington is going to be calling the shots for a lot longer than that… and you’d better have your portfolio prepared.
Just ask Bill Miller… or, more acutely, his investors.
“Why didn’t I just throw my money out of the window – and light it on fire?” asked a venture capitalist and large owner of Miller’s value fund. The strategy “worked for a long time, but it’s broken.”
Put Out the Fire
I hope you get my point.
This is a drum I’ve beaten a lot in recent months. The idea has been building ever since Tim Geithner, Ben Bernanke and Larry Summers secretly got together to map out a plan to bail America out of its debt-fueled crisis. But it gained tremendous momentum in March, when Washington spent far more – in just a few weeks – than it spent fighting all of World War II.
This heavy-handed action – the fiercest we’ve seen in our lifetimes – means we must change our investing philosophy.
We’ve done exactly that in the pages of Manward Letter. I’ve not only introduced two brand-new portfolios this year but also, thanks to the Modern Asset Portfolio, introduced you to an entirely new economic theory.
It’s all built on the ideas above – that if you’re doing what you used to do, you might as well light your money on fire.
You can see the idea coming alive in our portfolios.
Our crypto play – Monero (XMR) – is up more than 30% in just a few weeks.
It represents the most modern of modern assets.
Meanwhile… shares of AT&T (T), a classic “widows and orphans” stock, according to the textbooks, is back trading at 2010 levels.
Which would you rather own? Old or new?
But Andy, you say, what about AT&T’s whopping 7% dividend?
Easy. A big dividend doesn’t mean much if the stock price is dropping faster than the payout.
That’s why it’s so important to pay attention to what we call “total yield.” That’s dividends plus what the company is spending to buy back its own shares.
In our portfolio, we’ve got a high “total yielder” in KBR (KBR). Its board not only boosted its dividend by 25% earlier this year but also approved a $350 million share buyback.
It’s paid off.
We’re up 15% on a true “widows and orphans” stock.
I’m not writing to brag or pat myself on the back. Not all of my recommendations are or will be winners. It’s the idea of it all that will help you the most in the long run.
Understanding that things have changed…
That what worked for Bill Miller at the start of his streak in 1991 doesn’t work now…
And that Wall Street is no longer dominated by natural forces…
That’s what’s far more valuable. Understand that and your portfolio will blossom like you’ve never imagined it could.
We’re already seeing it.
But if you’ve liked the action of the last few months… you’re going to love the action as the Dow climbs to 100K.
The folks sitting on the sidelines won’t be happy.
But you sure will be.
Your next monthly issue will be out soon. It’s a good one… especially if you agree the ties between Wall Street and Washington will only get tighter and more heavy-handed.