What’s A Value Investor To Do As Markets Hit All-Time Highs


What’s a valuation conscious investor to do in the face of markets hitting all-­?time highs on an absolute basis, and expensive valuations on a relative basis? This is a fair question to ask, though we think it also falls victim to the framing effect. There are several implicit points embedded in this statement,one of which has serious consequences for the ultimate answer—you see, not all markets are  hitting all-­?time highs, nor are all markets expensive. This statement implicitly assumes that the investment pool is restricted to the United States and the United States alone. While many institutions are restricted via mandates to put their investment dollars to work in the United States, and/or U.S. markets, not everyone suffers these restrictions. Yet, many subconsciously end up the victims of what the investment community calls the “home country bias.”

Jason Gilbert’s RGA Investment: European markets remains one of the cheapest

European markets in particular remain some of the cheapest in the world today. We all know that the Eurozone went through an existential crisis of sorts, and some might argue that this particular crisis is far from over. Further, some might argue that European demographics are a concerning headwind to long-­?term  growth (and thus equity returns) amongst  other problems. While these are valid concerns, there remains a safety valve investors can use to their advantage in making a foray into Europe more palatable. We have  discussed Europe several times in this forum, starting with our July 2012 commentary, continuing with our Preview for 2013, and most recently with our August 2013 note.

One of the most important points remains how global European businesses actually are. The companies that populate both our portfolio investments and European watch list
make plenty of money outside of the Eurozone to the point where it mitigates the risk of Eurozone disintegration, and makes  the demographics fears largely irrelevant.

Ray Dalio At Robin Hood 2021: The Market Is Not In A Bubble

Fractional Shares Stock PickerAt this year's annual Robin Hood conference, which was held virtually, the founder of the world's largest hedge fund, Ray Dalio, talked about asset bubbles and how investors could detect as well as deal with bubbles in the marketplace. Q1 2021 hedge fund letters, conferences and more Dalio believes that by studying past market cycles Read More

Jason Gilbert’s RGA Investment: Eurozone’s problems remain a concern

Why do we think it necessary to make this point yet again? While the Eurozone’s problems remain a concern, we think right now is a crucial inflection point where policy imperatives shift from preservation of the “Euro project” to fostering a recovery environment. Since our first investments in Europe, the focus of the policy community on
both the monetary and fiscal side has been taking steps thatbuild confidence amongst Union members with competing interests, and building the institutional structure necessary to  take the Euro from a largely fragmented collection of nation-­?states, to a true Union of integrated economies.

Hints of stronger action had been growing throughout the early part of this year, as inflation was  decelerating and Mario Draghi was looking for more creative policy measures to boost Eurozone economies. The firmest sign  that monetary stimulus was imminent came when the Bundesbank, Germany’s own central bank that exercises considerable control over the ECB, shifted its stance from resistance to acceptance. Although during the month of May, the precise actions to be taken remained unclear, everyone in the investment communities marked June 5th on their calendar as the date when it all would take place.

Two key objectives are improving the corporate lending market and weakening the Euro, both of which would be extremely positive for European multinationals.

Jason Gilbert’s RGA Investment: The case for Groupe SEB

To that end, we commenced a position in a company we had followed since we first started looking at  Europe: Groupe SEB (EPA:SK). We think Groupe SEB in particular has a confluence of favorable traits that standout amongst European companies. These are worth highlighting, below:

  • The company is owned and operated by its founding family, collectively owning over 40% of the stock. This has fostered an environment of long-­?term, strategic thinking, with the owners acting like and protecting the interests of shareholders.
  • Groupe SEB (EPA:SK) is number one, two or three globally in most of its key product  segments from pots and pans, to bread makers, to coffee machines  and waffle makers. Their products include a broad array of householder  essentials, everyday appliances, and premium accessories.
  • The company owns some of the most recognizable household brands in the world, like All-­?Clad, Krups, Tefal and Moulinex.
  • With its leading brands, and  global positioning the  company is able to grow  consistently without spending a lot  of money on capital expenditures. CAPEX amounts to a mere 3.2% of revenues annually, on average.
  • 36% of their sales are in the Eurozone, with the remainder around the world including large presences in Asia, North America and Latin/South America.
  • Going back to 2007, the year before the Great Recession began, revenue growth has averaged over 7.5%  annualized, EBITDA growth over 10% annualized, and book value has compounded at  over10%.

See full Jason Gilbert: Framing Broadly and Thinking Globally in PDF format here via Jason Gilbert.

Jason Gilbert: Framing Broadly and Thinking Globally

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Jason explains about himself: I've been managing money for high net worth individuals since 2006. I'm the founder and Managing Director at RGA Investment Advisors LLC, an independent and fee-only registered investment advisor (RIA). I'm the partner in charge of wealth management and financial planning at Rayner and Gilbert CPAs. Prior to a career in wealth management and investment advisory, I held M&A roles at both General Atlantic LLC (GA), a leading global private equity firm providing capital for growth companies driven by information technology or intellectual property, as well as Berkery, Noyes & Co. (BNC), an independent Wall Street investment bank serving the broadly defined knowledge and information marketplace. At GA, I was responsible for deal prospecting, transaction structuring, as well as value added portfolio work. At BNC I specialized in serving large and mid-sized information providers in the U.S. and international markets with strategic mergers & acquisitions, corporate and asset divestitures, strategic research, and valuations. Prior to a career in Finance, I led the due diligence efforts for numerous financial buyers within KPMGs Transaction Services practice, and provided estate planning tax consulting services at the law firm of Buchanan Ingersoll, PC in Washington, DC. I am a CPA who holds the PFS* designation for my expertise in Personal Finance and a CFF** for my accreditation in Financial Forensics. I hold a B.A. from the University of Michigan and an M.S. in Accounting and Finance from the George Washington University School of Business. I lives in New York with my beautiful wife Julianna, two sons, Logan and Henry, and dog, Samantha

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