“I make no attempt to forecast the market – my efforts are devoted to finding undervalued securities.”
- Warren Buffett, Co-Founder, Chairman and CEO, Berkshire Hathaway
Happy Wednesday,
Let’s start by acknowledging that January 2023 was a strange month for most investors, with the S&P 500 rising 6.2% to 4,077. This happened while at the same time, many S&P 500 Q4 ’22 earnings were coming in lower than expected.
There was a clear mismatch in January between value investing and emotional investing. In addition, the trailing PE ratio for the S&P 500 which stood at 19.7 on January 31 is projected to increase to the low-mid 20’s as more companies miss earnings in 2023.
This is all a by-product of more interest rate increases in 2023 and a projected longer period to pause rates at those high rates (+/- 6%), before beginning a slow gradual reduction of rates in 2024/2025.
Here at PointFour Capital, we are adept at seeing the “big picture” since we have been at this for many decades, thus we largely avoided the 2022 meltdown and largely avoided the January “head fake”. In January 2023, our public portfolio increased by 2.9% as we moved to reduce risk and wait for better entry points in the future.
We accomplished this by acknowledging early on what the market had been signaling for many months. That is, the 10-year “growth at any cost” movement was about to end … and we would be ushering in a return to “value-based investing”. That all came to pass in 2022 and we invested accordingly in January 2023 using long/short/macro bets to stay one step ahead of the market.
We invest for the long term and making a profit and avoiding the latest fads means something to us. Our perspective is that we will mind our own business in 2023/2024 and get ready to shift capital allocation at some point as interest rates begin to ease and other opportunities present themselves. Remember that every significant market shift usually involves an “over-correction” and we expect that this will happen here, so we will look to take advantage of the coming over-correction and set ourselves up for a great 2023 and beyond!
Thanks again for your consideration and ideas. Have a great 2023!
Best regards,
Vincent M. Oddo
Co-Founder & Managing Partner
PointFour Capital, LLC