Nov

29

 I always enjoy reading James Montier, SocGen equity strategist. Here are a few highlights from his current research piece:

Conclusions – The Return of the Coffee Can Portfolio

The road to revulsion is throwing up some exceptionally attractive opportunities for investors.In many ways, perhaps we are being offered the investment opportunity of a lifetime in areas such as the corporate bond markets.

In aggregate, equity markets are cheap, perhaps not at their ultimate bottom but cheap nonetheless. For those focused on long-term returns, equities are pretty attractive as an asset class. From a bottom-up perspective, the equity market is offering some excellent companies at truly bargain prices for those with the fortitude to shut their eyes, or at least switch off their screens and buy. The institutional imperative to perform on every time horizon hampers this ability in a particularly frustrating way. Investors are looking at the short term, and ignoring the long-term opportunities they are being offered.

As I was completing this note, a friend sent me a great speech by Jim Fullerton (former Chairman of Capital Group) written in 1974. It concluded with a quotation from Dean Witter speaking in May 1932 which I found apposite in the extreme. "Some people say they want to wait for a clearer view of the future. But when the future is again clear, the present bargains will have vanished. In fact, does anyone think that today's prices will prevail once full confidence has been restored?"

This looks like a great time to start to fill up your coffee can. As if all this wasn't enough, Mr Market is offering you the opportunity to protect yourself from the ravages of inflation in an exceptionally cheap way. With all of these opportunities available I have never been more bullish! Will I be early? Almost certainly yes, but if I can find assets with attractive returns and I have a long time horizon I would be mad to turn them down.


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