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FAANGs Gone Value

One of the more vocal arguments against value investing stems from a belief that we’re in a “new normal” environment where innovative or high-tech companies have a leg up on “old guard” industries, such as energy or financials. FAANG stocks have typically been the poster children for this position; these behemoth technology companies have contributed meaningfully to the market’s overall return and, by virtue of being growth stocks, the negative value premiums in recent years. Well, guess who showed up
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Single-Stock ETFs: The Worst of Both Worlds?

Investors awaiting ETFs with as few stocks as possible are in luck: Single-stock ETFs have arrived on the scene, providing leveraged or inverse exposure to individual names such as Tesla, NVIDIA, Nike, PayPal, and Pfizer. While some investors may want greater exposure to their favorite companies or to express bearish views on their least favorites, single-stock ETFs may be a case of the wrong thing done for the wrong reason. Single stocks already have a wide range of outcomes, which
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Active Management Hasn’t Shined in Volatile Markets

Many investors have likely heard the adage that active management performs better in times of market turbulence. This may sound like an emotional hedge for market stress akin to betting against your favorite sports team to balance an adverse outcome with financial compensation. However, a historical analysis of active US-domiciled equity funds finds no meaningful relation between market volatility and managers’ success rates; the implication is that traditional active investments may compound your concerns during times of market uncertainty. The
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Market Cycles and Seeing What Isn’t There

Many investors believe markets to be cyclical and search for signs of cycles in an attempt to predict which investment styles are coming into and out of favour. People have a tendency to see patterns where they do not exist.1 Do a Google image search for “#iseefaces” and you will understand what I mean. This can be a problem for investors because it is one thing to interpret a startled expression in a bowling ball or a light switch, and
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The End of Rate Hikes?

The current rate-hike cycle began in earnest last year after record-breaking policy rate cuts among global central banks’ responding to the economic impact of the 2020 global pandemic lockdowns. In early 2022, stocks around the world began to slide into a bear market as the net number of central banks hiking rates turned positive. The number of central banks hiking rates is now higher than the number that were hiking in 2008, when central banks attempted to rein in the
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Ingenuity and the Investor

A recent news item reported that Frederick Smith intended to step down as Chairman and Chief Executive Officer of FedEx Corp., the largest air freight firm in the world. As a Yale undergraduate in 1965, Smith wrote a term paper for his economics course outlining an overnight air delivery service for urgently needed items such as medicines or computer parts. His professor was not much impressed with the paper, but after a stint in the Air Force, Smith sought to
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