Does it ever make sense to go after value anymore? Isn't it just all about momentum?
I struggle over this concept because when I look at the market I see two kinds of stocks, momentum stocks and value stocks. Except I might as well call them stocks that work and stocks that don't.
Case in point: the oils. Long-term inventories are way down. We are in a growth economy. We aren't drilling nearly enough worldwide to satisfy the 1.5% growth in demand we expect.
But these are the worst acting stocks in the market, even as oil has resumed its upward climb. Sure some oil is landlocked in the Permian. But most oils are not and yet they all trade together and they trade badly.
Now, contrast them with the refineries. The refineries are regarded as growth stocks and the majors and independents are valued as value stocks. I might as well say that the refiners, because of the landlocked Permian oil, are the equivalent of the fintechs. Valero (VLO) and Andeavor (ANDV) are Mastercard (MA) and Visa (V) . It really is that simple.
Nobody wants the value.
Now compare that to Amazon (AMZN) . Last April when the president was attacking Amazon daily, we stepped up and bought some for Action Alerts PLUS. Why did we buy it? Because it was the ultimate momentum stock and they almost never come in.
It's been one of the best buys we have ever made.
Why? Because it has not one, retail, not two, advertising. but three, web services, and all are firing on all cylinders. It's the most powerful concept story of the ages. The stock is now up about 500 points. It is the antithesis of value.
Why does this matter? Because people are drawn to value as it is thought to be less risky.
In reality, because we are in a competitive business for money, it's the most risky. Amazon is so visible, Anadarko (APC) , not so.
Again, you don't get much chance to go in momentum. I thought that the president would unveil a fusillade of tweets against Alphabet (GOOGL) .
I still think he will.
I say you have to use them now to buy.
And as much as I am drawn to the oils, and we will buy them, I recognize that the struggle is the risk to owning value, and not the other way around.