”I pitched Aurora Innovation, a developer of autonomous trucking technology, a year ago. The stock has nearly doubled, but the long-term upside is probably greater than I appreciated last year. The technology has been derisked, and the ability to scale to new geographic regions is faster than we thought. Customer feedback is even more positive than a year ago, and the competitive moat is stronger.” (David Giroux’s in Barron’s July 14 issue)
Cheery Thought - That big 18-wheeler rolling your way might be devoid of a human … Sorry I haven’t time to summarize the entire Barron’s Mid-Year Roundtable.
A few glimpses David Giroux is cautious overall, waiting for better value to develop. He’s “mixed” but cautious on utilities mentioning he stays away from those in fire-prone areas or where they are poorly regulated by local authorities.
Mario Gabelli likes sports (as usual). Maddison Square Gardens and Fox Broadcasting are a couple favorites.
All agree it’s been a rough year for
value investing. And the Barron’s editors comment that overall market valuations are very high by historical standards.
Todd Ahlsten is not as alarmed as others about the rich valuation of the S&P calling it “an outstanding asset class” and noting that most of the components have historically outperformed / out-profited many less prominent stocks.
Franklin’s Sonal Desai tends to be a “homer”, often picking Franklin funds. But her take on
munis here might be of interest to bond investors - “I
continue to like municipal bonds and the Franklin Dynamic Municipal Bond ETF. Munis have been navigating rate volatility and record new issuance. However, credit fundamentals are stable and yields are still near their highest levels in over a decade ” Desai also likes EM debt.
William Priest and Abby Joseph Cohen are downbeat regarding some recent government policies. Priest wonders how angering neighboring countries rich in natural resources should advantage us? Cohen takes issue with the new tax bill and sees more economic harm than good coming from it (more detailed than I can adequately summarize) . These cause them to be unusually cautious. Cohen’s top pick is South Korea’s Samsung. She does not see an impending U.S. recession.
If there was a “raging bull” among the group, I missed it.
Comments
I haven't read the Mid Year Roundtable article yet but it's on my to-do list.
The prevailing exuberance—and preponderance of nosebleed valuations—hasn’t been lost on the members of the Barron’s Roundtable, most of whom expect the stock market to stall, or even sink, in the months ahead. Prices are too rich, they say. Tariffs will stoke inflation, and economic growth may look increasingly tepid.
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Sonal Desai:
At the start of the year, the dollar was probably at its second-strongest level in 40 or 50 years. Then, three developments took the air out of the rally: DeepSeek, a Chinese AI company, was reported to have much lower development costs than U.S. AI companies; the Germans stepped up their spending commitment on defense; and U.S. tariffs were announced. As a result, investors took profits in their dollar positions. Profit-taking accounts for the dollar’s decline.
Unfortunately, valuations are not a good indicator of an accurate future performance or when markets will correct.
Many times the markets go down based on other unique situations.
2008-the MBS fiasco
2020-covid
2022-Fed rapid rate hike.
Prof Shiller created PE10(P/E over 10 years) which supposed to predict performance based on valuation better than PE
On 05/2012 (the link for this article doesn't work anymore)
Question: You have become famous for your cyclically adjusted 10-year price/earnings ratio. What do the latest numbers say about future stock market returns?
Shiller: we found a correlation between that ratio and the next 10 years' return.
If you plug in today's P/E of about 22, it would be predicting something like an annualized 4% return after inflation.
FD: reality, the SP500 made about 11% after inflation in the next 10 years (04/31/2012-04/31/2022). It was much better than countries with lower PE10 such as Emerging markets.
And I’m aware that in recent years there’s been more “empty” forecasts of gloom and doom for the S&P than there are likely to be empty beer cans outside a college frat party.