Absolute Return Letter - December 2020
Zombies are firms that are neither dead or alive. They are in so much debt that virtually all their free cash is used to service their debt, and that is very damaging to GDP growth. This month, we explain why there are more and more zombies all over the world, and why they do immense damage to the global economy.
Has the Size Premium Disappeared?
Small-cap stocks have underperformed the broader markets since the “discovery” of the size premium in 1981. But research shows that a segment of those small-cap stocks have performed well and that now is a compelling time to invest in them.
Technically Speaking: Investors Go “All-In” Without A Net
We have recently written a couple of posts about the “exuberance” that has invaded the market since the election. Such is often seen near short- to intermediate-term peaks in markets as investors go “all-in” without a net.
The Investment I’m Most Grateful For
So far this year, shares of HIVE Blockchain Technologies have soared an incredible 715%, well past Ethereum’s gain of 273%. 2020 has been marked by healthy expansion in mining capacity, the most recent example being HIVE’s acquisition of additional access to low-cost green energy.
Buyout Titans Fire Up LBO Machine With $1.6 Trillion to Spend
The biggest private equity firms in the U.S. are unleashing a flurry of new leveraged buyouts and debt-funded dividends, seeking to make up for lost time after staying on the sidelines for much of 2020.
Distressed Credit Opportunities on Rise Amid Uncertainties in Middle Markets
Liquidity issues and other business risks could prompt a wave of defaults and restructurings, in turn creating fertile ground for opportunistic investing in distressed credit.
Income Fund Update: Navigating an Uneven Recovery
We are cautiously optimistic about economic growth over the next year, but over the longer term, disruptive factors will likely contribute to heightened volatility and lower returns across both fixed income and equity markets.
Gold: Testing Patience But Toeing the Line (For Now)
Since early August the “barbarous relic” has corrected some 9% while many other assets have ascended to all-time highs. This has no doubt caused a bit of consternation for holders of gold who have been using the metal not as a hedge, but as a capital appreciation vehicle unto itself.
‘Big War’ in Bonds Escalates as Treasury Rift Puts Fed in Play
The tide in the $20 trillion Treasury market appears to be turning in favor of the bulls for now, with expectations growing that the Federal Reserve will boost purchases of longer-maturity debt as soon as next month.