The Capital Growth Channel

Behind Davis Advisors’ “Wall of Mistakes”

Danton G. Goei joined Davis Advisors in 1998. He is a portfolio manager for the Davis Large Cap, Global, and International Portfolios and a member of the research team for other portfolios. In this interview, he discusses those funds and why Davis maintains a “wall of mistakes” that immortalizes its investment blunders.

Why Abandon a Rising Star?

Many investors allocate their U.S. equity holdings among both large-cap stocks for their relative stability, and small-cap stocks for their expectational upside, which refers to the potential for companies to significantly outperform market expectations over the long term. But what happens to the opportunity offered by small-caps when they become mid-caps?

How a Pair of Hedge Fund Billionaires Bought the NBA’s Worst Team

Can the discipline required to invest in distressed assets be applied to purchasing the ultimate trophy asset – a professional sports franchise? Marc Lasry and Jamie Dinan found that it can, but only to a point, when they bought the NBA’s worst team.

Hotchkis & Wiley: Exploiting the Inefficiencies in Small-Cap Stocks

Judd Peters is a portfolio manager of the Hotchkis & Wiley Small Cap Diversified Value Fund (HWVIX). Since its inception, the fund’s annualized return has been 9.45%, resulting in a 254 basis point outperformance versus Russell 2000 Value Index. The fund is rated five stars by Morningstar. I interviewed Judd last week.

High Yield Train Wreck

The first defaults will occur at the lowest end of the problematic market: high yield or “junk” bonds. They will play a role comparable to subprime mortgages in the last crisis. We’ll see mortgage problems as well, but I think overleveraged companies will be the core problem.

Building a Better U.S. Economy

This shouldn’t surprise anyone, but public trust in the federal government is eroding. Sixty years ago, 75 percent of Americans expressed faith in the government to do the right thing “most of the time” or “just about always.” Seventy-five percent! You can’t get 75 percent of people to agree on anything now, as the recent “Laurel or Yanny” video proved.

When an Innocuous Correction is the Start of a Sinister Bear Market

It's true that equities fall before the start of most recessions. So why bother following the economy; why not just follow the price of equities? "Market corrections" occur every 20 months, but less than a third of these actually becomes a bear market. Recessions almost always lead to bear markets, and bear markets outside of recessions are uncommon. For that reason, discerning whether a recession is imminent can help determine when an innocuous correction is probably the start of a sinister bear market.

Trump "Victories" on Trade are Anything But

Earlier this year when President Trump began beating the drums loudly, causing fear of a trade war (and assuring us that such a conflict could be easily won), I cautioned that he had no idea the trouble he was courting . Based on his spectacular misunderstanding of the power dynamic built in to international trade, he was also in danger of bringing a knife to a gunfight.

S&P 500 Snapshot: Down 0.24% from Yesterday

The S&P 500 fluctuated around a smaller interval to start the week and dropped midweek. The index saw a gain of 0.31% from last Friday and 0.24% loss from yesterday. The index is up 0.95% YTD and is 5.27% below its record close.

ECRI Weekly Leading Index Update

This morning's release of the publicly available data from ECRI puts its Weekly Leading Index (WLI) at 148.5, down 0.2 from the previous week. Year-over-year the four-week moving average of the indicator is now at 3.34%, down from 3.80% last week. The WLI Growth indicator is now at 3.5, down from the previous week.

Michigan Consumer Sentiment: May Final Slips Slightly

The University of Michigan Final Consumer Sentiment for May came in at 98.0, down 0.8 from the April Final reading. Investing.com had forecast 98.8.

Beyond the FAANGs: Technology Stocks and Downside Protection

Technology stocks are widely seen as powerful return drivers—with a lot of volatility attached. But surprisingly, shares of many companies that enable the technology revolution can provide solid returns and even downside protection.

‘Simplification Day’ for Oil & Gas MLPs: What Investors Need to Know

We believe the news is evidence of a broader shift toward simpler corporate structures in the midstream energy sector – a trend that supports our investment approach and our constructive view of the sector.

Have You Noticed That Many Dividend Stocks are Finally in a Bear Market? General Mills Inc.: Part 1

For quite some time I have been complaining that most best-of-breed dividend growth stocks were overvalued. Frankly, for the most part I continue to hold that opinion. On the other hand, I am also starting to see what I’ll call a stealth bear market for many dividend growth stocks.

Equity-Sector Leadership Can Shift Amid Rising Interest Rates

In an environment in which interest rates have been steadily rising — the 10-year US Treasury yield has moved up almost 75 basis points since its recent low in September 2017 — one question that investors face is the potential effect of this phenomenon on equity sectors. Which sectors might be winners or losers in a rising rate environment?