Congrats on Beating Warren Buffett!
I’ll admit that it took some nerve in June 2018 when I told you that I thought I knew better than Warren Buffett.
I said that Buffett — who had loaded up on shares of the airlines Delta (DAL), American (AAL), Southwest (LUV) and United (UAL) — was doing it all wrong.
Not that he was wrong for buying shares of airline companies, mind you.
But that he was buying the wrong airlines!
My opinion at the time was that Air Canada (ACDVF) represented a much better opportunity.
And what do you know?
It turns out that I was right — and it wasn’t even close!
We’ve thumped Mr. Buffett.
While Air Canada shares are up 125% since June 2018, the best of Buffett’s four airline stocks (United Airlines) is up just 34%!
So congrats on another big gain!
What You Need to Know — The Time for Value Stocks is Now
I’ve been pounding the table on value stocks for months now because I believe this is by far the best opportunity in the market today.
Value stocks offer the least risk, and most reward.
Air Canada is a perfect example. When I wrote about the company in June 2018, the stock was valued at just 3.2 times earnings. That was less than one-third the valuation that Buffett was aggressively buying his airline companies at.
And with Air Canada’s underlying business benefiting from all of the same tailwinds that attracted Buffett to invest in the sector, Air Canada’s shares had little downside risk and massive upside potential.
I’m telling you, value is where investors should be focused today.
Now here is the reason why…
Value stocks are table pounding buys today because a mind-boggling $1.5 trillion has been sucked out of them over the last decade.
The chart below tells the whole story.
Over the past ten years, investors have withdrawn $1.5 trillion from active fund managers (the managers that focus on value). And in turn have put that money into passive investment funds (like ETFs and Index Funds) that focus on growth.
This means value stocks have been exposed to $1.5 trillion of net selling, and growth stocks have had $1.5 trillion of additional buying.
While the market has gone up, value stocks have gone nowhere (or down)!
This $1.5 trillion of relentless selling and neglect is the reason that value stocks now offer a multi-decade buying opportunity.
Next Week I’m Bringing Deep Value Again — Don’t Miss It!
This is the part where I come clean.
While I wrote about how cheap Air Canada shares were in June 2018, this wasn’t an idea I came up with all on my own.
I stole the Air Canada idea from the portfolio of the great trader Julian Robertson.
Stealing of course isn’t the correct word, because the stock holdings of the world’s top traders is available for everyone to see.
I’m just a little more obsessed with keeping my eye on these great traders than most folks.
I agreed with Buffett’s bullishness on the sector. I just liked Robertson’s stock pick more.
Next week, I’m going to be bringing readers of The Daily Edge another deep value idea that I’ve pilfered from one of the best investors in the business.
Value is the place to be, so let’s get you there.
Talk to you next week!
Here’s to looking through the windshield,
Financial Analyst, The Daily Edge