June 2024

To Our Business Partners


A recent report in the Wall Street Journal noted that investors are once again moving back into the stock market.  Flows into stock and bond funds are the strongest since 2021, after two years of outflows.  Globally, through April, the dollars flowing into Exchange Traded Funds (ETFs) are the highest on record. 

While we generally don’t pay too much attention to “big picture” events, we believe the recent rush into the stock market represents a pattern in human behavior.  People react to recent trends and extrapolate them into the future.  That is, investors tend to assume that recent experience will continue indefinitely. Greed and fear cycles repeat over and over, whether it’s stocks, bonds, commodities, or other economic activities. It is something we have seen repeating often over the years. 

 The general optimism or bullishness in the marketplace today – for us VALUE investors – makes generating satisfactory investment returns challenging.  While optimism, greed, and fear of missing out (FOMO) could propel this trend further, we believe that the opposite will eventually prevail.  The market cycles from greed to complacency to concern to fear to disgust, then back again:  “lather, rinse, repeat,” as the shampoo label says.  As we have said numerous times in the past, higher prices set the stage for lower future returns and, conversely, lower prices set the stage for higher future returns.  Warren Buffett famously said it is wise for investors to “be fearful when others are greedy and greedy when others are fearful.”

While the short term can be very unpredictable, we continue to believe that today’s high valuation levels will make it more difficult to achieve satisfactory future returns.  We continue to search very selectively for those stocks which offer the prospect for above average future returns.  


There’s virtually no change in valuation over the past month of rising pricesOur widely held stocks, as a group, are still expensive. 


Market indexes rebounded in May after declines in April, with large cap indexes again leading the wayThe bigs were up 5-7%, compared to 3-4% gains in the small company indexes.  Year to date, results continue to be dramatically different, with the S&P 500 and the NASDAQ Composite up 11-12%, while the small and midcap indexes are showing gains of only 2-3%. Likewise, over the last twelve months, the large cap indexes continued to dominate, advancing 2230%, while the smaller company indexes experienced gains of 18-19%. During the same twelve-month period, the capitalization-weighted S&P is up almost 8 percentage points ahead of the S&P Equal Weighted Index. The lack of broad participation in market returns continues to be a concern A recent report noted that only three companies – Apple, Microsoft, and Nvidia – represent a whopping 20% of the total S&P 500 index As referenced above, the other 497 S&P members have been virtually dead in the water for the past year.  Historically this has not augured well for future returns Our group* of portfolio stocks continues to compare favorably to most of the indexes over the last month, year to date, and last twelve months. 

Steve Nichols, CFA • Bill Warnke, CFA •  Andy Ramer, CFA

*The group of “portfolio stocks” — our Equity Composite for the purpose of evaluating investment performance — consists of 19 stocks that are held in our clients’ accounts. Portfolios might hold some or all of these stocks, depending on investment guidelines unique to each client, the timing of purchases and sales, and start dates of accounts. The performance of this group of stocks is a good proxy for our equity performance but might vary widely among accounts. Of course, past performance is not necessarily indicative of future results.

We hereby offer to deliver to you without charge a copy of our current Form ADV Part 2, in accordance with the U.S. Securities and Exchange Commission’s “Brochure Rule.” Please contact us if you would like us to send you a copy.