As markets deal with the decline of the “Everything Bubble” and the consequences of the great misallocation of capital, Alec Cutler, portfolio manager at our offshore partner, Orbis, chats to Bloomberg’s Merryn Somerset Webb about the impact of central bank and government intervention, the future of inflation and why being a contrarian, value-oriented investor can help navigate a path through choppy waters.
From explaining the importance of the peace dividend slide and how it has affected the defence sector, to breaking down the thinking behind some of the more contrarian energy holdings, they discuss where we are, how we got here, and importantly where we can go next.
Watch the full conversation, or to find out more about a specific topic, jump to one of the chapters.
Chapter 1: Introducing a contrarian Mecca
Alec and Merryn set the scene in Edinburgh’s Library of Mistakes and discuss why the financial industry repeats itself over and over.
Chapter 2: What do we mean by regime change?
From 1981 to 2023, there have been a number of significant events that have created the investment environment of today, from the global financial crisis to the Everything Bubble and the great misallocation of capital. But is the tide finally starting to turn? And what does it mean for investors?
Chapter 3: The impact of greenflation and the journey back to "normality"
The number of inflationary impulses, including greenflation, is not receding as quickly as some might believe, so what does this mean for inflation expectations going forward?
Chapter 4: Navigating markets as a contrarian investor
Alec and Merryn discuss why – despite the market backdrop – being a contrarian, value-orientated investor with a disciplined process has proved to be a successful foundation for Orbis.
Chapter 5: Understanding the valuation gap
Is the value rally over before it really started? Alec and Merryn chat about the valuation gap, what it is and why there are actually more opportunities than you might expect.
Chapter 6: Where are some of the opportunities in energy?
Energy has been a strong sector in recent years with high oil and commodity prices, but is that changing? Are there still opportunities to be found, and can they really fit into a world focused on energy transition and getting to net zero?
Chapter 7: Why is the UK stock market interesting from a value perspective?
Is Brexit to blame for UK equities languishing at the bottom of the pile for most investors? Or are there other reasons why companies in the UK are being overlooked and trading at very low valuations? More importantly, is there still value or are they cheap for a reason?
Chapter 8: The peace dividend slide and rise of the defence sector
The war in Ukraine has focused more countries, and investors, on the need for good defence stocks, and also raised the question of whether these companies actually play a role in creating social good. Alec and Merryn discuss why they have been overlooked for so long, and what it means going forward.
Chapter 9: Have the roles reversed for passive and active investors?
The shifting market environment is affecting not just growth and value but also passive and active. Do investors need to rethink what it means to be either a passive or active investor?
Chapter 10: What does it really mean to be diversified?
As investors digest the consequences of the regime change and the great misallocation we have witnessed, diversification becomes more important than ever. But how can you tell if you’re diversified, and what does it really mean?