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When is valuation important?


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As fundamental analysts, we constantly hear that if you do good valuation work you'll be rewarded in 2-5 years. Taking a contrarian view, does this mean you can be valuation agnostic under a 2-year time frame? I bring this up because of a few articles I read on Michael Steinhardt. He was able to piece together an extremely long track record of 30% gross returns. The articles mention that he didn't have strict rules or a valuation framework. What he tried to do was to use a variant perception. He had an innate ability to think differently from the crowd. Likewise, Stan Druck uses a different way to think about the World and relies far less on a valuation framework, as he typically takes views from 6-24 MO. My goal is to challenge convention here and think outside of the box.


- Some concerns: 1) I'm being extremely selective and not considering the graveyard of similar managers who have failed 2) The managers I mention think more macro and tend not to operate strictly in the equity markets. If anyone has some valuation reversion studies I'd love to see them. I believe this approach can't be discredited and is plausible as a way to gain above-average results.

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With this in mind, what investments look attractive, whether commodities, equities, or fixed income, to everyone?

Each investment mention must be outlined in the following format:


1) The idea

2) Consensus view/expectations

3) Your variant perception

4) A catalyst


Go get em!



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