Best of Breed in 2016
In the era of plentiful liquidity that accompanied QE and six-plus years of near-zero interest rates, the rising tide lifted many boats that really didn’t deserve to get lifted. U.S. markets are now slightly over-valued, and have a number of psychological and macroeconomic headwinds. We think this is an environment where correlations will get weaker, “best of breed” companies will outperform the indices, and careful analysis and selection of individual stocks will be rewarded. After selecting markets and industries with positive macro fundamentals, we’ll spend 2016 carefully analyzing stocks — looking preferentially for those with strong and proven managements, strong balance sheets, low valuations, realistic earnings guidance, and track records of modest and consistent growth.
