David Fleer
Bristlecone Value Partners, LLC
12301 Wilshire Blvd., Suite 320
Los Angeles, CA 90025 USA
Work 1-877-806-4141
www.Bristlecone-VP.com


A Five-Year, High Level Perspective

May 7th, 2014

In this commentary five years ago (April 2009), we wrote:

“While the short-term outlook remains murky, we continue to believe the long-term course of the market is somewhat simpler to foresee from today’s vantage point. Two powerful forces—corporate earnings and stock valuations—will eventually revert to normal (and, if history is a guide, above normal) levels, fueling an extended period of above average returns.”

Circumstances then combined to create what we called a “generational buying opportunity” and indeed the subsequent five years have been spectacularly good to investors who stayed the course. Annualized returns for the S&P 500 for the five years ended March 31, 2014 were above 21%, or 160% cumulatively.

We hinted in that 2009 quote that earnings and valuations sometimes revert beyond normal levels to above-normal levels, and that is the best explanation for what has happened in the last half decade. Valuations today are, by most fair measures, above normal levels, and so is corporate profitability. Both have been fueled by an exceptionally accommodative monetary policy that has just recently begun to dissipate, with unknown consequences. Read the rest of this entry »

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