The Cerno Global Leaders Programme seeks to identify and invest in a group of companies worldwide which possess leadership attributes with a view to holding them for the long term.
Throughout 2014, institutional investors have become more concentrated in their positioning.
Through the first 8 years of the noughties, global healthcare stocks were notable underperformers.
One of our larger accounts rang me this week to ask what we thought of the geopolitical situation and how we were positioning for this.
In short, not much. Like any attempt to reduce a complex process to a digit, it fails as an investment assessment tool. “Active Share” is the number you get when you sum the difference between the weight of a stock in a portfolio and the weight of that stock in an appropriate benchmark for all… Read more »
I recently met Colin. He has the longest unbroken track record in the UK Equity Income sector. We did not talk about his Income fund; instead, we talked about his Blue Chip Equity Fund, which, notwithstanding a long track record has seen assets dwindle as investors joined the passive bandwagon – predominantly through Exchange Traded… Read more »
The launch of QE by the ECB on January 22nd represents a milestone in the drawn out campaign against disinflation. With all the major Central Banks of the world having ‘deployed’, it is logical to begin to contemplate the consequences of failure in these monetary campaigns. Extending the military analogy to ISIS or the Taliban,… Read more »
“You were the guys that came into the room and said yes, we’re going to do this” was how Clare Balding welcomed us at the BT Sport Action Woman of the Year Awards in December 2014. Our involvement with Action Woman represents a new era for Cerno Capital. The referral-based nature of our growth trajectory… Read more »
The cyclically-adjusted price earnings ratio (CAPE), also known as Shiller’s P/E, continues to fascinate stock market watchers. The ratio, developed by the Nobel laureate Professor Robert Shiller of Yale University, and further popularised by market commentators such as John Authers, Andrew Smithers and Russell Napier, quantifies the relationship between the price of the stock market… Read more »
The election-inspired excitement of Narendra Modi’s landslide victory in May has subsided and investors are beginning to question whether the Modi government can actually deliver on their promised reforms. The macro story in India is very powerful, with inflation falling, interest rates dropping and the currency strengthening. All this at time of weakening commodity prices,… Read more »
We live in a world where a teenager can discount future cash flows with the aid of a financial calculator. A little screen tells him the price/value of a financial instrument to as many decimal places as takes his fancy. This great leap forward for mankind has, however, not made the valuation of financial instruments… Read more »
Typing “Smart Beta” into Google yields sixty-four million hits. Close to the top of the list is the headline “Smart Beta – The Investing Buzzword that Won’t – and Needn’t – Die”. For every advocate there is a cynic such as GMO’s James Montier who coined the equation “Smart Beta = Dumb Beta + Smart… Read more »
After decades of subdued growth, Japanese equity markets rallied in 2013 following Abe’s election and announcement of his triumvirate of measures. The three arrows, as his policy approach is called, consist of monetary measures, fiscal measures as well as growth oriented structural measures. The first two of these have been implemented early on and were… Read more »
Friday, September 26th 2014 will be etched into the memory of followers of investment management companies and fixed income investors alike. Shortly after lunchtime, when London based manager researchers and consultants were probably settling down to an afternoon of email inbox and desk tidying, Janus Capital announced the recruitment of William “Bill” H Gross. Indeed,… Read more »
This aritcle was written by Will Grahame-Clarke and first appeared in thewealthnet on 29th September 2014 Cerno Capital’s James Spence believes interest rate normalisation should start in the US sooner than markets expect. Mr Spence, lead manager of the Cerno Capital’s flagship multi asset portfolio TM Cerno Select, argues the progress of returning to normal… Read more »
“It is not unnatural that, perhaps, in this matter of being misunderstood, Japan has more reason to complain than any other nation in modern times”. These words were written in 1900 in a book titled Misunderstood Japan. After stellar returns for investors last year, the Japanese stock market has been much less exciting this year…. Read more »
As ever, Apple’s product launches are greatly anticipated and 9th September was no exception. At that launch the iPhone 6, iPhone 6 Plus, Apple Watch, and an intriguing new payment platform, Apple Pay were revealed to the world. Thanks to its tightly integrated iOS ecosystem, Apple’s hardware tends to feel less commodity-like compared to its… Read more »
Global Oil and Gas stocks have been rerated to levels not seen since 2000. Exhibit 1 (below) maps their relative decline in Price to Book Value (PBV) terms. In this respect, they are experiencing the mirror image phenomenon to that of Tech and Internet stocks, whose valuations have been rising. Energy companies are also asset… Read more »
Of great interest to us are the internal workings of markets. These are often very good indicators of where we are in the ebb and flow of valuation cycles. Valuations work, provided you are patient. They especially work if the constructed relationship is mean reverting and also non-mainstream. Recently, we have been looking at equity… Read more »
It has long been observed by eminent practitioners that the market really represents nothing more than a pendulum that swings back and forth through the median line of rationality spending little time at the point of rationality and most of the time on one side or the other. In August last year we wrote that… Read more »
Clifford Asness is the founding principal of AQR Capital Management. AQR is a US based, SEC registered investment advisor with approximately US$98bn under management in asset allocation and stock selection strategies which are mostly quantitatively implemented. Asness is a regular contributor to the Financial Analysts Journal and a deep thinking investor. In the latest copy… Read more »
A variety of factors have held back returns from event driven strategies since the 2008 financial crisis. We believe that the underlying forces which determine corporate merger and arbitrage (M&A) activity are beginning to align very well and the consequences of a return of enthusiasm will boost the performance of such strategies. Cerno Capital is… Read more »
Before addressing the particular merits of dynamic asset allocation it is worthwhile examining the attributes of its notional alternative: static asset allocation. Termed in this manner, we might not immediately recognise static asset allocation. To a marketer’s attuned ears, it lacks intuitive appeal: stasis being less comment worthy than dynamism. Dynamism, after all, is an… Read more »
Recent analysis conducted at Cerno Capital reveals a positive correlation between the event driven hedge fund universe and the excess returns of smaller companies over larger companies. At the time of writing, we have observed meaningful outperformance of smaller capitalisation shares globally and some suggestions of an uplift in the fundamentals for event driven managers…. Read more »
We remain of the view that investment returns from gold will disappoint. It is a widely held belief that gold is an inflation hedge. We challenged this view in a recent piece entitled Inflation protection is a noble aim, but not a reliable strategy (see What normalisation means for investors elsewhere on this website http://cernocapital.com/investment-view/)…. Read more »
Japan has been the stand out equity market of 2013, rising 50% in Yen terms during 2013. We explain the reasons for our continued interest in this equity market despite these gains having already been recorded. • Valuations on the Japanese market remain attractive. Although the market is up approximately 50% YTD, earnings per share… Read more »
If it takes a theory to beat a theory, then there may finally be an alternative to the Efficient Market Hypothesis (EMH) first proposed by Eugene Fama in the 1960s. Paul Woolley, formerly of GMO and the founder of The Paul Woolley Centre for the Study of Capital Market Dysfunctionality at the LSE has offered… Read more »
Returns from government bonds have matched that of equities in the past thirty years. Their risk adjusted returns are therefore superior. Bonds have been the stand out asset class during the Age of Disinflation that lasted from 1982 to 2012. We do not know whether we are arriving at an age of inflation but the… Read more »
Emerging equity markets enjoyed a decade of relative outperformance over developed equity markets up to 2010. Since then, emerging equity markets have underperformed. Headline valuations suggest emerging value in emerging equity markets. However we doubt whether the time is propitious and we remain cautious. Furthermore, the emerging equity universe should not be treated as a… Read more »
The wish to protect against inflation is a base emotion within investor psychology: one that lies deep within. Failure to offset inflation results in a decrease in real spending power. Over half a generation, the effects of this are meaningful; over multiple generations, families fall, countries fail and the formerly rich become only averagely endowed…. Read more »
Cross asset correlations have been rising for a number of years as the commodification of finance proceeds apace. In tandem with this, cross regional international equity market correlations have risen with the penetration of emerging markets’ consumer markets and the infiltration of emerging markets in the global production chain. Apple sells as much stuff in… Read more »
Infrastructure can be defined as the essential services, facilities and structures which societies and economies depend upon. A rising middle class throughout the world and the shift towards urban living has made infrastructure spending a priority for many emerging and developed market economies. For investors it offers the opportunity for long term, inflation protected cash… Read more »
Industry profitability, as measured by a firm’s return on capital employed (ROCE), is determined by how successfully a firm can capture the value it creates for its buyers, which can differ depending on the structure of the industry. When the structure is favourable, companies are typically able to retain a decent proportion of the value… Read more »
The UK government is to sell the 500-year-old Royal Mail. Veteran dealmaker James Leigh-Pemberton is to take on the helm of UK Financial Investments with its holding in Lloyds in his sights. Will the sale of Royal Mail come with a “Busby” or “Tell Sid” campaign familiar to those who lived through the BT and… Read more »
In the past five years since the onset of the 2008 financial crisis, it has been tempting to view the key investment choices through either end of a long scope with one view depicting inflation and the other deflation. Seeing the world in polar opposite terms, or binary terms, leads to quite distinctly different asset… Read more »
When investors fail to secure sufficient compensation for bearing illiquidity, they almost always come to regret it. The summer reaction of certain asset classes to the Fed’s suggestion that it was considering reducing the pace of its bond purchases exposed vulnerabilities for the future. list of domains . The US-centred bond market sell-off in June… Read more »
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