Larry Berman takes a bigger picture look at where the bargains might be for longer-term growth investors and what he is looking to accumulate into the next period of weakness for global equities.
Growth at a reasonable price and relative value are two core principles that I’ve always espoused in my investment philosophy.
It should not surprise anyone that we are expecting a recession in 2023 and that the earnings outlook for the market does not reflect this high probability outcome. Our first chart shows the current S&P 500 with the 2023 expected earnings per share bottom up consensus. From the $206 in earnings in the bank in 2022, it shows a 14 per cent growth from here. On what planet does that make any sense at all if the recession call is even remotely close? Forget the U.S.
If we exclude the stocks that were priced off meme craze or cheap money, we can see lots of value in real economy bellwethers. One good way of doing this is by looking at an equal weight index versus the market cap weighted index. RCD is the Invesco Equal Weight S&P 500 Consumer Discretionary ETF. We can compare its performance versus the S&P 500 and the market cap S&P 500 Consumer Discretionary ETF .
When we start digging into the sector, we see that the average consumer stock is beginning to perform better than the market cap weighted stocks. This is almost entirely Amazon and Tesla that are both still very over valued. But there are several stocks in the sector that are mostly, but not entirely pricing in lots of bad news for the economy in 2023.
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