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Strategies & Market Trends : Value Investing

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To: Paul Senior who wrote (62224)	7/23/2019 8:20:36 PM
From: Spekulatius	Read Replies (1) of 78476

Re mean reversion - I would tend to avoid anything with structural issues like for example retailing. I am fairly sure that retailing in 20 years will look different than it does today, so why should stocks reverse to the mean? I am also voiding energy stocks (except midstream). I haven’t owned any since 2015 and the whole sector is pretty value destructive, although I do admit it looks cheap. I would be more included to bet on mean reversion with stocks they are somewhat cyclical (BECN, RELL etc). I had some mean reversion plays they worked out for me. I recall WCC, which I bought late in 2015 and sold for 30%+ gain. the stock however wen almost all the way back down where I bought it (which was $45 or a bit lower back then). When I looked it again, I saw a business with a <10% ROIC and 3x EBITDA leverage and iffy cash generation. I could have made the same or more money playing GWW, which is a better business. So rather than cheap looking business, I rather wait until a better business sell off to at least a fair or better price. This happens from time to time, the last example being WFC. Even in the latter case, one could argue that buying JPM makes more sense.

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