Thursday, May 21st, 2009
Driehaus: rally led by beaten-down stocks
Driehaus Capital Management has released interesting research showing the rally since March has been led by beaten-down stocks with poor earnings growth and technicals.
As a result Driehaus’ strategy of focusing on companies with strong earnings growth and strong technical action has meant its funds have lagged indices since the rally began.
“Whether these strong performing stocks were re-priced upward to reflect reduced probabilities of bankruptcy or appreciated because they were trading at levels beneath their intrinsic values, it is not uncharacteristic for our strategies to underperform in this type of environment,” Driehaus said.
It helps explain why many aggressive/growth momentum investors can’t find as many opportunities as they’d like, which is proving extremely frustrating. Particulalry, as Driehaus says, there are “many reasons to be incrementally more positive on equities”.
It’s interesting to note that Driehaus isn’t changing their strategy, but will ride it out:
“Though frustrating, this is not the first period where our investment approach has been “out of favor.” Through experience we have learned that the best approach to take in such periods is to continue to implement our investment philosophy and to resist the temptation to chase returns by investing in weak fundamental companies and stocks with unattractive technical charts.”
It’s good to know I’m not the only one frustrated by this environment.
Word Count: 214. This entry was posted on Thursday, May 21st, 2009 at 5:09 am and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
May 21st, 2009 at 12:57 pm
This is very informative. You managed to include good points!