It’s deal-hunting season
A guilty pleasure of mine this time of year is to scan websites for good deals, sorting by the biggest percentage discounts. Anybody who has gone down this dark path already knows that this is a fruitless exercise. All it leads to is hundreds of listings of absolute garbage. Investors often make the same mistake during bear markets.
But do not equate big price declines to value
Nearly one year into this bear market, some have begun to scour the lists of the largest decliners for big discounts, failing to realize that those lists are dominated by prior market leaders for which the risk of failure was drastically underpriced. As the chart below clearly demonstrates, the biggest decliners in the first year of each of the last two bear markets were dominated by underperformers and failures. In each cycle, eight out of ten of those biggest initial decliners — not including the decliners that didn’t last a year from the peak (e.g. Lehman Brothers) — underperformed the market significantly in the subsequent decade (or however long they continued to trade). See Appendix for further details.
Originally published 13 December, 2022
For more news, information, and analysis, visit the .
By Dan Suzuki, CFA
Deputy Chief Investment Officer
Dan Suzuki is registered with Foreside Fund Services, LLC which is not affiliated with Richard Bernstein Advisors LLC or its affiliates.
Nothing contained herein constitutes tax, legal, insurance or investment advice, or the recommendation of or an offer to sell, or the solicitation of an offer to buy or invest in any investment product, vehicle, service or instrument. Such an offer or solicitation may only be made by delivery to a prospective investor of formal offering materials, including subscription or account documents or forms, which include detailed discussions of the terms of the respective product, vehicle, service or instrument, including the principal risk factors that might impact such a purchase or investment, and which should be reviewed carefully by any such investor before making the decision to invest. RBA information may include statements concerning financial market trends and/or individual stocks, and are based on current market conditions, which will fluctuate and may be superseded by subsequent market events or for other reasons. Historic market trends are not reliable indicators of actual future market behavior or future performance of any particular investment which may differ materially and should not be relied upon as such. The investment strategy and broad themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation. Information contained in the material has been obtained from sources believed to be reliable, but not guaranteed. You should note that the materials are provided “as is” without any express or implied warranties. Past performance is not a guarantee of future results. All investments involve a degree of risk, including the risk of loss. No part of RBA’s materials may be reproduced in any form, or referred to in any other publication, without express written permission from RBA. Links to appearances and articles by Richard Bernstein, whether in the press, on television or otherwise, are provided for informational purposes only and in no way should be considered a recommendation of any particular investment product, vehicle, service or instrument or the rendering of investment advice, which must always be evaluated by a prospective investor in consultation with his or her own financial adviser and in light of his or her own circumstances, including the investor’s investment horizon, appetite for risk, and ability to withstand a potential loss of some or all of an investment’s value. Investing is subject to market risks. Investors acknowledge and accept the potential loss of some or all of an investment’s value. Views represented are subject to change at the sole discretion of Richard Bernstein Advisors LLC. Richard Bernstein Advisors LLC does not undertake to advise you of any changes in the views expressed herein.