April 2018 Investment Strategy

The stock market shot out of the gate in 2018, with the S&P 500 Index posting a 5.5% gain in January. Just as quickly, volatility returned in early February for the first time since 2016. During this period, the market suffered a sharp correction of over 10% and several ETFs that were betting on further price tranquility collapsed in the process. Since then, the markets have remained volatile (which is back to normal) while leadership has thinned to the usual momentum-driven suspects: big tech and semiconductors. Meanwhile, value investors have continued to be left behind as the masses focus on companies with captivating stories. One of the narratives that has mesmerized investors over the past couple of years has been Netflix. In this letter we compare Netflix’s exciting story to their more attractively priced competitor Disney. This comparison will provide investors with a revealing snapshot of the current state of the stock market and the strategy we are following to deal with it.

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