With the vast majority of the increase in North American stock prices linked to only a handful of stocks (the lucrative FAANG stocks – Facebook, Apple, Amazon, Netflix, and Google/Alphabet), investors may continue to be enticed to place their faith in these soaring technology companies which have done nothing but impress in recent years, despite concerns that the overall technology sector may becoming unsustainable in terms of valuation multiple advancement.
With the rise of new technology companies taking much of the limelight away from less-attractive stocks in sectors such as materials, resources, and commodities, the incentive for investors to put their hard-earned money into such companies remains muted, which is one of the reasons investors ought to consider ramping up exposure to these sectors in this economic environment.
Warren Buffett’s famous expression of “be greedy when others are fearful and fearful when others are greedy” is perhaps the best way of looking at forgotten or unglamorous sectors today; after all, the Oracle of Omaha has built his fortune largely on the premise of value investing – purchasing stocks or buying companies in sectors which have largely fallen out of favour with the broader investor community.
Buffett’s penchant for sticking to simple companies with durable competitive advantages is one which should be looked to by investors seeking long-term capital appreciation within beaten up sectors which have received little love. Re-balancing one’s portfolio away from growth and toward value is easier said than done, however is a potentially lucrative strategy given the dynamic presented to investors today.
Invest wisely, my friends.
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