Resources

POLARIS BLOG: RATES, ROLLING CONFLICTS AND RETURN TO VALUE INVESTING
Time Might Be Up For Growth Stocks

2023 will be remembered as a year of several plot lines. The year started with economists calling for a recession; by summer, the consensus shifted to the “higher for longer” (higher inflation and interest rates for longer period) catch phrase; but by November, the temperature changed to cooling inflation, rate cuts and a “soft landing” scenario. The early anticipated recession did not materialize; in fact, just the opposite occurred with the S&P 500 Index up 26.29% for the year, leveraging gains from a concentrated group of mega-cap tech stocks (“Magnificent Seven ”).

Stepping back and looking from a historical perspective, a key driver of returns was accommodative monetary policy — the same tool to deal with every equity market downturn over the past 20 years. Consider the dot. com bubble bust, the 2008 Global Financial Crisis, the European banking crisis and the COVID-19 pandemic. Investors became fixed on cheap and, in some cases, almost free money (i.e. with negative nominal and real interest rates). While low-cost capital provided fuel for economic growth, the unintended consequence was market excess and over-inflated asset values on a global scale… none of which were healthy for long-term capital market stability.

But it certainly boosted residential property in Hong Kong, office buildings in San Francisco, 30-year fixed bonds and growth stock prices as evidenced by the booming S&P 500. Companies with limited near-term earnings but high expected growth rates (resulting in longer dated cash flows) were the biggest beneficiaries. But “time might be up” for growth stocks…

To learn more, read our recent Polaris Capital Management, LLC blog here: VALUE INVESTING RETURNS IN 2024

The S&P 500 Total Return Index is a broad-based, unmanaged measurement of changes in stock market conditions based on the average of 500 widely held common stock. One cannot invest directly in an index.

POLARIS’ HORN: THE END OF ‘FREE MONEY’ FAVORS VALUE INVESTING: MONEY LIFE WITH CHUCK JAFFE

Bernie Horn of Polaris Capital says that international value bested growth for several years now and expects the U.S. to follow suit as central banks keep interest rates higher, creating positive real returns for fixed income and ending some of the bubbles caused in equity sectors from years of borrowing at near-zero interest rates. While he expects the change to be global, Bernie favors international stocks now because their valuations are more attractive.

Listen in as Bernie speaks with Chuck Jaffe from the Money Life Show… www.moneylifeshow.com

POLARIS BLOG: ARTIFICIAL INTELLIGENCE – CAPITALIZING ON THE HYPE
Skip The Craze In Favor Of Value Plays In AI

Primitive versions of artificial intelligence (AI) have been around since the 1960s, but today AI is advancing at a breakneck pace… with new stories about AI advances, ChatGPT, AI reading famously inscrutable ancient scrolls or building 3D models.

Today, people are looking for the next leg of growth in the tech industry – artificial intelligence fits the bill. Instead of playing into the AI hype with a riskier startup or expensive mega-cap, look at companies with concrete products that can serve the AI market behind the scenes.

To learn more, read our recent Polaris Capital Management, LLC blog here: AI: CAPITALIZING ON THE HYPE

POLARIS BLOG: CAN U.S. BANK STOCKS RECOVER FROM THE 2023 CRISIS?
Can U.S. bank stocks recover from the 2023 crisis?: Lessons From The Holiday Classic, “It’s A Wonderful Life”

The 2023 banking crisis was set off by just a few banks; leading the charge were SVB and Signature Financial. The collapse of these two tech-laden banks shocked the U.S. banking system and drew scrutiny from Federal regulators. Markets were jittery with the news, and the entire industry was under pressure. But was the worry about U.S. bank stocks warranted?

To learn more, read our recent Polaris Capital Management, LLC blog here: CAN U.S. BANK STOCKS RECOVER FROM THE 2023 CRISIS

THE FIRM’S SUCCESSION NEWS SIGNALS THIS STRATEGY’S CONTINUITY

From the Morningstar report: The flagship global investing strategy via the Polaris Global Value Fund (PGVFX) and three other subadvisory relationships all follow founder Bernard Horn’s original investment philosophy. The investment team considers companies with durable, positive cash flows that look cheap using a conservative, deep value, long-term approach. As a result, the research team builds a global, all-cap portfolio of 80 to 105 stocks. The resulting portfolios tend to look quite different from the MSCI World Index (PGVFX’s prospectus benchmark) and most global large-stock value Morningstar Category peers’.

For instance, the fund’s average market cap tends to be relatively low, as does its weighting in U.S. stocks. When the Fund managers find an area they like, they’ll invest with conviction. Witness the comparatively larger stake in Norway, a country to which only six out of 55 distinct U.S.-sold funds within the category devote more than 1% of assets. So, the strategy tends to swing in and out of favor. … Long-term, however, Polaris Global Value Fund returns have been solid per Morningstar. To read the complete Morningstar analyst report, please visit Morningstar.com. 

The performance data quoted represents past performance and is no guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. View the MOST RECENT QUARTER-END PERFORMANCE HERE. Fund holdings and sector allocations are subject to change.

The MSCI World Index, gross dividends reinvested, measures the performance of a diverse range of global stock markets in the United States, Canada, Europe, Australia, New Zealand and the Far East. One cannot invest directly in an index.

POLARIS BLOG: INVESTORS JUMP INTO JAPANESE STOCKS
Is it time to invest in Japan? Changes are afoot.

2023 has been a historic year for Japan’s stock markets, reaching their highest levels in more than 33 years. The third-largest stock market in the world has finally taken center stage, far outstripping the gains for the U.S. S&P 500 for the year in local currency terms (as of 11/13/23). Through October 2023 foreign investors have bought a net $22.8 billion in Japanese equities, a stark reversal from total year 2022 when foreigners sold a net $17.1 billion (dollar figures at average exchange rates.)

Yet for every optimistic investor flooding into Japan is an equally skeptical one, pointing to the era of “Abenomics”. Prime minister Shinzo Abe stood in front of the cameras in 2014, touting his ability to shake up the staid operations of Japanese companies. It was a tall order after years of economic malaise (following the 1980s bubble burst), as companies chaffed against employee raises or shareholder dividends. It wasn’t the sea change Abe predicted, with an economy that has barely grown in the past decade. But times are changing… and two reasons are at the core: 1) inflation and 2) corporate governance revamp.

To learn more, read our recent Polaris Capital Management, LLC blog here: INVESTORS JUMP INTO JAPANESE STOCK MARKET

AN OVERHEATED U.S. MARKET HAS INVESTORS LOOKING ABROAD 

Market dynamics shifted with the onset of the Federal Reserve’s aggressive rate hike campaign in 2022. In today’s “higher-for-longer” interest rate environs, some of the largest technology stocks continue to face untenable growth projections. This has given investors pause to reevaluate, noting the pronounced disparity between U.S. and international stock market valuations. International value stocks are cheaper still, with the MSCI EAFE Value Index sitting near 10-year low valuation multiples. Many industry pundits are advocating to broaden their foreign exposure… with good reason. To read the complete advertorial from Portfolio Manager Jason Crawshaw, please visit the CITYWIRE WEBSITE.

Disclosures/disclaimers within context of article.
Additional disclosures: Fund holdings and/or sector allocations are subject to change. View the Fund’s top 10 holdings. The MSCI EAFE Value Index captures large- and mid-cap securities exhibiting overall value style characteristics across developed market countries around the world, excluding the U.S. and Canada. The MSCI EAFE Small Cap Index is an equity index that captures small-cap representation across developed market countries around the world, excluding the U.S. and Canada.
DEFINITIONS:
Standard deviation is a statistical measure of market volatility, measuring how widely prices are dispersed from the average price. If prices trade in a narrow trading range, the standard deviation will return a low value that indicates low volatility.
Price-to-earnings ratio (P/E) compares a company’s share price to its earnings per share.
Dividend yield is a measurement comparing a company’s stock price to the dividend it pays investors.
One basis point is equal to 0.01%.

7 BEST MINING STOCKS FOR THE ENERGY TRANSITION

In an article discussing the new era of energy production (renewable energy, electric vehicles and decentralized electricity grid), much depends on the mining metals and the elements that make clean energy possible.

Sam Horn, senior investment analyst with Polaris, talks about a number of copper stocks that take advantage of the energy transition. Copper is at the core of all types of renewable energy initiatives: EVs, wind farms, turbines and fuel-efficient airplane engines, he notes. But extracting copper is hard work, with mountainside mines and limited water sources in far-flung locations. The few dominant players in the copper industry are primed for success, taking advantage of the supply-demand constraints, he notes.

A LOOK AT BERNARD HORN’S TOP HOLDINGS AHEAD OF VALUE CONFERENCE
The guru will be one of the keynote speakers during the annual event in May 2023

Bernie Horn, portfolio manager for the Polaris Global Value Fund, seeks to generate strong risk-adjusted returns and capital appreciation by investing in discounted but high-quality stocks in developed and emerging markets. The Fund (PGVFX) consisted of 94 stocks in the fourth quarter of 2022, with overweight holdings in the financial services, consumer discretionary and health care sectors. The article details the Fund’s top five holdings through the end of December 2022. For more details, visit www.gurufocus.com.

10 BEST ENERGY STOCKS TO BUY IN 2023

Energy investors may want to consider both traditional oil and gas companies, as well as pure-play renewable energy companies in the current market. Yet, renewable energy (solar, wind) sources (and the accompanying battery storage) can’t power current needs. Sam Horn, senior investment analyst with the Polaris Global Value Fund, discussed the issue at length, pointing out the hurdles and expenses involved in renewable electricity storage capacity, while highlighting liquified natural gas as a transition fuel. He subsequently discussed a number oil/gas companies in the U.S. that are working to make their production greener.