At Balentine LLC, which manages $1.5 billion, Facebook just doesn’t fit into the strategy. “Growth investing is a tough game to play,” said Adrian Cronje, chief investment officer. “The evidence is really not behind people who try to play that game.” Investors in Facebook stock are paying too much for glamour, and not actual value, he said. “In one sense, Facebook is all about how they’re going to execute on the hope of a business plan,” Cronje said.
The housing situation while a bit better, is not resolved. “Homes are still the largest asset for many families, it will be years before many get back above water,” points out Alan McKnight, director of global investment strategy at Balentine.
“It’s a bit of Groundhog Day. Markets are tired of these inconsistent rescue plans thrown piecemeal at Europe,” said Adrian Cronje, chief investment officer at Balentine in Atlanta.
“QE has provided liquidity to the market. And there aren’t many other reasonable options for the Fed right now,” said Alan McKnight, director of global investment strategy at Balentine, in Atlanta. “But we’re coming up on almost four years since Lehman and we’ve had anemic growth despite all the monetary stimulus.”
Alan McKnight, the director of global investment strategy at Balentine, said taking on currency exposure adds the risk that movements in the currency can influence the overall value of the asset regardless of the underlying characteristics of the asset.
Keep in mind that commodities as an asset class can be volatile and therefore deserve “considerable research and scrutiny,” says Alan McKnight, the director of global investment strategy at Atlanta-based investment advisory firm Balentine. “Investors should be very careful. … It is important that they have a clear understanding of the spot and futures markets,” he says.
As we enter the second quarter of 2012, markets are looking up. The Super Bowl Index and the January Effect have proven to be true so far, and the stock market has experienced the best first quarter since 1998. However, economically speaking, we are not out of the proverbial woods yet. Despite significant gains, we are still in the midst of a “balance-sheet recession.”
“Profit levels are already at record highs. So Corporate America has to start showing sustainable revenue growth to justify current stock valuations. That is key. And there are considerable headwinds for companies to digest,” said Adrian Cronje, chief investment officer at Balentine in Atlanta.
Progress in the European debt crisis and better US economic data over the last three months have led to significantly less market volatility. As risks to the near-term outlook have abated, momentum in global equity markets has accelerated. Based on the long-term attribution of our returns, such an environment typically provides a compelling backdrop for us to harness the power of our quantitative models, because during such “normal” market environments, underlying asset class performance trends persist for longer.
2011 was filled with many ups and downs – with issues ranging from natural disasters to politically-created ones affecting markets. In this three part series, we will look back at some of the biggest factors that affected the economy and examine their potential impact going forward. In Part One of this series, David Damiani, Director of Risk Management, discusses Balentine’s risk-first approach to investing and the benefits of approaching investments in this way.