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MarketWatch* has some advice for investors: "Own out-of-favor stocks held by active funds when they start beating indices again." Pointing out the difficulties currently faced by fund managers, the article cites George's observation that this "dynamic sets up a clever way to place a contrarian bet against the ETF boom." Brush cites three of George's recent stock picks and touts The Turnaround Letter's straightforward investing approach.
A few of key points from the write-up are summarized below:
- The author, Michael Brush, describes how the heavy inflows into index-tracking ETFs create a self-fulfilling prophecy that makes active managers’ underperformance worse. Brush cites The Turnaround Letter for a clever strategy to place a contrarian bet against the powerful ETF trend.
- Putnam suggests investors buy stocks that are not in the major indices, that are “left behind.” These stocks may carry lower valuations.
- If the ETF rush fades, these “left behind” stocks might perform particularly well, especially if heavy ETF selling pushes down stocks that are in the major indices.
- MarketWatch cites three of the five “left behind” stocks that I highlighted in the May edition of The Turnaround Letter: Blackstone (BX), Las Vegas Sands (LVS) and Norwegian Cruise Lines (NCLH).
- The article continues with three reasons cited by Jeffrey Gundlach (head of DoubleLine Capital) at the 22nd Annual Sohn Investment Conference that active managers should start outperforming ETFs.
You can access the the full article here—it is an interesting read!
*MarketWatch, published by Dow Jones & Company, tracks the pulse of markets for engaged investors with more than 16 million visitors per month.