The Guru Investor Blog

"The opportunity set has changed," Romick tells Bloomberg, which adds that Romick says big companies are both cheaper and better positioned to tap into faster-growing non-U.S. markets. Romick also says he thinks the U.S. economy will “muddle along”, and is concerned that taxes will increase to pay down government debt. Consumers also may take years to pay down debt, he says, according to Bloomberg.

The article also gives insight into Romick’s broader strategy, which he has said is like a “free-range chicken” because of the broad spectrum of investments it will find. That strategy also involves holding high cash levels when need be, which helped him limit losses from the 2008 market crash. As of the end of June, Bloomberg reports, Romick has about 30% of the fund in cash, down from 45% at the end of September 2008.

“What is an enduring moat?” Reese writes. “It can come in several shapes and forms. One that Mr. Buffett has cited, for example, is a powerful brand name. Take Coca-Cola. The company is one of the (if not the) best-known brands in the world, and its famed cola has become enmeshed in our culture and lexicon.”

Other types of moats include being the low-cost producer in an industry, or having exceptional product quality, Reese says. “These various types of ‘moats’ all have a similar effect,” he explains. “They make it difficult, if not impossible, for other companies to move in on a firm’s business turf. A new startup could have unlimited funds and one of the best managers in the world, and it still likely couldn’t supplant Coca-Cola as one of the world’s leading beverage companies; the Coke brand’s tentacles are simply spread too deeply into the global consumer psyche.”

Reese says Buffett isn’t the only guru to use the “moat” concept. Others like Joel Greenblatt and Kenneth Fisher also make a point of targeting firms with competitive advantages. And, while such advantages are subjective qualities, Reese says these gurus used a variety of different metrics to identify firms that likely have “moats”.

To read the full article, which includes a few “moat stock” picks that Reese’s Guru Strategies like, click here.

“We continue to observe a clear deterioration in leading indicators of economic activity,” Hussman writes in his latest market commentary on Hussman Funds’ web site. “Over the short-term, my impression is that the technicals may hold sway for a bit. ... [But] the historical evidence suggests that fundamentals have ultimately trumped technicals when we’ve observed similar warnings from economic indicators in the past. ... My impression is that the economic cold water could hit investors very abruptly, so that gains achieved over several weeks may be suddenly erased in a matter of a few days.”

Hussman’s advice to those looking to the market to fund major expenses over a short period of years: “Get out.” His advice to those who have a long-term, diversified, disciplined system, however: “Stick to your discipline.”

In general, Hussman says he is “bearish”. He also says that characterizations of stocks as “cheap” are off-base, and rely on metrics that haven’t had much historical success in predicting future stock returns. According to his “normalized earnings” metric — a better predictive measure, he says — stocks are priced to earn about 6.7% per-year returns over the next decade. He says that makes the market about 35% overvalued at this point.

Hussman provides several interesting charts on historical valuations trends, and he offers extensive commentary on the government’s bailouts and stimulus plans, and current financial position.

“I’m not a market timer, so I’m not telling clients to back up the truck and load up,” Sonders tells Kiplinger magazine. “But to me, this smacks of a buying opportunity. I think we can have an up year, but there could be a decent amount of pain between now and then.”

Sonders also sounds skeptical of gold in terms of fundamentals. “When an exchange-traded fund is the fifth-largest holder of gold — it owns more gold than most countries — that tells me there’s a lot more performance-chasing demand than there are fundamental underpinnings for gold at current prices,” she says. And she adds that she finds the abundance of “machine-to-machine” trading in the market to be troubling, and causing “a lot of funky things happening that go beyond fundamentals”. She says she thinks machines will cause more “mini-dramas” going forward.

“Equities offer a superior opportunity for investors today, particularly compared to fixed income,” Hawkins and Cates write in their latest quarterly letter. The duo says the S&P 500′s earnings yield, based on 2011 projected earnings, is between 9.4% and 10.4%. The EAFE Index, meanwhile, is offering a 9.8% earnings yield. “If earnings grow organically from today's depressed levels at only 5% per year (a rate that does not require the reinvestment of earnings because of current excess capacity),” they say, “and even if the P/E ratio remains below the long-term average, an investor's five year average annual return will be in the mid-teens.”

Hawkins and Cates present a chart showing that at bear market lows since 1932, earnings yields have been an average of 2.8 percentage points above Aa2 bond yields. At the beginning of July, the spread was 4.3 percentage points, “or almost twice stocks' relative attractiveness to bonds at bear market lows,” Hawkins and Cates write. “We have rarely witnessed this much disparity in the benefits of being an owner of a growing coupon versus being a lender to a fixed one.”