Three Charts That Put Historic Growth-Value Divergence in Perspective

Posted by Dana Funds Investment Team on Dec 3, 2020 5:26:06 PM

Value stocks have quietly made a bit of a comeback in recent weeks, due in part to positive news on coronavirus vaccines, which could hold the key to opening the economy and helping many of the cyclical businesses in value indices. If this is the sign of a new turn for value, it was a long time coming.

The charts below offer perspective on just how wide the gulf between value and growth stocks has become. While we won’t try to predict whether a recent bounce by value stocks – the Russell 3000 Value Index outperformed the Russell 3000 Growth by more than 600 basis points the week ending 11/13 – we believe the wide delta in performance and valuation suggests an attractive entry point for value stocks, and a potentially long run for the investment style when it returns to favor.

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For Markets, What Comes After Election Results and Vaccine?

Posted by Dana Funds Investment Team on Nov 20, 2020 2:18:21 PM

In the past two weeks, investors got a lot more clarity on two of the largest clouds hanging over the market: the U.S. election and the coronavirus.

We now know who the next president is, and have a better idea (Georgia’s Senate election notwithstanding) of what the balance of power will look like in Washington D.C. And news that Pfizer’s coronavirus vaccine has shown a high success rate offers hope that we may be on the path toward addressing the coronavirus pandemic and normalizing the economy, even if current infection spread is alarming.

In this brief Q&A, Dana portfolio managers Joseph Veranth and David Weinstein reflect on what the election and vaccine could mean for markets going forward

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Is Consolidation Among Asset Managers Good for the Client?

Posted by Dana Funds Investment Team on Oct 22, 2020 4:06:38 PM

Mergers and Acquisitions (M&A) activity among asset management firms is creating some investment behemoths. As these businesses scale up, we hope their clients are asking a critical question: What’s in it for me?

The consolidation wave running through the industry continued this month, with Morgan Stanley announcing it will acquire Eaton Vance, and Trian taking stakes in two large asset managers with the hopes they will merge. The announcements follow several other mega-deals in the past few years.

Too often, the touted benefits of these mergers seem focused on two factors: size and scale. But does bigger mean better for the client? As a small investment boutique, we admit we approach this argument with our own bias, but we see a few reasons clients may not benefit when their investment partners merge.

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Election Day Q&A: What are the Wildcards That Could Affect Markets This November?

Posted by Dana Funds Investment Team on Oct 15, 2020 3:45:19 PM

The presidential race may be polarizing, but both sides can agree on one thing: It at least has been compelling. The unexpected twists and turns over the past month have everyone anxiously awaiting November.

We’re anxious too. But as investors, we don’t just think about who we want to win. We try to think about what could happen in a range of different – and unexpected – outcomes. In this brief Q&A, we look at some of the factors investors should consider before November. The views are not a wish list of a particular election outcome or an endorsement of a party or candidate, just straight-forward things that advisors and other investors should think about:

What is the base case markets are pricing in about elections right now?

Markets, like polls, are predicting a win for Joe Biden. The general view is that he would be less business-friendly and that this could ultimately weigh on corporate profits. However, it’s likely that Republicans could still control the Senate.

It’s generally believed Republicans will pick up a Senate seat in Alabama. If that happens, Democrats would need to flip three seats to get to 50/50. The most likely are Maine, North Carolina, Iowa, Colorado and Arizona. We believe the market is currently hanging its hat on a Biden win, but that flipping three of those five would be a tall order.

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Reflections on Stocks’ September Swoon

Posted by Dana Funds Investment Team on Oct 8, 2020 3:47:36 PM

Stocks recovered some ground last week, but September was the roughest month for U.S. equities since stocks began rebounding from bear market territory in late March. Below are a few quick takeaways on the September swoon, what may lie ahead, and how we are investing:

  • Given the disconnect between Wall Street and Main Street, a correction wasn’t entirely surprising. In the spring, the question clients asked us most frequently was why stocks continued to drive higher, despite high unemployment and a clear downturn in economic activity.

    The short answer was that fiscal and monetary stimulus boosted markets and gave hope that the economy would rebound quickly. In September, investors may have woken up to the reality that the economic recovery will be uneven, and economic activity and data will probably move in fits and starts. An impasse in Congress around additional coronavirus relief has raised additional concerns about the economic recovery.
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Advisors Should Ask: Is My Investment Manager a Partner?

Posted by Dana Funds Investment Team on Aug 6, 2020 3:03:59 PM

The financial crisis was painful for anyone working on Wall Street, but the period gets credit for improving at least one industry dynamic: The bar for effective communication from an asset manager has been significantly raised.

As markets plummeted, advisors, consultants, investment committees and other key fund decision makers demanded dialogue from their portfolio managers about the market collapse and what they planned to do going forward. The demand for increased communication continues today, and is an industry trend we applaud.

Advisors and consultants deserve shared insight from their investment managers, and an open forum for communication. In short, they deserve true partnership. We believe boutique asset managers are best positioned to deliver the partnership clients deserve.

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Top 3 Blog Posts of 2020

Posted by Dana Funds Investment Team on Jun 30, 2020 2:28:42 PM

It’s hard to believe we are already halfway through 2020 – and what a ride it has been so far.

Our top three blogs for the year to date include insights on the fall into bear market territory, an almost equally quick rebound that seemed out of touch with economic reality, and an index that has more concentration risk than at any point over the last 30 years. These issues are still relevant today – give them a read and make some sense of the madness.

As always, we welcome your questions or comments. If you would like for us to cover a specific topic, we would love to hear from you. Just fill out the form on our contact us page and we will be in touch! 

Warmly,

Dana Investment Team 

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A Sector’s Economic and Market Forecasts Are Rarely the Same

Posted by Dana Funds Investment Team on Jun 11, 2020 4:03:45 PM

In the recent downturn, there are few, if any, pockets of the economy that have suffered as much as the oil industry. Oil prices have collapsed since the start of the year, as supply builds up and a weakened economy saps global demand. U.S. companies have shut in wells, slashed investment, laid off workers, and in some cases, filed for bankruptcy. None of this, of course, is surprising to anyone reading the news … which is why underweighting the sector may not be as easy of a call as it seems.

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Style Boxes Pose Pitfalls in Post-Pandemic Investment Landscape

Posted by Dana Funds Investment Team on Jun 3, 2020 3:50:36 PM

Growth or value? It’s a question advisors and allocators ponder at every potential turning point in the market cycle. But as the world emerges from a pandemic-induced lockdown, the new investment environment may favor neither.

Instead, we believe heavy tilts toward either style box could punish investors in the coming quarters. Here’s the short case for why:

Scarcity of Growth Has Created a Crowding Effect Among Growth Stocks

So far this year, growth has outperformed value substantially. If the Russell 1000 Growth and Russell 1000 Value Index ended the year where they were at in mid-May, the growth index would have outperformed its value counterpart by the widest level in any year since 1999.¹

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Explaining the Disconnect Between Stocks and the Economy

Posted by Dana Funds Investment Team on May 27, 2020 4:34:57 PM

In recent conversations with clients, we are getting fewer questions about our economic outlook. Many of our clients are themselves business owners and have already felt the pandemic’s economic pinch firsthand. They don’t need investors to explain the fear gripping Main Street. What puzzles them is how the stock market could be so at odds with the economic gloom.

While entire industries are on the sideline during the pandemic and the unemployment rate continues to climb, stocks have recovered much (though not all) of March’s losses. So, what’s behind the rally that seems so out of sync? In short, we think the market is confident about the safety net the Fed and the government has provided. Given the size and scope of that safety net, markets are already looking ahead to when the quarantine ends.

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