Trends Watch: Investing in ETFs
- Feb 16, 2023
EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.
This week, Elana talks with Greg Kammerer, Executive Vice President, Altrius Capital Management.
What is your outlook for investing in ETFs and the public markets?
Prior to the start of 2022, we were likely at the end of one of greatest bull markets of our time, watching traditional growth stocks significantly outperform their value stock counterparts. We have seen that trend reverse in 2022, as investors are starting to understand you can’t overpay for stocks and that revenue and profits are fundamental to a business being a good long-term investment. Our belief is that many of the trendy tech and mega cap names you see on TV every day are still wildly over-priced from a value perspective. We have had historically low interest rates and low borrowing costs, providing investors excess capital which they were speculatively deploying. In turn, this enabled many businesses to grow too big, too quickly – a great number of these companies were not even profitable and, unsurprising to us, have lost upwards of 80% of their share price within a year. There is still plenty of opportunity to find quality investments, with strong fundamentals and cash flow, that can allow investors to whether the storm of continued volatility.
Where do you see the greatest opportunities and why?
The greatest opportunity we see is a return to active management and getting out of passively managed indexed ETFs. Indexed ETFs are great low-cost investments that allow investors to ride the wave of the market, but when the market reverses, which we saw last year, investors are paying for the privilege to lose their money in jaw-dropping chunks. Selecting an ETF allows investors to benefit from a seasoned investment team that looks for well established companies, trading at reasonable prices, that pay meaningful dividends and grow those dividends, while investors wait for capital appreciation to occur over the long term.
What are the greatest challenges you face?
We have been managing money since 2003, so we have seen many cycles, but the greatest challenge we always feel is to remain humble. It is easy for many money managers to chase yield, get enamored with bleeding-edge technology or the “next big thing,” but we remind ourselves constantly: Investing is not speculating. It is hard work and it takes the patience of a monk to find companies that are not overvalued, pay meaningful income and have a history of raising their dividend; even in the toughest of market cycles.
What keeps you up at night?
Research, lots and lots of research. Jim Russo, founder, portfolio manager and chief investment strategist often jokes that at the age of 54 he is starting to slow down and his usual 80-hour work week has been trimmed to 70-75 hours. Whether we are working with private clients or selecting investments for our ETF, we know that people are trusting us with their hard-earned money, and we want to make sure that we are selecting the best possible investments that meet our preliminary criteria of growing global revenue, meaningful and increasing dividends, and priced at reasonable valuations so we may be able to capture future price appreciation.
The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.
If you have any questions, we'd like to hear from you.
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