Este artículo ha sido marcado como molesto Deshacer
17:49 el 24 abril 2012

The Long Good Buy

Creemos que los próximos 10 años serán mejores para el mercado de acciones que la pasada década.
Even though we make a virtue of going against the flow and taking an independent approach at SKAGEN Funds, far removed from the world’s financial centres in Stavanger in Norway, every so often it is nice to feel that some people agree with us on a qualified basis. 

Together with other institutional investors and 

selected media, in March this year we received our copy of the Goldman Sachs report 

“The Long Good Buy; the Case for Equities”, 

written by strategists Peter Oppenheimer and 

Matthieu Walterspiler with assistance from 

an army of analysts.

Thankfully our own investment director 

Harald Espedal had managed to accurately 

communicate our strong faith in equities for 

the coming decade in this feature beforehand, 

otherwise people might have thought that we 

had plagiarised the Goldman analysts.

“The Long Good Buy; the Case for Equities” is a dry, 40-page theoretical and empirical review of the historically low pricing of 

equities. The title is a twist on a Raymond 

Chandler novel. Its relevance is not completely clear, but that is often the way with financial headlines: You try to inject a bit of life 

into something which is matter-of-fact and 

technical to interest your readers.

The message is that equities are historically cheap, especially for patient investors. 

In relation to earnings in the companies and 

in relation to the interest on bonds, buying 

equities has hardly ever been more attractive. 

At least that’s how it looks from a historical 

perspective if you analyse the figures for the 

past few decades.

However, since 1999 equities have been 

in decline. They were priced too highly, and 

since then reality checks have knocked the 

stock markets again and again, culminating 

in the financial crisis in 2008. But at some 

point the situation has to change.

If you are a long-term investor in SKAGEN, 

you may not have discovered this trend, but, 

put simply, the growth in the value of your 

assets is due to greater returns from the funds 

rather than general increases in the stock 


Frightened of losses

The investment guru Warren E. Buffet takes 

the same positive attitude to equities compared with bonds and gold. In this year’s 

newsletter to the Berkshire Hathaway shareholders, Buffett and his team explain that 

equities are, basically, the most productive 

asset you can invest in. Gold on the other 

hand has limited uses, while government 

bonds depend on other people’s determination to keep inflation down.

Buffett’s newsletter has led to interesting 

debates in the media and on the Internet. 

However, while Buffett is treated respectfully by the media, the same is not true for 

the investment bank Goldman Sachs. Google 

the title “The Long Good Buy; the Case for 

Equities”, and you will discover that the 

net is awash with analyses and comments, 

many of them rather critical. If you search 

long enough, you will undoubtedly also find 

a copy of the report which we do not have the 

rights to distribute.

Warren E. Buffett emphasises a fact 

which cannot be repeated often enough: In 

the short-term, risk can be measured by the 

expected price fluctuations which are bigger 

for equities than for bonds.  In the long-term 

however – which is what is relevant for most 

of us – the risk is the fear of losing purchasing power, if your investment doesn’t create 

value. And in the long-term it is especially 

important that you carry out your stock investments when the markets are priced low and 

fear is prevalent in the markets.

However, equities have been cheap for 

some time, and if it is so obviously wrong, 

why don’t the financial markets correct it?

Irrelevant in the short-term

One of the main explanations is, quite simply, 

that it is easy to find many arguments that the 

developed countries will limp along for many 

years to come, burdened by debt and unemployment, especially southern Europe. This 

will continue to drag down the stock markets, 

while the process of paying off the debt will 

take decades. We do not necessarily agree, 

but it influences the markets.

Another explanation is that so many private investors and institutions have had 

their fingers burned by the stock markets 

since 2000/2001. Each time they have risked 

their necks and increased their equity investments, they have lost money. Now, they cannot take any more, and dare not believe that 

the biggest potential is actually in the stock 

market rather than in gold, bonds, commodities, property and all the other investment 


A third explanation is that pricing equities 

is meaningless in the short, six-month term, 

as shown by calculations from the Goldman 

analysts. Over the short-term, there is no clear 

correlation between pricing and returns. High 

multiple equities continue to be high multiple, while cheap stocks remain cheap. For 

the short-term speculative investors – who 

dominate the market and who strongly influence the financial analysts – it is the marginal 

changes that create value. Better than expected financial statements, a movement in the 

relative prices between companies etc. or a 

negative management change.

For SKAGEN it means, among other things, 

that even in an era of abundant information, 

we can find incorrectly priced businesses 

because so many other investors think and 

act short-term. We continue to believe that 

real values will win in the long-term, and that 

the next ten years will be better for the stock 

markets than the past decade.

C h r i s t  i a n   J e  s s e n

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