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The Return of the Rotation Missionaries

Summary:
To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever. One of the things we will be highlighting in our November Epsilon Theory Professional monitors is the emergence of two narratives that have finally managed to marginally peck away at the attention on China Trade War narratives – at least in the short run. One of them is the “Rotation from Profitless Growth” narrative. The other is the “What Would Impeachment (or President Warren) Do to Markets” narrative. We will have a lot more to say about the growing commentary and missionary behavior here, but if you feel like WeWork’s IPO failure, some disappointments at Amazon

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The Return of the Rotation Missionaries

To receive a free full-text email of The Zeitgeist whenever we publish to the website, please sign up here. You’ll get two or three of these emails every week, and your email will not be shared with anyone. Ever.


One of the things we will be highlighting in our November Epsilon Theory Professional monitors is the emergence of two narratives that have finally managed to marginally peck away at the attention on China Trade War narratives – at least in the short run. One of them is the “Rotation from Profitless Growth” narrative. The other is the “What Would Impeachment (or President Warren) Do to Markets” narrative.

We will have a lot more to say about the growing commentary and missionary behavior here, but if you feel like WeWork’s IPO failure, some disappointments at Amazon and execution successes from the likes of Apple and Microsoft are being sold as a package story about quality, value and cash flow mattering again, you aren’t imagining it. We think a rotation trade IS being promoted by market missionaries, which is not exactly the same thing as the rotation actually happening, and neither of which is necessarily the same thing as trading on that observation being a good idea.

Of course, what people mean by quality and value varies wildly. The only universally accurate definition is “things with traits I like more than other investors do.” Still, when you walk through the zeitgeist, you start to get the picture of what a change in vernacular looks like. For example:

Articles about brands and competitive advantage in grocery store chains rank among the top 5 most linguistically connected articles today.

Articles with a lot of value investor-triggering language covering the energy sector do too.

What else is in the zeitgeist? Quoting “path to profitability” language anywhere and everywhere as the panacea for anyone who might think your favorite profitless revenue growth company might end up like…well, those other ones.

The missionaries are out there – the missionaries who benefit from your trading activity, in particular – and they are officially pounding the table for rotation.

As always, we’re better at observing than predicting, so if it isn’t obvious exactly what to do with this information, know that it isn’t exactly obvious to us, either. Still, our counsel is Clear Eyes: be especially aware right now that you’re being told how to think about what WeWork and the death of profitless revenue growth as the engine for valuation means. That doesn’t mean that won’t manifest in reality – after all, that’s exactly what other investors are being told, too. But we are creatures with a tendency to auto-tune to common knowledge. Knowing that it’s happening is something, at the very least.

Rusty Guinn
Executive Vice President of Asset Management, Salient. Rusty Guinn is the executive vice president of asset management at Salient. He oversees Salient’s retail and institutional asset management business, including investment teams, products, and strategy. Rusty shares his perspective and experience as an investor on the Epsilon Theory website.

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