Finding value in the stock market tends to be tricky, for a few reasons.
If one believes he or she has found value in a particular company or sector, it is because one of two things is happening: either the company or sector has momentum, and one expects things to continue over time, or the sector or company has been beaten up by Mr. Market to a degree which does not make sense, and a contrarian position becomes warranted.
One area many investors are now focusing on is companies with an Environmental, Social and Governance (ESG) focus, a hotbed topic for investors at this point in time. With institutional funds often restricted with respect to which companies and sectors such firms are allowed to invest in, the ability for funds to flow into non-ESG related companies is somewhat limited by this movement.
In other words, betting on a cigarette producer vs. a solar panel manufacturer is a bet one must take knowing institutional money may not be able to flow in your direction.
Of course, fundamentals remain key for any long term conservative investor, so please remain cautious and skeptical as to which companies are chosen to be in your portfolio; seek balance sheet stability first, and profits second – many an ESG company have come and gone, and many more are likely to fall to the wayside, given the sector-wide push by many companies to get into this sector.
Invest wisely, my friends.
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