Wide Spreads & Good Days Ahead?

Financials vs. the Index:

  • FACT: BAC earns 30x the profits of ZM, but BAC is only ~3x bigger
  • Sometimes the greatest investment ideas can come from a simple chart
  • The dashed line below highlights periods when financials are in the 95th percentile of cheapness relative to the index like today



As always a rigorous fundamental review is a critical precursor to any investment. The chart below shows that, historically, if you just bought Financials when they were as cheap relative to the S&P500 as they are today your odds of outperforming were very high.  Specifically:

  • 68% of the time you beat the market with average excess returns of 11% over the next 12 months
  • 60% of the time you beat the market with average excess returns of 14.9% over the next 24 months
  • While there are no guarantees it is worth remembering that “all of Las Vegas was built on a ~2% advantage”

If you would like to see the Financials favored by Kailash’s Investment Tools, click here.


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