FAM Millennium Equity Fund

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1. Why Being Different Matters

If you are happy with the market return, you don’t need to do anything too complicated. You can buy an index fund, sit on it for the next 20 years, and get the market return. But if you want a higher return than the market with lower risk, you need to do things differently from the crowd, which is often very uncomfortable and goes against human instinct. Valuations are most attractive when markets are most fearful, which can bring outsized returns if you get it right.

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2. Finding Underappreciated Market Opportunities

The more crowded an investment, the harder it is to make meaningful gains. To get above-average returns, we need to know where returns come from and get there before the majority. The chart shows that over the past 100 years, most investment returns have come from fundamental and valuation factors. By focusing on them, investors can find underappreciated opportunities to reap the full range of returns without being distracted by daily noise.
Drivers of S&P 500 Returns

S&P500 = P/E ‘valuation’, Earning Growth + Dividend

Valuation

P/E Change

Fundamentals

Earnings Growth

Dividends

Periods of higher returns driven by
strong fundamentals and valuation

Periods that lower returns muted by weaker
valuation despite strong fundamentals
Source: Finexis Asset Management, using data from Don’t Count On it (2010). Past performance is no guarantee of future results.

Underappreciated opportunities present themselves in periods of P/E contraction (e.g. 1910, 1940, and 1970) where market sentiments and valuations are weaker. However, such opportunities are better coupled with strong fundamentals as they have historically proven to provide stable and sizeable returns. Combined, they deliver periods of higher returns (e.g. 1950, 1980, and 1990).
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3. Artisan Managers To Be Different And To Be Right For Maximum Impact

Artisans combine aptitude, practice, and experience to become masters of their craft. When it comes to investments, there are low-profile artisans who focus on performance rather than promoting themselves. By assembling them in our portfolios, we are able to find opportunities that passive investors have yet to discover.

Quick Decision-Making

No Herd Mentality

Maintain Nimbleness

Focus on Performance

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FAM Millennium Equity Fund

1. Why Being Different Matters

2. Finding Underappreciated Market Opportunities

Drivers of S&P 500 Returns

3. Artisan Managers To Be Different And To Be Right For Maximum Impact