Strategist Jeff Saut on Efficient Markets ~ market folly

Tuesday, May 31, 2011

Strategist Jeff Saut on Efficient Markets

Market strategist Jeff Saut's latest commentary focuses on sideways markets and how you can still make money in them. He pulls a quote from Vitaliy Katsenelson, author of The Little Book of Sideways Markets (and e-book version here), who notes that, "one of the core reasons why markets are and will remain inefficient: because human beings are efficient."

In this regard, Vitaliy uses Cisco Systems (CSCO) as an example. The stock has fallen 80% from its highs and now investors who originally bought in 1999 have made no money. The company has guided below Wall Street expectations in recent quarters. Saut adds that, "to be sure, at downside and upside inflection points, stocks are anything but efficient."

Some hedge funds have dabbled in this name and you can see the value thesis rationale in a free sample of our newsletter. And as noted in the just-released new issue of Hedge Fund Wisdom, famed mutual fund manager Bruce Berkowitz started a position in CSCO last quarter.

While the stock market often churns sideways for years digesting large secular bull market moves, Saut points out that the trick to outperform during these periods is to "be more proactive (or tactical) in your investment approach, be sector and stock specific, and cut your losses quickly."

Embedded below is Saut's recent commentary:

You can download a .pdf copy here.

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