Steven Romick’s FPA Crescent Fund 2Q15 Commentary – No Value To Find

It continues to be a seller’s market. Private equity firms have been refinancing their debt at historically low rates and/or reducing their ownership stakes for the past few years. Shares in initial public offerings (IPOs) are being sold at the quickest rate in years. 2014 was the largest IPO year since 2000 and IPOs remain robust in 2015, thus far, despite decelerating from last year.6 And, the vast majority of those newly-issued shares in 2015 are for companies that have negative earnings. 

It remains challenging to find those investments that appropriately discount a reasonable worst case scenario. Until such time as that changes, we continue to add depth and breadth to our library of prospective investments so as to be ready when opportunities arise. Mark Landecker, Brian Selmo and I thank you for your continued trust in our Contrarian Value team.

Respectfully submitted,Steven RomickPresidentJuly 14, 2015

DYI Comments:  No doubt....It is a seller's market.  Prices in relation to sales, earnings, or dividends have now topped all preceding U.S. markets except the last few weeks of 1929 or the year 2000 Great Insanity.  Currently today on a price to dividend basis the market is 117% higher than its average since 1871.  Once our averaging formula exceeds 100% DYI is "kicked out of the market" and for good reason.  The market has transformed at those levels to nothing more than a gambling hall all looking for greater fools to sell their over priced securities.

Except for Precious metals mining companies or oil/gas/service companies there is no other value left to be found.  You may find some possibilities with individual stocks such as the list DYI has in its Dividend Room even there the pickings are very slim.  World wide central banks along with our Federal Reserve have embarked upon ultra low interest rates which only till very recently rates have moved up a bit.  A very little only to have our averaging formula with a 2% position at the long end of the market.  With commodity prices dropping all around the world deflationary talk will reemerge in the financial press along with dropping interest rates despite the Fed's intentions.

So hang onto your head while everyone else is losing theirs.  The Great Wait Continues and will reward the patient value player.

DYI