Of play for stocks as we build into our discussion. Youve got dr. Birx on the task force. The covid surge, quote, the worst event the country will face coming this winter. Stocks have run a lot coming into november. The vaccine is getting closer day by day values been outperforming lately the value etf coming off its fifth positive week in a row thats the First Time Since its fiveweek stretch ending the end of december of 2019. So my question to you to start things off, where do we go from here it seems like the market wants to go higher i think its been incredible all year it seems to definitely be picking up steam in november and pt fir the first part of december, investors are leap frogging, the political discord in washington, the lack of fiscal stimulus and leap frogging that and buying stocks in general and buying growth stocks, buying momentum stocks, buying value stocks, airline, energy, all of the above. It a really good time to reflect as investors, you got to be in it to win it i feel that by the time the vaccine is actually here, disseminated and we get behind this, who knows where the s p will be but it seems like its going to be quite a bit higher than where it is today okay. Weiss, you take that on. Bryn says the market wants to go higher does it want to go higher or does it want to pause . Mike wilson says, quote, recoveries create rotations but with those rotations now fully in gear, it may be time for a nearterm pause. Any time market has to move, you wouldnt be surprised at a pause. However, the catalysts will keep coming the way i look at it is, yes, the market has taken some of whats in front of us in terms of the recovery and put it and embedded in where the performance has been however, if you look at where the market was before covid, the beginning of the year, were not that much higher but whats changed . Whats changed is massive economic stimulus around the world thats going to drive an economic recovery that synchronize globally so under that score as well as the potential for great are stimulus here, for an infrastructure plan and for massive capex, which i keep harping on will see the biggest capex cycle this country has ever seen will say the markets got a lot of runway ahead of it and i think thats going to dictate the direction. I think its an interesting debate to have and youre starting to get some notes on the street now as to whats already baked in the market went up a lot in november, like steve was saying. Lori of rbc says their analysis suggests the recovery has room to run from a fundamental perspective. I think everybody would agree with that. But she says it also suggests a key risk for u. S. Equities in 2021 is already baked in already. Do you agree with that i think can you say that about certain sectors. Large Cap Technology didnt keep up with the Broader Market as a group in november or for the quartertodate period, even though its had a positive return i think what we could see and what we have absolutely seen is a catching up of other groups and small cap is a great example. Just for this Current Quarter to date period since october 1st, small cap is up 21 , which is phenomenal but if you look over three years, the cumulative returns in small cap are only about half of large cap. There are other areas where i think there does continue to be an opportunity weve been adding to more value oriented groups and sectors. Just as part of our thesis when we look at these more beaten up cyclical groups, theyre going to be able to grow earnings exponenti exponentially and 2021 and then 2022 that has led historically toth outperformance of those groups i think it paying to be mindful of what has worked thus far and what might work as we look out over a longer period of time i think one of the most obvious questions that any investor would have, were all wondering this ourselves, are you going to have a melt up before the end of the year do you get the santa claus rally . Traditionally it is into the first week or so into a new year or because youve maybe pulled some forward from the november record run in stocks do you miss out on this years melt up . Great question. I think the answer can be found in where the tenyear treasury is going to be priced. To stevens point, a lot of the gains have been pulled forward on the expectation youre going to get a 908 billion stimulus package, on the expectation that not only do you have the introduction of three vaccines but potentially on thursday the fda approves the Pfizer Vaccine for emergency usage. A lot of that is priced into the market where we go from here is predicated on capital coming out of where its been hiding, which has been the fixed income market being delivered into the equity market that propels it higher lets cite that today once again the nasdaq is higher, nine consecutive davis. Thats the best performance since last year. So i understand i understand the fascination with value i get it but overall were not losing exposure to that defensive Technology Growth oriented holding in the portfolio let me ask you this, joe. Whats not priced into the market optimism about a vaccine, maybe thats priced into the market. Whats not priced in yet i would suspect that favorably whats not priced into the market has a lot to do with the tariffs and theres been commentary that the tariffs in 2021 will remain in place. Im suspicious of that i, for one, believe that we will see tariffs roll back. I think eventually youll see tariffs vacated. That is going to have a very powerful, positive impact on corporate margins and Consumer Spending lets understood the detrimental impact that tariffs but the president elect is already out saying hes not going to get rid of them right away theyre going to have to sort of take stock in where we are and decide what kind of relationship he wants his administration to have with china. That may take some time to unfold understand that, respect that, but as you said, some time to unfold. That time might be quicker than the market expects it to be and that might be a near term reality that we begin to price in sooner in 2021 than we currently anticipate thats the surprise. I also think i hear more these days of people saving i like some areas outside of the u. S. , maybe for some of the same reasons that were having the conversation, steve, that we are right now. How much has been pulled forward. How much is already in the market and maybe theres more in the market here than there is elsewhere. I see you buying into south korea through the ewy, which has good exposure of different sectors. Is that trying to play other parts of the world that may be further ahead of us . You know, thats exactly right, scott so i dont typically like to buy things at the highs and if you look at the south korean index, which is classified interestingly by msci as emerging market but ftse classifies russell as a developed market but what i like about it is that they handled covid appropriately. So they quashed it as did china and you see the growth in those economies is really hitting crescendo. South korea is an industrial company. By buying that, i get exposure to samsung, which had a terrible year last year, better this year exposure to lg chemical, i get exposure essentially to 20 basic industry and cyclicals so while i key keep my technoloy exposure, thats why i like it the idea came out from a certain Pro Football Team owner in one of our conversations but thats why i like that so i was looking for the emerging markets chinas not working as well because of what were seeing going on with the administration and, to joes point, i agree at some pouint, relations an this is the other catalyst, but with china and germany, theyll normalize what weve seen under the current administration, which would be good for trade. So, yes, i think there are opportunities outside the u. S. To make money. So, bryn, are we going to be having this conversation eight to ten months from now saying that we should have gone more into areas outside the u. S. Or do we think the u. S. Is going to be the outperformer next year, just out of hand because theres going to be so much pentup demand here that thats going to drive this market higher yeah, i mean, you may be having the conversation. I dont think were going to be investing there. I do think, you know, to steves point, south korea is interesting for all the points that steve laid out. You also have samsung i believe is 22 of that index, which could definitely give it a tail wind i think the one thing you have to separate emerging markets versus developed economies i think that europe, japan, which make up the lions share are structurally flawed economies. But if you do have the economy improving globally, you could get more commodity, more materialdriven economies do well, which lend itself to emerging markets but at the same time, those emerging markets arent going to get the vaccine as quick as we are. So i think that the u. S. Is still where you want to be heavily overweight because technology is the epicenter of where growth is and that is in the usa. So i think if you want to buy secular growth names, youll have to stay in the u. S. I dont know, brenda. Why wouldnt parts of asia outperform the us, whether its korea or china for all of reasons that steven and joe just said. If you have countries that dealt better with the virus. They just did. Theyre back on the road to recovery faster than we are. They just are. And if you have a president elect biden who becomes president and says i dont want any more tariffs on china, isnt that going to be beneficial to the chinese economy . Isnt that market going to do potentially better than the United States . I think it certainly could and if nothing else, it will certainly improve sentiment about investing in china if we look at where we can invest dollars in the world and where there is innovation happening . There is a ton of innovation in asia and in china and so i think thats an area in the market that shouldnt be ignored. We currently have an overweight to emerging market, which is level dominated by china we continue to think thats an interesting part of the world to invest in and have been allocating dollars there everybodys looking for value, wherever they can find it our headline guest is a big believer in value trade. His portfolio was up 17. 5 in vote through a highly con sen ce strategy its the first time weve seen in in at least a year it feels like i hope youve been well. Good to see you again, too, scott. This strategy of yours. I say concentrated thats an unity statement, okay . If i look at how you do things, youve made seven trades this year, you normally do five in a year in 12 years youve literally made a total of 60 trades. Well, youre not going to beat the market by looking by the market so we take a best ideas approach and we still have 30 stocks in the portfolio. If you look at the Academic Research on diversification, if you own 30 different stocks in a portfolio, youre getting almost all the benefits you would get from a much larger portfolio of 100 or more stocks youre a Value Investor obviously. This rotation weve seen, is value getting its moment in the sun or is it going to be fleeting yeah, i guess thats the big question and a lot of it depends on what youre calling value and with our clients weve been making this important distinction between value stocks and value indices. The value indices have been absolutely terrible. Theyve been underperforming for 14 years but value stocks have done far better than that the big difference is when we talk about value stocks, were talking about the cheapest 20 of the market. And you think the s p 500 value index would be Something Like that say the hundred cheapest stocks in the s p 500 those hundred cheapest stocks are in the s p 500 value, but so are about 300 more stocks. Theres almost 400 stocks in the s p 500 value index. So you dont really get value stock returns from the value stock index. If you look at how value stocks have done, they did great coming out of the financial crisis. They had significant outperformance for nine years from 09 through 17 they beat the s p by 175 percentage points. Now 18 and 19 and for three weeks this year, they were definitely out of favor, but value stocks have been working since mid march and its only recently that the value index has started to work. So i want to stay on this theme before we get into some stock picks and what you like. One of the members of my Investment Committee just bought the u. S. Value etf recently. I want brenda to tell you why she did that and if that plays in your same sort of stay away from those strategies and if not, why brenda, the floor is yours sure. This etf is an s p 900 value, which has a lot more exposure to a broader range of market caps within the traditional val aal defined by indices we structure our portfolio with asset components so often we do see a big shift in leadership like we expect we could see and have started to see more recently, its a lot of stocks the Asset Managers dont necessarily want to own that end up participating in that rally so we pair active and passive together we would agree with the s p 500 value. Its a little too concentrated for us especially in nation like Berkshire Hathaway but we chose the 900 value. Professor wellington, what do you think of this purchase i like it in theory in practice some of what youre hoping to achieve im afraid may not happen the s p 900 value while i think better than the 500 value, its still a capweighted benchmark so its almost the exact same as the s p 500 value. I think if you were to run a chart of one versus the other, youre not going to see a lot of gap between the two performance lines. The cap weighting still is going to put almost all that index in the s p 500 names and very little in those incremental 400 names. And then again,if we just look at the history, and i dont mean to pick on s p, all the Large Cap Value indices have this issue. It just how theyre constructed. But you could have made the perfect call and said, you know what, on march 18 lt of 2020, this has gone on too far low pe stocks have sold off and im going to go all in to value. If you bought the value index like the s p, youve underperformed since then by 12 percentage point but if you just bought, say, the cheapest 200 stocks out of the largest thousand, youve actually outperformed by 27 percentage points. So you could have made the right call, but if you did it with the wrong instrument like these Large Cap Value indices, you didnt get the results you hope to achieve thats interesting. So, again, because you run such a concentrated portfolio and you are way more selective, i think its fair to say than perhaps the average investors, what sort of screens do you use to find the stocks you like the best so we look at Something Like the lowest pe stocks we have a slightly more sophisticated approach, which is not to just look at next years earnings or the year after that. We look at fiveyear forward earnings so we can incorporate epments of growth as well and when we do that and we look at the cheapest stocks, our first reaction to looking at that list is, my god, what a pile of junk you never want to look at the components of any value index. Youre not going to like what you see. Most stocks are cheap for a reason if you sift through them carefully, what you find is buried in this big pile of junk are a bunch of gems. Thats our approach. We try to sift through all the junk and find the gems theres cheap companies that not only downsee their earnings killed by the pandemic, earnings came out better in the pandemic. Theres enough gems out there. We couldnt build a 50 stock portfolio or hundred stock portfolio but we can build a 30something stock portfolio out of some of thievese gems lets talk about exactly what weve found. I want to get through ameriprise financials please tell me why that fits into this category scott, we dont love banks but we do own a bunch of other Financial Services companies ameriprise is an asset and wealth management. Its not a credit risk company theyve grown their earnings over the last Economic Cycle at Something Like 13 the s p 500 hasnt even grown at 5 during that time. You have almost three times the growth and yet it trades at half the price. Its around 10, 10 1 2 times earnings today i believe and the markets up around 24. So heres a great example of a gem. This is a good company youre not giving up growth. Its got good growth its a nice capital light, high return on capital business, lots of cash flow and you can get it at a really discounted price this is not the kind of crappy company youd expect to get at less than half the market multiple so tell me about whirlpool, which is number two. Whirlpool business took a big hit after the housing crisis but even with all that, if you look over the last Economic Cycle going back before the housing crisis, theyve still grown their earnings at 7 a year, which is again a bit better than the s p 500s, 4. 8. So its had good growth. And this is a stock that actually ameriprise, too, they both sold off more than 40 whirlpool al whirlpools earnings are coming out ahead. This is a company that keeps getting better, expanding their margins and people, spending money on their homes, which includes upgrading their appliances im also wondering about a new administration and tariffs and things like that tariffs did not have a great effect on or i say a positive effect on whirlpool. We saw prices go up in terms of their products tell me about Dell Technologies as we continue to move this is stock number three yeah. For old time sake, i think i talked about dell the first time i was on your show eight years ago. Since then it went private and came public again. Dell is another example of a stock that sold off more than 40 at the lows. Their earnings are again coming in higher than expected because people are spending on pcs, theyre buying more laptops this year, as well as they have an 80 ownership stake in a Company Called gmwear, the leader in virtualization if you track utility the value of vmware, its about 1. 5 times earnings we think that business is better than hp but hp is up more than 7 or 8 times so thats more than a trimming of what that business should be worth. All these companies are all up over 100 since the bottom and they all trade between 10, 11 times earnings, less than half the market multiple and two of them, whirlpool and dell, have had ear