Digging for Value in a Down Market with Tobias Carlisle

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Without living in a cave, it is nearly impossible to avoid today's negative headlines. Inflation persists and the Fed continues to raise interest rates. Russia is still at war with Ukraine and has openly talked about deploying tactical nuclear weapons. Many believe a recession is imminent. These negative events have taken their collective toll on the stock market as the S&P 500 is still off 15% from its all-time highs.

Tobias Carlisle joined 7investing Lead Advisor Matthew Cochrane this week to help us walk through these challenging questions. Carlisle, the founder and managing director of Acquirers Funds, believes that while the indices are still not "cheap", valuations are down overall and there are plenty of opportunities within the stock market for investors willing to dig. Carlisle said while he is fascinated by macroeconomics, he does not let it affect his investment process.

Cochrane asks Carlisle about the high number of basic materials and energy companies currently inside the The Acquirers ETF (NYSE:ZIG). Carlisle notes this is not due to any love for these particular sectors, but that even after recovering from the absolute lows these industries feature some companies that are still trading at multiples of just 2-3 times earnings. Even after accounting for their inherent cyclicality and political headwinds, he believes their valuations provide enough of a margin of safety for investors to find decent bargains.

Carlisle used Micron Technology (NASDAQ:MU) as an example of one company in his portfolio. Even as it reported bad earnings, the stock rallied because its low valuation had baked in very low expectations. Carlisle calls this the counterintuitive nature of deep value investing. Cochrane contrasts this with stocks that reported great numbers throughout 2022, yet continued to be punished by the market, mostly because their lofty valuations had baked in such fantastic expectations it was almost impossible for real life results to measure up.

Carlisle and Cochrane then dive deep into Meta Platforms (NASDAQ:META) and Domino's Pizza (NYSE:DPZ), two stocks in which they currently both hold long positions.



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