Astoria’s Investment Committee Quarterly Report: Increasing the Cyclicality of our Portfolios

July 10, 2020

Attached is Astoria’s Investment Committee Quarterly Report. We discuss our performance 1) YTD 2) trailing 3) since the March 23rd lows of the market.

 

We also discuss a few strategic shifts we have implemented in our portfolios.  Lastly, we provide some forward-looking commentary on earnings, the economy, and factors. 

 

Topics discussed :

 

  • High quality stocks are starting to look historically expensive.

  • Defensives are expensive while Cyclicals are cheap.  As the economy rebounds off the lows, Cyclicals are more attractive in Astoria’s view.

  • Small Cap factor is pervasive, persistent, robust, cheap to implement, and the current entry point is particularly attractive in Astoria’s view.

  • Small Caps have more operating leverage to the local economy.  Given their earnings were de-rated more than Large Caps, we see potential for a greater rebound.  

  • Stay strategically tilted OW equity, UW bonds, EW alts.

  • OW the US, OW China, and slightly UW DM (cyclically leveraged to global economy), although we are raising our exposure to DM.

  • Credit is attractive to own. We previously bought QLTA & LQD and we want to continue adding credit to our portfolios.

  • Preferred sits below bonds but above equity on the capital structure. They are tilted toward financials which are cheap and well capitalized.

  • PE multiples are on the high side.  However, with the Fed Funds Rate anchored at 0%, we believe there is a new upper bound for PE ratios.

 

Click here to read the full research report

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