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

Attached is Astoria’s Investment Committee Quarterly Report. We discuss a few strategic shifts we have implemented in our portfolios. Also, 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.

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