Examples when attractive stock-picking opportunities could be found in otherwise expensive markets


Chris Davis: I mean the late '90s is a great example because it was narrow and it created real opportunities for value investors. You had a market where if you had told people in advance that in next year the market's going down 10%, people would say, oh, I better get in the sidelines. But in the year 2000 with the market down 9% or 10%, we were up 9% or 10%, a lot of value investors. That pivots to an idea where you could have a market where there are undervalued opportunities and they're available because a part of a segment of the market is at such an extreme valuation. I think you certainly saw it in '72 with the Nifty 50. I think there are examples in history, but they rhyme rather than match perfectly.
Danton Goei: I should mention that those same periods with the Nifty 50 or the tech bubble, were also periods where there are good companies underneath there. They're not part of the big drivers, but the businesses are doing really well, the valuations are low, and those can be the drivers of the future performance of the index. Those are, like you had mentioned and asked before, I mean those can be the stock pickers part of the market. Those periods like the Nifty 50 and the tech bubble were followed by periods where active management actually managed to shine because there were a lot of opportunities out there that were just not part of this really narrow market.

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