This week’s Alpha Trader podcast features hosts Aaron Task and Stephen Alpher speaking with Lyn Alden Schwartzer and Chris DeMuth. Lyn is the founder of Lyn Alden Investment Strategy, and co-author of the Stock Waves service on Seeking Alpha. Chris is the founder of Rangeley Capital and author of the Sifting the World service on Seeking Alpha.
First up is DeMuth to talk about Special Purpose Acquisition Companies, otherwise known as SPACs or blank-check companies. SPACs have been around for some time, but in 2020 appear to be on their way to seriously challenging IPOs as the traditional way for firms to go public. That might be good news, thinks DeMuth, given the shortcomings of the IPO process.
That doesn’t mean DeMuth is a fan of all SPACs. In fact, he notes “brutal headwinds” faced by SPACs, and says the odds of a SPAC ultimately succeeding aren’t good. Having said that DeMuth says the selective investor can find big winners in the space. Key criteria: Size – they should be larger than the typical SPAC; they have experienced sponsors; they were brought public by a quality underwriter; they ultimately purchase well-known brands familiar to the investing public.
DeMuth then goes on to discuss two SPACs which should fulfill the above criteria: The recently gone-public Bill Ackman vehicle, Pershing Square Tontine Holdings (NYSE:PSTHU) and Conyers Park II Acquisition Corp. (NASDAQ:CPAAU).
Up next is Alden Schwartzer, who currently is expecting a broad, but not particularly deep correction in the equity markets. Her outlook over the next few years, however, gets more interesting.
You might not know it by the performance of the averages lately, but over long periods, an index of equal-weighted large caps tends to outperform an index of market-weighted large caps. That doesn’t mean there aren’t sizably long periods where market-weighted dominates (such as right now). According to Alden Schwartzer, we’re nearing a setup where that action is about to reverse, and equal-weight will again be the place to be. An example of a market-weighted index – the S&P 500 (SP500, SPY). An example of an equal-weighted ETF – the Invesco S&P 500 Equal Weight ETF (NYSEARCA:RSP).
Turning to gold (XAUUSD:CUR), Alden Schwartzer has been a bull for awhile, and continues to be so. However, with gold flirting with its all-time high (as of the time of Friday’s recording; it pushed through that high on Monday), she wouldn’t be surprised by a bit of a pullback here. Longer-term the fundamentals point to gold to move to well over $2,000 per ounce in coming years.
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