At the start of the year, this short piece in the Financial Times’s ‘Lex’ column caught my eye – and not just because it referenced one of my all-time favourite sitcoms, Seinfeld.
The set-up to the article was a piece of advice Jerry Seinfeld gave to his friend – and perennial loser – George Costanza: “When every instinct you have is wrong, then the opposite would have to be right.”
Lex used that as a springboard to highlight how bullish sentiment among company analysts had somehow remained at levels not seen since 2011 – even as the S&P500, the main US index, continued to plough further into negative territory. “Over 70% of S&P500 stocks currently carry a consensus buy, or strong buy rating,” the column added. “And only one carries a sell, Campbell Soup.”
Clearly not a committed Seinfeld fan, Lex at that point missed the opportunity to reference one of the series’ most famous episodes with a stern “No soup for you” – instead observing: “Just before the 2008 crash, Wall Street analysts were screaming ‘buy’. At the March 2009 low they were screaming ‘sell’. Going against this consensus view would have saved or made you a lot of money over the next six months.”
The thoughts of a good value investor
Swimming against the tide of popular opinion? Buying when others are fearful? Selling when others are greedy? You know, they might just be onto something here.
Somebody should formalise that into a long-term investment strategy and put it to good use in the stockmarket. Oh, hang on, you’re right – that all lies at the heart of what value investors have been doing for decades.
What the Lex column did not mention is that George actually takes Jerry’s advice.
In the episode, appropriately entitled ‘The Opposite’, he resolves always to do the opposite to what he would normally have done – a lifestyle approach that results in a complete turnaround in his fortunes, including somehow securing a perfect girlfriend and a perfect job.
As it happens, that peripherally involves managing the New York Yankees baseball team – and it probably goes without saying that, for the good of the sitcom, George’s new mindset does not last long.
Had he persisted with doing the opposite of what his instincts were telling him, of course, another potentially perfect job for him would have involved managing money with a value investment strategy.
On which note, we need to go and take a closer look at the financials of Campbell Soup …