This week's Alpha Trader podcast features hosts Aaron Task and Stephen Alpher talking with David Trainer, CEO of independent research firm New Constructs, and the author of Value Investing 2.0, a newsletter available on Seeking Alpha's Marketplace service.
While Trainer doesn't see a ton of upside to the averages after their big rally from the March bottom, more important to him is what might be a topping out in the passive investing trend.
That doesn't necessarily mean a bear market if he's right. Instead, it could be the averages and passive investing - dominated more and more every day by a very small handful of names - might suffer relative to the rest of the investing universe, i.e. a comeback for active investing and value names.
As the name of his service makes clear, Trainer is a value investor, and all that money flowing into FAANG + Microsoft is leaving a lot of stocks to choose from. Among some recent picks is Southwest Airlines (LUV). It's a best-in-class operator, says Trainer, and those types of companies tend to pick up market share during crises, and we're surely in one now. Another super-important point for Trainer: Never assume executives care about you. As for Southwest, Trainer is pleased that management is explicitly compensated for creating shareholder value.
An industry facing maybe an even larger existential crisis than airlines is shopping malls, and Trainer is a fan of Simon Property Group (SPG). Yes, the retail apocalypse is real, but some malls will survive and thrive, and Simon - like Southwest, best-in-class in its sector - is going to the player owning a high proportion of those survivors.
Finally, there's D.R. Horton (DHI). When Trainer picked the stock at $41 per share (it's at $55 at publication of this podcast), the valuation suggested profits wouldn't get back to 2013 levels for ten years. In Trainer's mind, there's tons of growth opportunity for the company - particularly in DHI's mid-market area of housing - but even without that growth, the stock would be a buy.
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