"Post-traumatic stress syndrome" following the global financial crisis (GFC) has created some of the best buying opportunities since the tech bubble of the 1990s, according to Southeastern Asset Management chief executive Mason Hawkins.
Hawkins said US$1.3 trillion had flowed from mutual funds to bonds since 2007.*
He said the earnings potential of equities versus bonds were much higher – there were only two other times in the last 60 years when the spread of forward reward-to-owning versus return-to-lending favoured stocks were as high as they are currently.
Within equity, investors were now seeking comfort and yield from familiar brand names due to a focus on yield, Hawkins said.
"People are willing to pay for 'quality' where we would think much better companies are much better competitively entrenched," he said.
Oligopolies and duopolies – which were indispensible to growth but suffered from some exposure or volatility – were extremely discounted right now, he said, but investors shied away because of a focus on yield.
"It's a time horizon arbitrage, you're arbitraging perception to reality and people are so short-term oriented right now. They're thinking in the next two months, quarter. It's just not how you make good long-term money," he said.
* Correction: The original version of this story incorrectly stated that US$2.3 trillion had flowed from mutual funds to bonds since 2007.
