Pariah Capital: Going Against the Grain

The inevitable day looms when this news site will replace me, a mere mortal, with an AI chatbot. (Cue the sarcastic voice from the peanut gallery: "How soon?")

Yet, I have prepared for this eventuality.

My backup plan is set in motion.

Enter Pariah Capital, my brainchild hedge fund with a winning strategy already in place. The secret? A contrarian approach inspired by none other than the big institutional investors like pension funds and endowments.

Here is my game plan: I will observe their every move, and then do the exact opposite.

Fans of this column know all about Pariah Capital. It's our tongue-in-cheek feature where we delve into how a portfolio would perform if invested solely in the assets that the Wall Street honchos can't seem to get rid of. Pariah Capital may sound lighthearted, but it's far from a joke. And this week's news only reinforces that fact.

According to the latest global fund manager survey by BofA Securities, institutional investors are currently disdainful of three specific assets: commodities, energy stocks, and Treasury bills.

Surprisingly, these big players hold a smaller portion of their portfolios in commodities now than they did during the depths of the 2020 Covid crash, when oil briefly went negative. Their exposure to energy stocks is at its lowest since November 2020, a time when Covid vaccines were not yet rolled out and the global economy was frozen. Additionally, their stake in Treasury bills is currently at its smallest since early 2021, before skyrocketing interest rates made them attractive.

Needless to say, Pariah Capital now adores all three.

What makes this even more intriguing is that these three assets have fallen out of favor with the big money crowd only after yielding subpar returns compared to a basic, well-balanced portfolio. But let's not forget that back in January, these same fund managers were head over heels for them.

As I highlighted earlier this year, commodities, energy stocks, and Treasury bills stood among the top eight assets favored by Wall Street and where global fund managers placed their biggest bets.

Originally, I didn't plan to provide an update on Pariah Capital until January. However, the dramatic flip-flop revealed in the latest BofA survey has compelled me to take action sooner.

In January, fund managers were extremely bullish on a total of eight assets. In addition to the aforementioned trio, this group included European and emerging markets stocks, as well as healthcare companies, consumer staples companies, and banks.

Stay tuned for more updates from Pariah Capital as we continue to trailblaze our contrarian path in the world of investments.

Investing: Following Top Picks vs. Pariah Capital's Contrarian Strategy

Investing in low-cost Exchange-Traded Funds (ETFs) recommended by renowned financial experts seems like a sound strategy. However, recent performance suggests otherwise. An equally weighted portfolio composed of eight ETFs, namely Goldman Sachs Access Treasury 0-1 Year ETF (GBIL), iShares S&P GSCI Commodity-Indexed Trust (GSG), Energy Select Sector SPDR ETF (XLE), SPDR EURO Stoxx 50 ETF (FEZ), Vanguard FTSE Emerging Markets ETF (VWO), Healthcare Select Sector SPDR ETF (XLV), Consumer Staples Select Sector SPDR ETF (XLP), and SPDR S&P Bank ETF (KBE), has yielded a meager 5.3% return this year, before fees.

In stark contrast, a simple benchmark portfolio comprising just two index funds – Vanguard Total World Stock ETF (VT) and Vanguard Total World Bond (BNDW) – has outperformed significantly, generating a remarkable return of 15.3%. The discrepancy of 10 percentage points between the two strategies is quite striking.

It becomes apparent why these highly compensated fund managers are regarded as financial experts, given their track record. Nevertheless, earlier this year, we unveiled Pariah Capital's 2023 portfolio, which adopted an entirely contrarian approach by focusing on the eight assets that the aforementioned fund managers favored the least and were underinvested in. This unique portfolio consisted of the following ETFs: Vanguard Total Stock Market (VTI), Franklin FTSE United Kingdom (FLGB) and Japan (FLJP), Vanguard Real Estate (VNQ), Fidelity MSCI Utilities Index (FUTY), Fidelity MSCI Communications Services (FCOM), Consumer Discretionary Select Sector SPDR (XLY), and Technology Select Sector SPDR (XLK).

The results have been truly astounding. Pariah Capital's portfolio has achieved an average return of 24.6% this year, significantly surpassing both the global 60/40 portfolio and the top picks of conventional fund managers.

Pariah Capital's success is undeniable. Watch out for Chat GPT as we approach January's update, where we will unveil Pariah Capital's picks for 2024. Meanwhile, it's noteworthy that esteemed financial experts are currently avoiding investments in commodities, energy stocks, and Treasury bills. Will these unconventional choices prove to be the winning ticket in beating the market? Stay tuned.