It’s déjà vu all over again

By David Nelson, CFA CMT

All of us are students of history. We live, work and survive as participants in a never-ending experiment called life. Early in our careers we have little real-world experience to draw upon. To hone our craft, we look to teachers, a mentor, books, classrooms etc. Most will study and practice but eventually we move to real time application. We learn a little from success but, the bulk of our knowledge comes from our mistakes.

While the above applies to almost any industry, as a soldier of financial fortune the last 27 years I can tell you history offers some painful lessons.

Those who cannot remember the past are condemned to repeat it

The above is often attributed to Winston Churchill but it was Spanish philosopher Jorge Santayana who actually coined the phrase. It’s a chilling reminder that we need to look beyond our own historical context perhaps even to a previous era to be sure we don’t repeat the same mistakes.

Many investors today are what I call “post-crisis traders.” Stock jockeys with a practical knowledge set that only knows a market drowning in liquidity backed by a Federal Reserve with an endless checkbook ready to throw in $Trillions at the first sign of trouble. If the first $Trillion doesn’t work, add another 6 just to be sure.

Does this bull market look like any other you’ve seen?

For most of the last decade tech and growth have led every march higher dwarfing the returns of other sectors and investment styles. Buy the dip was code to add to tech and large cap secular growth every time there was a market hiccup.

Who could blame them? Since the market bottom in March 2009 Growth (IVW) is up 716% vs. Value (IVE) up just shy of 500%. Tech (XLK) over the same time frame is up a staggering 1050%. Most of that outperformance has come in just the last 5 years.

Tech vs Growth vs Value vs S&P 500 since March 2009

Any trend that goes on that long has to continue right?

  • It’s the future
  • Digital triumphs over analog
  • The internet of things
  • Space stocks
  • SPAC stocks
  • yada yada yada

The one lesson we seem to forget over and over again is that a stock certificate is little more than a contract. It entitles you the investor to your pro rata share of the earnings and/ or dividends of the company. Outside of that it’s a story. In the short run that story can take stocks well beyond intrinsic value.


In the last decade investors have pushed the concept of Growth At the Right Price to Growth At Any Price. Some of the best performing cloud stocks earn nothing on a GAAP (Generally Accepted Accounting Principles) basis, yet investors are happy to pour money into these companies as long as the top line is growing.

Cloud favorite Twilio (TWLO)

It’s déjà vu all over again

2021 is looking a lot different than 2020. Year to date while the market is up a strong 6.2% Technology and popular growth stocks aren’t participating. In fact, the picture looks eerily similar to the bursting of the bubble in March of 2000. Relative sector performance over the following 7 years pushed Energy out in front with Financials close behind.

2021 is less than 3 months old but the leadership looks the same. Traditional fossil fuel energy is in secular decline and perhaps even brick and mortar banks will ultimately be redefined by fintech startups, but for now investors are reaching for something a little more sustainable than pie in the sky growth.

Retro Tech

Even within technology some of its best performers this year are what I would call Retro Tech, stocks that used to be “must own” for any momentum investor in a forgotten era. Applied Materials (AMAT), HP Inc. (HPQ), Dell (Dell) & Western Digital (WDC) year to date are up over 49%, 28%, 21% and 21% respectively. On a forward 12-month basis all trade at about a 50% discount to the market multiple of 22x. HPQ is trading with a single digit PE of less than 10x. Hot ETFs like Ark Innovation (ARKK), Ark Next Generation Internet (ARKW) and Cloud ETF (SKYY) are all struggling in 2021

Three months isn’t a trend, but post crisis traders should take a hard look at these pictures and get out a calculator. Valuations for some momentum stocks stack up right against some favorites. had Amazon as an investor and raised $82 Million in February 2000. It filed for bankruptcy 9 months later.

*At the time of this article some funds managed by David were long SPY, AMAT HPQ, DELL & WDC