Active management revival / stock-picker's decade (new) Stock-picker's decade ▲

Robotti (RWH046, 2024-JUN-22; SumZero, 2025-JUL-24): the "restoration of the fallen" — active management and stock-picking have been abandoned for 15+ yrs as capital fled to passive and private equity, so passive flows now mis-price the neglected corners of the market (the "zombie 1000" of the Russell 2000 trading at 20-30 cents on the dollar); a rhyme of the 1973-74 Nifty-Fifty unwind that birthed value investing, and "the next decade belongs to stock-pickers." The post-GFC zero-rate decade was "Financial Brigadoon" — an anomaly that lasted long enough to convince everyone it was the norm; beware recency bias (the biggest companies by market cap rotate every decade — 1970s energy, 1980s Japan, 2000s China, 2010s low-rate winners — so ask which firms benefit from this regime). Corollary risk: capital is mis-allocated on free-money assumptions — private-equity / real-estate valuations (cap rates, mark-to-model) haven't repriced to higher rates and are the under-appreciated risk, not public equities. Slegers (2025-APR-20, back-fill): a live proof-of-concept — his disciplined six-criteria quality screen (moat, founder skin-in-the-game, low capital intensity, ROIC>15%, >90% earnings-to-FCF conversion, structural growth) beat the index owning zero big tech (Compounding Quality's real-money book +40% vs the S&P's +24% since Oct 2023); the behavioural edge — patience, no client pressure, "say no in 60 seconds" — is retail's one durable advantage now that informational and analytical edges have gone to data ubiquity and quants/AI. Polomny (Jul 10): the Bogle idea has been "polluted" — the US is ~22–25% of world GDP but ~65% of world market cap at a <2% earnings yield ("that's stupid — you should be selling that down"), and the strip-mall adviser's target-date fund is all Google/Meta/Nvidia anyway; after a 20-year swing into passive, "you're going to have to be more active or you're just simply going to underperform" — there is a world outside the index, and the best investors publish the secret sauce (time, consistency, good businesses). Aitken (Jul 28): the case for active in an expensive index — "fortunately for us as active managers, we are not the market." He doesn't go to cash; he funds every purchase by trimming the holding at the most extreme forward multiple. "We're not necessarily contrarian by nature, but in an expensive market that's at all-time highs day after day after day, worth finding opportunities sometimes where people are more fearful." He concedes it's "still more difficult to find those same opportunities today than two, three or four years ago." 2026-08-17 — Strategas names the regime: "we've called it an alpha market… a market where stock picking and active matters a lot more than passive," because "if you look at 2026, it's been about the E, not the P/E — the PE is down maybe two or three turns from where it began the year," i.e. earnings-dependent and cyclical, "a return to that prior Fed regime." The confirming tape is the asset managers themselves: "you're seeing all these asset managers start to break out here for the first time in years… everything from State Street to T. Rowe to Invesco… Ben's been a great chart" — names that "have been on the wrong side of the passive trade for the better part of the last 15 years in this QE environment." (Verrone on Eisman Ep 73, Aug 17) 2026-AUG-17 — Joseph Carlson (After Hours): the Q2 13Fs show independent convergence rather than crowding into the index leaders. Pershing Square makes Uber its top holding at 12.72% and adds 20% to Meta (to 9%), plus new Netflix (~5%), S&P Global (5.4%) and Visa+Mastercard (~11%); Dorsey independently buys Uber, adds 24% to Meta, builds AppLovin and Booking; TCI concentrates $52.7B into ~11 names. The shared shape is "piling into some of the highest quality companies that have temporary discounts and dislocations from their intrinsic value." The counter-case is Valley Forge, whose all-reductions quarter across FICO/SPGI/MA/V — sold into falling prices during its longest underperformance streak, by a manager "on the record saying that they hold almost no cash" — Carlson diagnoses as redemption-driven, not conviction-driven: the mechanical flow that forces good managers out of good names and creates the dislocation others buy. 2026-08-18 (App Economy Insights, Q2 13Fs): non-AI growth buying stayed idiosyncratic — APP, UBER, MELI, RDDT, DASH, NFLX, SNOW, TWLO and NOW all attracted buyers, but "this still looks more like stock picking than a broad rush back into software," i.e. not a factor rotation and not tradeable as one. The systematic counterpoint: the Global X Guru ETF (GURU), built to track top hedge-fund holdings, "has underperformed the S&P 500 since its inception in 2012" — before the 2-and-20 fee drag. Filings source ideas; they do not transfer conviction, sizing or exit discipline. 2026-AUG-20 — Rhys Summerton (Milkwood Capital, BizNews BNC#9): the mirror image of the passive bid, and why it self-perpetuates. "John Smith sells his shares in this little company and puts his money into a passive ETF. The shares get sold down, the valuation goes lower" — global, "not a South African phenomenon, it's not a UK phenomenon." Seventeen years of capital withdrawal has demoralised the managements too: they "just go through the motions… if they produce good results or bad results, the share price still goes down." His route out is not waiting for a re-rating but the serial acquirer that recycles the capital — decentralised to "the point of abdication," motivated and honest management, real cash flow, a countable acquisition runway, an unpriced tax loss, no debt. Worked example: ART.JO Argent Industrial — bought at ~R4 against ~R8 of net asset value, sold the no-return divisions, retired half the shares (95m→53m, turning Milkwood's 15% into 30% without buying a share) and bought ~7 UK industrials from retiring owners at 3–4× EBITDA; R293m of profit compounding to ~R500m in just over two years = R100/share against a R40 price. The failure mode is symmetrical: chasing earnings into reckless deals, then centralising the autonomous subsidiaries into a head office that "strangles the business" (EOH/iOCO, Steinhoff). (Summerton, BizNews BNC#9, 2026-AUG-20.) Pernas (Monetary Matters, 2026-AUG-07): the index-concentration version of the argument, from a two-brother firm whose audited book has compounded ~32%/yr since 2017. The top 10 names are ~30–40% of the S&P and are "existentially forced" into step-function capex with uncertain ROI at ~10× EV/sales — "the leaders of the index are being forced to kind of subsidize this spend for the rest of the economy," so the alpha sits in the un-indexed beneficiaries: microturbines, virtual-pipeline LNG, inter-data-centre optics, exposure-management security, marketplace and cross-border-payments franchises at 1–4× EV/sales. Process, not just picks: a ~1-in-100 hit rate from turning over rocks, published pass-notes, averaging down as 20–30% of alpha, SBC treated as a variable cost. "A very special time to be an active manager." (Pernas, Monetary Matters, 2026-AUG-07.) 2026-AUG-31 — Jeff Keller (Other People's Money): markets are getting less efficient, not more: AI chatbots as investor echo chambers manufacturing consensus theses and overconfidence, faster and more crowded narrative cycles, shorter attention spans. He explicitly rejects the "AI removes fear and greed from markets" claim. Combined with ever more capital that must be factor-balanced quarter-to-quarter and delever at the wrong time (July), he thinks the unconstrained old-school long/short model is in for a renaissance — long-biased (>50% net), longer duration, willing to hold known factor exposure. The behavioral edge comes from horizon and LP management: monthly results are "completely insignificant," quarters "probably insignificant." Slegers 2026-JUL-14: the practitioner's-drawdown view of the same thesis — quality is 2026's worst factor and he says so unhedged ("Yes, I feel personally responsible for that"), while arguing that the moment the style looks most foolish is statistically the worst moment to abandon it: 1998-2000 saw Berkshire underperform by 93.9 points and Fairfax by 139, both followed by wide outperformance. His answer to the ETF/momentum alternative is a timing argument — "if you switch from Quality to Momentum or ETF investing right now? You'll probably do it at exactly the wrong time" — supported by published base rates (one year in three the market falls 10%+, one stock in three disappoints, one year in three underperforms) and by reporting the book's look-through free cash flow ($65,520/yr, $0.12/minute) instead of its price. Slegers 2026-JUL-21 (guest: TJ Terwilliger): the capitulation datapoint — Terry Smith turned over more than 50% of Fundsmith in H1 2026 and told investors to expect more trading, after underperforming “every single year over the past 5 years” (13.1% CAGR after fees since 2010). The stated reason is a constraint, not a view: “a buy and hold strategy can only work if you are not subject to flows, and we are… there will be little point being proved right about the dangers of passive or momentum investment after our Fund has closed.” Slegers’ verdict is a timing call: “They are switching from quality to momentum right now. They might be making the switch at exactly the wrong time.” Read as a sentiment extreme on the quality factor rather than a forecast. Slegers 2026-AUG-20: the skew argument, restated as a reason not to own the index — Bessembinder over nearly a century finds an average cumulative return of +22,840% against a median of −7.41%, so "buying a standard market-cap weighted index like the S&P 500 means you buy everything… you're also buying the companies destroying capital." The rules-based answer (Invesco's SPHQ: score the S&P 500 on ROE, leverage and the accruals ratio, keep the top 100) has its own flaw worth noting — a trailing-quality screen buys cyclicals at peak earnings, and its disclosed top ten is 42.5% technology, led by Lam Research and Sandisk. Slegers 2026-MAY-07: sizes the quality drawdown from inside a quality book. Against a pre-screened investable universe of 153 stocks (0.4% of the 40,000+ listed worldwide), 49 are rated Buy and 68 are undervalued on all three valuation methods simultaneously — both records. Corroborated externally rather than asserted: a Bloomberg Factors To Watch chart showing that since Liberation Day long-quality / short-junk has lost ~25% while momentum has gained ~9% — "high-quality stocks with strong balance sheets continue to be pummeled." Slegers 2026-MAY-24: converts the quality de-rating into a number. Intrinsic value +8.6% in 2025 against a -6.6% price and +8.3% expected in 2026 against -17.2%, so the book became 40.7% cheaper over two years while the S&P 500's own valuation rose 5% — "Our Portfolio's relative valuation declined by almost 50% compared to the index. That's just ridiculous." At a 17.1x forward P/E the earnings yield is 5.8%, which on Terry Smith's two-input rule (yield + 12% expected EPS growth) gives an expected annual return of 17.8% — "the highest it has ever been". The stated conclusion: "now is the time to swing heavily." Worth noting the response was a reallocation (2026-MAY-31 switch), not fresh capital. Slegers 2026-JUL-09: the quality-versus-momentum spread reframed honestly — "We're not at maximum pessimism. But we are at a maximum discrepancy (the difference between quality and momentum). That's almost as good" — and the first evidence in its favour: in one month Interparfums +35.1%, Brown & Brown +26.9%, Medpace +23.7%. The counting cuts the other way, though: names undervalued on all three of CQ's models rose from 69 (18 June) to 83 (9 July), both records, so the universe kept getting cheaper. Pieter Slegers (Compounding Quality), 2026-FEB-12 makes the strongest version of the case in this archive: "Quality stocks are currently underperforming. It's the largest irrationality in the market over the past 30 years. The last time this happened was in 1999, just before the dotcom bubble. After that, quality outperformed massively (+18.5%)." The mechanism is asserted without a horizon — "Because stock prices eventually follow earnings. Always." His own book is offered as the evidence: over five years, Owner's Earnings compounded +22.3% a year while the valuation fell -10.0% a year, i.e. "amazing companies at a discount of almost 33%"; per-name, Brown & Brown grew intrinsic value +13.6% in 2025 against a -21.9% share price, so "the stock became 35% (!) cheaper" (2026-FEB-05). The market view stated on 2026-FEB-15: "S&P 500: Very expensively valued and lower expected returns / Quality stocks: The most undervalued since 1999 (relatively seen)." Pieter Slegers (Compounding Quality), 2026-MAR-12 → 2026-MAR-31: the quality factor's drawdown documented by naming peers rather than by argument. On 12 March: Chuck Akre "is now even slightly underperforming the S&P 500 since inception" and Terry Smith "underperformed over the past few years" while holding Stryker, Marriott and L'Oréal. On 19 March: "Top investors like Terry Smith, Chuck Akre, Warren Buffett, and Bill Ackman have all fallen short of the index over the past three years." On 31 March the drawdowns are numbered — "Chris Hohn is down 11% · Bill Ackman is down 19% · Dev Kantasaria is down 20% · Chuck Akre is down 21%." His own book is disclosed with the same candour (Games Workshop +100.8% and Medpace +80.6% against Evolution −26.9% and Novo Nordisk −39.5%), and the base rate offered is Buffett's own: "From 1962 until today, Warren Buffett underperformed the market in 20 out of 64 years. That's 33% of the time." 2026-SEP-02 (Hay/Haymaker) — a data point AGAINST the revival: on an @AskLivermore table relayed by Trader Ferg (as of Aug 28, 2026), every celebrity manager trailed SPY's +12.6% regardless of style — GLRE +8.5%, ARKK +8.0%, BRK.B +1.6%, PSH −0.8%, IEP −9.4%, MSTR −19.0% — and this in a year the equal-weighted S&P was ahead of the cap-weighted one, i.e. a broad tape stock-pickers should have enjoyed. Hay's point is the absence of style clustering: "both growth- (Cathie Wood) and value-oriented investors (David Einhorn and Bill Ackman) are lagging," which rules out style rotation and points at an index concentration no discretionary book could hold. Caveat carried in the table's own footnote — these are share-price, not NAV, returns (Pershing Square's NAV was −7.1% vs a −0.8% unit return). Dissent — Hedgeye Real Conversations (2026-SEP-15): retail active investors get 'eviscerated' over the next two years, so the near-term consequence is 'even more passive investing versus active.' Joseph Carlson (Sep-5, 2026): his book is flat YTD vs the S&P +12%, defended with Berkshire beating the index in only ~66% of years; he ranks every holding by five-year expected return against a 15% hurdle and steers new money by the ranking rather than churning. Dissent — Michael Green (2026-SEP-11): active managers are about 7% of daily trading, down from about 85% in 1995. Value is mechanically anti-correlated with the passive factor, and a 2026 paper finds traditional managers' aggregate active share has turned negative. The alpha has moved to market makers (Citadel, Jane Street) that buy retail and passive order flow, so active's best strategy is to hug the benchmark. Pieter Slegers (Compounding Quality, 2026-SEP-20) concedes the quality style is still lagging: "The current results are below our expectations. Quality has had a rough time recently. Every active strategy will out- and underperform the market from time to time." He stays the course rather than switching style ("You can borrow someone's stock idea, but you can never borrow their conviction"). He cites the portfolio's FCF yield at ~5.9%, the highest on his 2015-2026 chart, and a book expected return of 13.9%/yr, down from the 17.1% modelled on 1 September. He adds to Fairfax. Rob Vinall (RV Capital, Richer Wiser Happier, recorded 2026-08-20, published 2026-SEP-19): "the weirdest market" since the late '90s — the S&P near highs while a handful of semis "have gone to the moon" and most quality names sit ~50% off; momentum turns small misses into 25% one-day drops and AI has commoditized research people now ignore, so both "out-think" and "out-wait" have inverted — "an ideal market" for buying durable 15% compounders on temporary setbacks.