by Scott Ronalds

With the start of another NHL season comes hype, excitement and high hopes. Or not. My wife and I went to the Canucks’ second game of the season the other night and the vibe was, well let’s just say, different than previous years. There were large tracts of empty seats. We were able to buy our tickets online (in row 2 of the upper deck) for $20 U.S. The atmosphere was cold. A few seasons ago, this was unheard of. Evidently, the locals have grown restless with our beloved Canucks. Sentiment has shifted.

It happens in all walks of life. Musicians, politicians, sports teams and stocks can go from hero to goat in a hurry. Sentiment is a funny thing. You don’t know when it will shift, but when it does, look out.

Investing is a great example. Stocks can fall in or out of favour based simply on the industry they fall into or how they fit into a style box (growth or value). We all remember the dotcom boom of the late nineties and the resource bust earlier this decade. In recent years, investors have been gung ho for fast growing companies like Facebook and Amazon. Slower growing businesses in the old economy like banks and basic materials (value stocks), on the other hand, have been largely passed over.

The result is a big discrepancy between the valuations of these types of stocks. Growth stocks trade at a premium to both their historic levels and the rest of the market, while value stocks trade at below-average levels.

Investors are well advised to build broadly diversified portfolios, which means having exposure to stocks and bonds of all types. When sentiment is at an extreme, however, opportunities emerge and seasoned investors look to take advantage of an eventual change in the mood of the market by tilting their portfolios towards unloved, undervalued assets. It can take a while, but stock valuations eventually revert to the mean – which in today’s environment means that growth stocks are due to cool off and value stocks are poised for a rebound. Our Global Equity Fund in particular is positioned to benefit from such a shift.

Sentiment is a feeling. It can’t be precisely measured. It’s part of what makes investing an art, not a science. If one thing’s for certain though, it’s that the prevailing mood never lasts forever. Which means that value stocks, and Canucks fans, will again have their day in the sun.