Yes, Pariah Capital has beaten Wall Street. Yet again.
Before fees, too.
Oh, and we’re willing to make a semi-serious bet we will do it again in 2023.
Pariah Capital is the exclusive free money advice service offered to our readers by MarketWatch. To reach our target asset allocation for the year ahead, we tap the finest minds in all of money management. We scour the world to listen to the really big honchos—the M.B.A., CFA, Ph.D. types managing the world’s biggest, richest, and most powerful pension funds, sovereign-wealth funds and other major institutions.
We listen to what The Best of The Best Of The Best (” With Honors!”) are doing.
Then we do the exact opposite.
We bet on the investments they like the least. The ones they are shunning. Hence the name Pariah Capital. We invest only in assets that are absolute anathema to your top money managers.
Actually, to do this we cheat a little. We just check in with the invaluable global fund manager survey conducted monthly by BofA Securities, the artist formerly known as Merrill Lynch. Investment strategist Michael Hartnett and his team do all the hard work. They survey hundreds of top money managers around the world every month. People handling hundreds of billions of dollars in assets.
And, helpfully, the surveys always reveal where the BOTBOTBWH are placing their big bets and where they aren’t: Their top “overweight” investments, meaning the ones they favor the most, and “underweights.”
Last year this led us to a collection of 7 asset classes, each accessible to everyone in the cheap seats through simple, low-cost exchange-traded funds. The 7 investments most hated by money managers, and therefore embraced by Pariah Capital, were bonds AGG, -0.18%, utilities FUTY, -0.24%, telecoms stocks FCOM, -0.62%, consumer staples stocks FSTA, +0.13%, and U.K. FLGB, +0.20%, Japanese FLJP, +0.80% and Emerging Markets VWO, -0.52% stocks.
In the 12 months since our article was published, an equal weighted portfolio of those 7 asset classes ended up losing 8.5%.
So Pariah Capital beat the Street by 1.1 percentage points. This is, of course, the same Street that “nobody can beat.”
Credit where credit is due, though. In 2022 (for once) the BOTBOTBWH themselves also put in a stellar performance. Although Pariah Capital beat the index, as usual, through the reliable system of betting on the assets that the top money crowd hates, the assets that they actually liked the most put in a winning year. An equally weighted portfolio of their 7 favorite assets actually ended the year up nearly 5—thanks to big bets on commodities and energy stocks, which were sent into orbit by Putin’s invasion of Ukraine.
We shouldn’t have to say it, but Pariah Capital is a tongue in cheek exercise mainly provided for your entertainment, amusement and information.
So what does 2023 hold? The latest BofA survey is out this week, and we are pleased to offer you two portfolios.
According to the latest survey, top money managers this January are most heavily invested in 8 asset classes: Cash, commodities, European and emerging markets stocks, and the stocks of healthcare, consumer staples, banking and energy companies. So the BOTBOTBWH portfolio for 2023 can be replicated with 8 low-cost ETFs, such as Goldman Sachs Access Treasury 0-1 Year ETF GBIL, -0.01%, iShares S&P GSCI Commodity-Indexed Trust GSG, +1.04%, SPDR EURO STOXX 50 ETF FEZ, -0.21%, Vanguard FTSE Emerging Markets ETF VWO, -0.52%, healthcare Select Sector SPDR ETF XLV, -0.47%, Consumer Staples Select Sector SPDR ETF XLP, +0.07%, SPDR S&P Bank ETF KBE, -0.38% and Energy Select Sector SPDR ETF XLE, +0.21%.
As for Pariah Capital? The 8 most hated assets of the year—drumroll, please—are U.S. equities (if you can believe it), U.K. equities, Japanese equities, REITs, utility stocks, and the stocks of consumer discretionary companies, Which means Pariah Capital is pleased to unveil its 2023 portfolio of 8 ETFs: Vanguard Total Stock Market VTI, -0.13%, Franklin FTSE United Kingdom FLGB, +0.20% and Japan FLJP, +0.80%, Vanguard Real Estate VNQ, +0.28%, Fidelity MSCI Utilities Index FUTY, -0.24%, Fidelity MSCI Communications Services FCOM, -0.62%, Consumer Discretionary Select Sector SPDR XLY, +0.07% and Technology Select Sector SPDR XLK, +0.45%.
Incidentally, across the 6 main asset classes the two that money managers really, really like are cash and “alternative investments,” meaning hedge funds, private-equity funds. Their least favorite are stocks, followed by real estate. And across the five main stock market regions, by far their favorite is emerging markets. Their most hated? The U.S., followed by the U.K.