Brett Arends’s ROI: Investors who did this one thing survived the markets in 2022

by | Jan 4, 2023 | Stock Market

Forget inflation. Forget oil prices. Forget Vladimir Putin’s invasion of Ukraine. Forget layoffs in the tech sector. Forget the yield curve. When I sat down to write about what worked for investors in 2022 and what didn’t, I came to a simple conclusion. Put very simply, what worked was price. Price mattered in 2022. Or, if you prefer, “value” mattered.

If you bought inexpensive assets a year ago you did OK, even despite the market rout. If you bought expensive assets…well, not so much. The biggest winners of the year were, of course, those who owned energy stocks. The Energy Select Sector SPDR ETF
made you a stunning 62% return if you were lucky, or smart, enough to own it. And sure, Putin and the energy crisis were a big part of that. But…another huge part was that a year ago oil stocks were really, really, really cheap. Take bellwether Exxon Mobil
for example. Just over a year ago, in late 2020, its stock price hit a relative low, compared with the broader S&P 500 index
not seen for decades—at least not since 1973, which is as far back as FactSet’s data go. In 2020 Exxon Mobil stock actually traded at a couple of points at 20% below “tangible book value,” meaning the cost of its real assets. The usual figure over the past 40 years has been somewhere around 200% of tangible book, or more. So oil stocks began 2022 really cheap. And as value investors like to say, “good things happen to cheap assets.” Sooner or later someone who bought big oil stocks at knockdown prices was going to make out. Putin’s war sped up the process, but it wasn’t the only factor. (Incidentally, in the second half of 2020 Exxon was booted out of the Dow Jones Industrial Average
to be replaced by highflying tech company Salesforce 
Performance since then? Exxon is up 200%, including dividends No, really: You’ve tripled your money. Salesforce over the same period? Down 50%.) Or take inflation-protected U.S. Treasury bonds, know …

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