This week, we speak with Rob Arnott, founder and chairman of Research Affiliates. The firm created & patented a methodology for basing indexes on fundamental metrics instead of market cap weighting, and its strategies runs $157 billion in assets. Arnott plays an active role in the firm’s research, portfolio management, product innovation, business strategy and client-facing activities. He is the author of over 100 academic papers, and is the co-author of the book “The Fundamental Index: A Better Way to Invest.”
He explains how rebalancing portfolios on a fundamental basis relative to stock price creates additional performance at no additional risk relative to rebalancing market capitalization indices.
We discuss why the entire electric car sector — not just Tesla — has become a “big market delusion.” All of the firms in the rising EV space have risen together, despite some will win and some will lose. A dozen EV companies are all priced as if each will be na outlier winner, e.g., stupendous success ands overwhelming market share. Of course, there will be some winners from the group, which in addition Tesla, include Lucid, Rivian, Polestar, Nio, Rad Power, Rimac, Sono, etc. Add in the traditional ICE auto manufacturers, notably VW, Ford, Toyota and GM. But not all of these EV producers can have a dominant market share, and collectively, the entire EV sector has become wildly overvalued.
A list of his favorite books is here; A transcript of our conversation is available here.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Jack Brennan, former CEO and Chairman of the Vanguard Group. When Vanguard founder and investment legend John Bogle decided to step down as CEO, Brennan was his hand-picked successor for the job, and ran the firm from 1996-2008.
Rob Arnott’s Authored Book
The Fundamental Index: A Better Way to Invest by Robert D. Arnott, Jason C. Hsu, John M. West
Rob Arnott’s Favorite Books
Ten Global Trends Every Smart Person Should Know: And Many Others You Will Find Interesting by Ronald Bailey and Marian Tupy
1491: New Revelations of the Americas Before Columbus by Charles C. Mann
1493: Uncovering the New World Columbus Created by Charles C. Mann
