In the past year I believe that many of the mispricings in the market have disappeared. For years the market was putting a big discount on defensive stocks. That was where I was doing most of my hunting in the past few years. Healthcare, biotechnology, select telecom and staples were trading very cheap even during times when the market had gotten overheated. For the past couple of years I had been long stocks in these sectors, while at times hedging my market exposure.
In the past year and a half defensive stocks have outperformed and are no longer cheap. The market is fairly priced and I am finding much fewer pockets of value. I have recently established some pair trades as a result. These are similar companies that trade at drastically different valuations. Over the next few days I plan to post my explanation for some of these trades.