The Glorious Return of Fundamentals

Today, we shift our attention away from the Middle East to highlight a significant transformation occurring in financial markets.

Gradually, investors are rediscovering the importance of fundamentals.

Following over ten years of reckless speculation, meme stock mania, gambling, and near-zero interest rates, there’s a resurgence of traditional investing principles.

An emphasis on dividends, earnings, and tangible assets is making a comeback.

This refreshing change looks set to endure for quite some time.

Is the Dark Age of Investing Over?

A famous moment in the HBO series Silicon Valley (2014-2019) perfectly captures this mindset.

The narrative centers on a tech startup called Pied Piper.

When the CEO informs their biggest backer about plans to generate revenue, the investor reacts with shock.

“If you show revenue, people will ask ‘HOW MUCH?’ and it will never be enough. The company that was the 100xer, the 1,000xer is suddenly the 2x dog.

But if you have NO revenue, you can say you’re pre-revenue! You’re a potential pure play.

It’s not about how much you earn, it’s about how much you’re worth. And who is worth the most? Companies that lose money!”

This was not just fiction; for years, this was reality.

Startups without revenue were often valued based on their pitch potential rather than actual finance. Once they started generating revenue, some investors switched to traditional valuation metrics like revenue multiples.

Consequently, firms lacking revenue sometimes commanded higher valuations than revenue-generating peers, with a strong emphasis on rapid expansion fueled by massive spending.

This mentality spilled over into the broader stock market, where relentless growth became the obsession. Small tech stocks delivered rapid expansion but also significant losses.

Low interest rates contributed significantly to this phenomenon. With minimal returns on bonds and savings accounts, capital flooded into equities, fueling one of the most speculative markets ever seen.

The period was wild, beyond doubt.

However, this cycle appears to be coming to a close. Investors are moving funds from software ventures into energy sectors like oil and gas.

They’re also pivoting from government bonds toward precious metals such as gold and silver. Over the past year, gold has risen by 46% and silver by an impressive 134%, while U.S. bonds have remained essentially flat.

Additionally, reallocations from overpriced U.S. equities toward emerging markets like Brazil have intensified. In the last year, the iShares Brazil ETF (EWZ) gained 72%, outperforming the S&P 500’s 28%, and Brazil still appears undervalued.

This pattern is likely to dominate for at least the next ten years.

The Revenge of Buffett and Graham

Benjamin Graham, the legendary value investor, famously remarked, “In the short run, the market is a voting machine. In the long run, it is a weighing machine.”

In essence, manias and bubbles can temporarily push stock prices irrationally high, but ultimately, earnings and dividends determine long-term returns.

A noticeable move away from unprofitable startups—particularly in tech—is underway.

Take Snowflake (SNOW), once the hottest tech stock globally, attracting interest even from Warren Buffett’s Berkshire Hathaway at its 2020 IPO.

Shares soared above $350 in 2021 but have since fallen sharply as enthusiasm waned. Though the company is growing rapidly (30% annually), it recorded a $1.3 billion loss in 2025.

SNOW’s price has dropped 62% to $131. Numerous similar stories exist: tech firms spending excessively, handing out large employee stock options, without clear profitability paths.

The emergence of AI has further clouded software stocks’ prospects, making firms with tangible assets like oil fields, mining operations, and manufacturing plants more appealing.

U.S. Stocks – Still Overvalued

Early signs indicate a shift in investor attitudes toward profitability, dividends, and real assets.

Yet U.S. equities remain significantly overpriced. For instance, Walmart now trades at a P/E of 46—far above its historical 10-16 range, reflecting an overheated market.

Ownership of real assets alone doesn’t guarantee a good investment under current conditions; valuations must be attractive enough to provide genuine protection.

The transition has begun but still has a long path ahead.

The financial world is approaching a reckoning, which will unfold independently of Middle East developments. Though escalating tensions there would only intensify the problems.

Now is not the moment to hold a sizable stake in costly speculative stocks. These tend to suffer the most during market downturns.

Instead, it’s wise to focus on hard assets and high-yield value stocks—businesses equipped to endure turbulent times.

In the U.S., stocks that are inexpensive, appealing, and offer high yields are somewhat scarce.

Therefore, my investments remain concentrated in emerging markets for value opportunities. They currently comprise about 40% of my equity portfolio, with plans to increase that allocation.

Paradoxically, the resurgence of fundamental investing involves owning a greater share of unconventional assets. More on that shortly.