Observing the Herd
Reading all the buzz around Palantir’s ($PLTR) recent earnings release made me reflect on my own investment path. For over a decade, I leaned heavily into deep-value investing—building models, seeking “cheap” companies, and seeing decent returns. Yet I kept noticing how many high-flyers I was missing. This fact was even more glaring when I looked to an algorithm I created years ago to analyze market patterns. With my passion for technology, I found myself increasingly drawn to growth opportunities. Companies like Tesla, Nvidia, and Palantir soared on factors traditional value metrics barely capture—often chalked up to “multiple expansion.” And it’s not just these famous names; every year, hundreds of lesser-known stocks also post huge gains, typically over months or years, meaning they’re potentially capturable for open-minded investors.
If someone had traveled back to late 2022 from the present with Palantir’s recent earnings report, my old value bias might have still kept me on the sidelines—missing out on a tenfold gain. Many value investors dismiss such runs as “irrational,” yet oddly expect the same market to someday validate their own price targets. Markets, however, never stand still; variables shift constantly. If a strategy demands patience while others keep outperforming, perhaps that strategy itself needs a closer look. I quickly felt a gap widening between myself and the value-fixated community. No disrespect to the art of value investing—I speak from experience because that’s my background and have walked that path.
Of course, for activists aiming to restructure or take private control of a company, a deep-value approach can make perfect sense. But for most of us in public markets, passively “along for the ride,” it’s harder to justify. I realized that investors—myself included—ultimately care about consistent, risk-managed price appreciation, not how “cheap” a stock might be. Market prices reflect the balance of buyers and sellers, each with their own justifications—nowhere is that more evident than in crypto.
Value investing purists can indeed be right over time, but how long must they wait, and what if policy interventions prolong or negate their theses? Howard Marks touched on this when he noted the government’s growing role in market panics—once the role of value investors. Others point to the dot-com era and argue valuations were overblown from 1995 onward, yet the market never returned to those so-called “excessive” levels. Many surviving tech companies ended up multiples higher than their dot-com peaks. In that sense, the bubble wasn’t purely “wrong”—it was simply followed by a multi-year shift from buying to selling. Of course, this excludes stocks like Pets.com.
In the moment, it isn’t easy to distinguish. Today, buying pressures are escalated within speculative areas like space-related industries and quantum computing. I believe both will play a role in the future, but it’s anyone’s guess which ones survive or fail. In my opinion, you must have a system to be able to navigate exposures to industries like these. And ultimately, each investment style is a belief about why the price should rise. If that style falls out of favor, you risk missing the next big move. Top-tier managers often look brilliant when their strategies match prevailing market conditions, but those conditions can change quickly, leaving them with tools once believed to be superior that are now no longer effective. At the extreme end of the scale of reluctance to change, most are familiar with the “permabears,” which are “right” once a decade or so.
With Palantir specifically, I have no prediction whether the company will become the next trillion-dollar juggernaut or witness a price collapse. But completely ignoring stocks like it can mean forfeiting meaningful returns. The returns are what make it a discussion. The stock is up over 1,600% since the end of 2022, which took years to occur, making it possible to capture some of the return. The majority of market participants were well aware of the company, yet I would speculate only a small minority enjoyed this run, none of which I would guess are “value” investors. That realization in other stocks was a factor that led me to start Even Herd. We focus on flexible, data-driven strategies that minimize bias—what we believe is essential for delivering consistent, systematic returns in a constantly evolving market.
Part of that approach involves strategic diversification. From my value days, concentrating on top-conviction ideas is common, but it can skew performance and add unnecessary risk. We think diversification is most powerful when it spans genuinely strong investments that complement each other, rather than merely offsetting correlation. If multiple holdings are on strong upward trajectories, some correlation is inevitable—but we see that as positive, not a problem.
Looking ahead, Artificial Intelligence (AI) is poised to reshape every industry, including finance, at an unprecedented speed. It’s surprising that so many market participants think they can forgo AI’s capabilities—tools that will be capable of analyzing near-infinite data points in milliseconds. At Even Herd, we’re committed to integrating AI into our systems so we can adapt as it becomes a defining force in investing. It’s hard to imagine analyzing markets without such tools in the near future. I sit in complete disbelief when I hear managers genuinely believe they will not need AI anytime soon.
I’m not claiming to predict the future, but I do believe in preparing for it. Even without these technological shifts, there’s long been a need for strategies that can thrive under any conditions. That’s what drives Even Herd. I personally suspect we’re in an era more akin to the 1950s, 60s, and 70s, where many indicators from the past four decades may not apply. Even if I’m off the mark, I’m confident our adaptive systems, which rely on principles like relative momentum, can handle a range of scenarios, none of which are dependent on any specific market environment.
This post marks the start of a series called “Observing the Herd,” where I’ll share candid reflections on the industry, Even Herd, current events, and more to help give more insight into my own opinion as well as the philosophies behind Even Herd. I hope you’ll continue to follow our progress and get in touch if you’d like to learn more about our strategies. You can also subscribe to our monthly newsletter for updates, sector allocations, and broader market trends. We look forward to staying in touch and navigating this changing landscape together.
Looking forward,
Sam
CEO & Founder, Even Herd
Comments