Welcome to November. The October jobs report was released this week—a headline-grabbing number that paints a dire picture of the labor market. Just 12,000 jobs were added last month, significantly undercutting the forecast of 100,000. For all the meticulous forecasting by Wall Street analysts and economists, the reality turned out to be quite different. But a closer look shows that there’s more to this number than meets the eye.
Last month’s job market was uniquely pressured by multiple external disruptions. We experienced a major port strike, affecting supply chains and trade flows, as well as two hurricanes that swept through large swathes of the Southeast and Florida. On top of this, Boeing’s strike involving 33,000 workers added to a difficult backdrop. So, while the headline jobs figure is the lowest since 2020, the underlying story is less about economic collapse and more about extraordinary, temporary challenges.
Despite the grim job growth number, the unemployment rate remained steady at 4.1%, and average hourly earnings held firm. If the labor market were truly cracking, we’d expect to see wage pressure ease and unemployment spiking. The bond market, which typically rallies in response to weak job reports, actually dropped on the long end today, signaling that investors are still more concerned about inflation, the Middle East, and fiscal policy than a collapse in employment. What we’re seeing is a bond market grappling with uncertainty on multiple fronts, and notably, fiscal spending that continues unchecked regardless of who takes office in January.
While some in the market may frame this jobs report as a sign of imminent economic distress, it’s important to keep in mind that context matters, especially in the lead-up to next week’s critical election. Volatility is almost guaranteed. In such times, it pays to focus on fundamentals and remain clear-headed.
A New Era of “Ruthless Efficiency” in Markets
As we discussed with Ryan Faluna recently, market efficiency is evolving fast. AI-driven tools and algorithms are increasingly absorbing market data in real time, translating new information into prices faster than ever. This “ruthless efficiency” will likely narrow the advantage for individual investors who use relative growth rates, PEG ratios, and pattern trading to spot opportunities. In a highly efficient market, where prices reflect information almost instantly, buying broad market indexes could seem like the most viable strategy.
Yet, two elements should remain viable and profitable: deep value and fundamental momentum. AI’s emphasis will likely center on high-volume stocks with fast-moving data, leaving pockets of deep-value opportunities—particularly less liquid stocks—off its radar. This presents a clear advantage for investors who can identify solid companies trading below intrinsic value. These stocks, ignored by larger pools of capital, can still offer outsized returns, especially as they either improve operationally or become attractive takeover targets. Additionally, fundamentally strong stocks with robust earnings growth and improving returns on equity should also benefit from AI efficiency, as rapid price adjustments will drive returns for those already invested.
Portfolio Highlights
Given the elections, we won’t be adding new positions this week. The market is likely to experience emotional, potentially erratic trading in the days ahead, and we’d rather not be caught in the crossfire. That said, here’s a quick update on our current positions:
- Zeta Global Holdings (ZETA): Zeta had a strong week, up 4.2%. KeyBank initiated coverage with a $40 target, giving it a solid boost. We remain bullish on Zeta ahead of its November 11 earnings release.
- Baker Hughes (BKR): With a steady performance this month, Baker Hughes remains a core holding. It recently secured a contract to supply Petrobras in Brazil, further solidifying its position in global energy markets. In a world increasingly reliant on data centers and AI, Baker Hughes is a solid play on the energy needs of the future.
- Flexsteel Industries (FLXS): After a stellar month—up 32%—Flexsteel is experiencing some profit-taking. However, the fundamentals remain strong, and we anticipate continued earnings growth.
- Oscar Health (OSCR): Oscar has been on a tear, gaining 8% this week and reclaiming key price levels. With upcoming earnings and new insurance offerings in multiple states, Oscar’s tech-driven approach to health insurance should fuel further growth.
- Idaho Strategic Resources (IDR): Gold prices have pulled back, and so has Idaho Strategic. But with its new mining developments and the potential for gold to rise amid geopolitical and inflationary pressures, we’re optimistic about its prospects.
- KKR & Co. (KKR): Down 1% this week, but KKR continues to impress. It’s raising a $20 billion buyout fund and expanding its partnership with Energy Capital Partners to invest in power generation for AI and data centers—an investment with monumental growth potential.
Election Week Strategy: Staying on the Sidelines
During election week, the market will be full of noise and heightened emotions. Rather than trying to capitalize on short-term volatility, we’re holding our positions and letting the dust settle. These moments can lead to irrational price swings, providing potential opportunities to acquire great stocks at discounted prices once things stabilize.
With fundamentally strong holdings, we’re positioned to withstand the ups and downs of the coming days. Next week’s election might inject drama into the market, but we’re confident that our portfolio’s deep-value and momentum-based picks will continue to show resilience.
Enjoy the week, stay calm, and let the market’s “shallow pool of sharks” play out their moves. We’ll be back next week, or sooner if a compelling opportunity emerges. Until then, stay grounded in fundamentals.