Up for the day. Down for the month. That was the market in a flash. On to March we go.

February is the shortest month. But in subjective terms, it ‘feels’ like it lasts forever (probably the short days and cold nights). Yet there are early signs of spring here in the High Plains offices of Bonner Private Research.

What do I mean?

Investment Director Tom Dyson called the action in the Dow/Gold ratio an ‘exciting development’ in a private note on Tuesday. He was talking about a decline in the ratio below five. That’s the trigger point where we sell gold and buy stocks. And if we’re right, it should be the last best chance to take advantage of low prices and compounding the reinvested dividends of companies that generate tons of free cash flow in a highly efficient manner.

That led to a long phone conversation on Wednesday morning (close to midnight in India for Tom) about what we’d be buying. I can tell you Tom and I would like nothing more than to be deploying our cash into great businesses at valuations that are impossible to pass up. How close is that to happening, though? Check out the chart below.

(Click on image to enlarge)

For the trend to be our friend again, ‘value’ has to outperform ‘growth.’ Those are just two of many ‘factors’ that group stocks into big baskets. If the baskets are well-built, you can find correlations and relationships between how they perform. Such is the case with growth and value.

The higher the ratio, the more ‘growth’ stocks are crushing ‘value’ stocks. In this cycle, ‘growth’ means large cap tech stocks (small caps have been left behind by the big money). The end of 2021 saw a double peak in the ratio and then a huge decline. Value outperformed until 2023 (much of which we captured in our Trade of the Decade, and in our energy and tanker plays).

Then along came Chat GPT and the AI/GPU boom. That’s been rocket fuel for stocks, especially large cap tech stocks. The ratio between the two Vanguard funds actually made a new high at the end of 2024. But along came 2025. Year-to-date (early days) value is outperforming growth. Where to from here?

It depends on what you mean by ‘value.’ There are 343 holdings in the Vanguard Value fund. The big ones are household names. You can thin the herd a little by screening for anything selling at less than 20 times forward earnings, less than four times sales (those are still fairly aggressive valuations historically, but quite conservative in the context of the current market).

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