The Evolved Investor

How rocky will the markets be in 2025 and what to do about it?

Many market strategists are advising caution in 2025, with valuations appearing frothy from a Shiller PE ratio perspective. Berkshire seems to be preparing for a substantial correction as it builds a historic $325B pile of cash. Yet Jim Paulsen, the former Chief Investment Strategist at the Leuthold Group and Wells Capital Management, makes the bull case citing a “cyclical run” the Fed set off when interest rates began coming down. “If I think about the whole year, of 2025, I think I’m going to sit in value and cyclical stocks,” Paulsen stated during a recent New Year’s Eve podcast.

What is “The Evolved Investor”

I’ve been investing my entire adult life. Shortly after I turned 18 years old, I took $2,000 that I had saved up from bussing tables at a local diner and opened a ROTH IRA. In the years leading up to that moment, I had read all the books on finance, economics, and investing in my local public library and I came to two conclusions:

1. There’s a lot of bogus, gimmicky investment advice out there designed to sell you something

2. The best strategy was, is, and always will be value investing for the long term

In those years, I was drawn to Vanguard (and its low fees) as an asset manager and considered myself a “Boglehead” after legendary investor and Vanguard founder, John Bogle. Over time, I wanted to have more control over my investments and, of course, came across Benjamin Graham’s The Intelligent Investor which laid out a series of mental models and concepts about how to think about investing. This remains one of my favorite investment books. However, it is getting more challenging to determine the value of future cash flows when the money supply is expanding so rapidly as well as new technologies are making once seemingly strong economic moats irrelevant.

Over the last few decades, my original $2,000 investment has grown substantially. With regular contributions, calculated risk-taking, and the ultimate magic of time, built a sizable net worth in my early 40s and am on track to be a millionaire way ahead of retirement age. And you know what? I succeeded by starting only with what I had, without taking on a second job, and even with some of life’s unforeseen roadblocks in my way.

How did I do it?

Well, that’s why I started The Evolved Investor. After years of having investment conversations and providing tutorials to friends and family, I wanted to share my thoughts and opinions with as many people as possible. Every week. For free.

Our Thesis:

• The core tenants of value investing are still valid: buy quality companies at a reasonable price.

• However, it’s becoming more challenging to navigate the waters; markets are structurally different today than when Graham wrote and revised The Intelligent Investor from 1949-1974.

• Technologies are more disruptive and faster than ever. AI can potentially displace or transform business models at a rate never before experienced and recent floods of expansionary monetary policy have meant increased asset prices of all kinds (including stocks and real estate) making valuations harder to ascertain.

• Outsourcing the management of your wealth to an index fund means potentially leaving opportunity on the table.

• Managing your portfolio wisely with the right mental frameworks and willingness to adapt to the modern investing landscape is possible.

The Evolved Investor is a vital and easy-to-implement resource for navigating the modern investment landscape. Each week, you'll get a fresh take from the latest financial news, an original analysis to support your investing practice, and a new stock idea to help you sustainably grow your wealth and achieve financial freedom. So, I hope you'll join me for the road ahead and hit subscribe. And if you find value in what I'm sharing, by all means, please bring a friend along for the ride. The more, the merrier.

Sponsored Post

UPDATE 3/6/25: Due to the SEC fraud investigation, The Evolved Investor (TEI) rescinds its recommendation below on CIVI

Civitas Resources (CIVI)

Civitas Resources is a Colorado-based oil & gas producer that primarily produces oil. As energy stocks go, there seems to be some solid value here, trading at the lower end of its 52-week range, with a PE ratio of 4.77, and a dividend yield of 10.3%. Total operating revenues increased to $3.9B, a 66% YOY increase from the end of Sept 2023 to 2024. At the same time, net income rose 42%, while basic EPS rose from 5.75 to 6.91 per share. This is a growing and successful company that we feel Mr. Market is not fully appreciating at the moment.

While we cannot predict the price of oil, a major driver of revenue for Civitas, the company is well positioned to control the output of its operations (costs), CEO Chris Doyle said this during the latest earnings call in November 2024: “As we look to 2025, we are focused on generating significant free cash flow, reducing leverage, and returning capital to shareholders. Our high-quality assets, with positions of scale in the lowest-cost oil basins in the U.S., strong capital discipline, and top-tier execution, position us well to create value in 2025 and beyond.”

Civitas has a strong share buyback program, repurchasing $78M in shares, in addition to the $149M it distributed to shareholders as dividends. In our opinion, even if the stock price goes horizontal for some time, the shares can generate cash via the dividends and the share buybacks provide a margin of safety while shareholders wait out for share appreciation driven by oil price increases.

Disclosure: TEI is long CIVI

Did a friend send you this newsletter? Subscribe below to get weekly news and bespoke content around value investing to make informed decisions about your portfolio.

Want to advertise with us? Send us a note!

_{Legal Disclaimer: The Evolved Investor is for information purposes only and is, by law, not personal investment advice. Concepts and ideas are for your consideration only. We encourage our readers to do their own due diligence. Investing has inherent risk, and investments can lose value.}