Why Fundamentals Fail the New Economy | Jacob Pozharny on “Sentiment” Analysis’ Role in New Economy Stocks

May 2, 2026

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5 min read

Jacob Pozharny, co‑CIO at Bridgeway Capital Management, opened the conversation with a chart that upends a core assumption of value investing. For old‑economy industries—household products, autos, real estate—the classic relationship holds: higher profitability earns a higher valuation multiple. But for new‑economy stocks—pharma, semiconductors, software—that relationship flattens and even turns slightly negative. Pharma companies with near‑zero return on equity trade at price‑to‑book multiples of four or more. The reason is accounting. R&D spending reduces reported earnings and book value, making these firms look expensive by traditional metrics even when their intangible assets—patents, customer relationships, brand equity—are enormously valuable. Academic work extending Bruce Lab’s research confirms that cross‑sectional fundamentals have become much less predictive for companies with high levels of intangible capital. For old‑economy stocks, discounted cash flow analysis still works. For new‑economy stocks, it systematically misleads.

A bifurcated stock‑selection process

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What you'll learn

1 Timestamped Navigation Outline
2 (00:06) **Episode Introduction & Guest Welcome** - Jack Farley introduces Jacob Pozharny, Co-CIO of Bridgeway Capital Management
3 (00:35) **Defining the Four Key Terms** - New economy stocks, old economy stocks, fundamental analysis, and sentiment analysis are framed before discussion begins
4 (01:24) **The Fundamental Problem: Intangibles Break Traditional Valuation** - Cross-sectional fundamentals have become less predictive for high-intangible companies
5 (02:42) **How Badly Does Value Investing Fail on Tech Stocks?** - Applying 1960s-70s value investing to today's technology stocks leaves investors far behind
6 (04:05) **The PBRE Chart: Old Economy vs. New Economy** - A visual demonstration of how markets price profitability differently across industries
7 (05:42) **Why Pharma Looks Expensive But Isn't** - The accounting treatment of R&D distorts earnings and book value for intangible-heavy companies

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Show Notes

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In this episode of "Monetary Matters," Jacob Pozharny, Co-Chief Investment Officer and Portfolio Manager at Bridgeway Capital Management, explains why traditional fundamental analysis often fails "new economy" stocks due to the rise of intangible assets like R&D and customer relationships. He details a bifurcated investment strategy that utilizes advanced sentiment analysis for high-tech sectors while maintaining a classic fundamental approach for "old economy" industries. The discussion highlights how the 2026 Iran war is currently creating significant market dislocations in global energy and shipping, offering unique "alpha hunting" opportunities identified through proprietary textual analysis of earnings calls. Pozharny argues that the most effective stock picking occurs in less efficient mid-cap and small-cap markets outside the U.S., where the potential return spread is significantly wider than in the S&P 500. Finally, he outlines his firm's market-neutral approach to building idiosyncratic return streams that remain uncorrelated to broader market direction by leveraging unique data such as buy-side borrow availability. Jacob is portfolio manager of Bridgeway Global Opportunities Fund (BRGOX). Recorded April 16, 2026.

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