By Justin Carbonneau (@jjcarbonneau) In December, Barron’s had two good pieces on the legendary Fidelity fund manager, Peter Lynch. Packed with Lynch-isms about successful long-term investing, active stock picking and opportunities into today’s market, the articles got the attention of lots of investors, and rightfully so since Lynch was one of the most successful mutual fund managers ever, retired at the top of his game, and left a long lasting mark on a generation of… Read More
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Excess Returns, Episode 7: The Importance of a Sell Strategy and Disciplined Rebalancing Approach
As difficult as it is to figure out the right stocks to buy, determining when to sell can be even more challenging. In this episode, we look at the important factors to consider when deciding when to sell and develop a systematic sell framework that can be used for both quantitative and traditional investors. We discuss: Why it is important to develop a sell strategy up front How to limit the impact of emotion and… Read More
A report from Pew Charitable Trusts shows that state retirement systems are adjusting their return expectations to lower levels over the next 20 years. This according to a recent article in Chief Investment Officer. The Pew report shows that from late 2007 to mid-2009, public pension plans lowered return targets due to changes in the long-term outlook for financial markets, adding that while the US experienced annual GDP growth of more than 5.5% from 1988… Read More
While the study and concepts of behavioral economics has drawn much attention and interest over the past decade by “explaining all the mind-bending ways people, try as they might, don’t act rationally,” a recent Bloomberg article argues that for a “small, but vocal group of skeptics, the field has quickly become a victim of its own astounding success.” According to the article, critics of behavioral economics believe there is a tendency for those who have… Read More
Private equity firm TPG is creating a fund to invest in public companies, “to offer its experience to aid in better decision making,” according to a recent article in Bloomberg. The Strategic Capital Fund will reportedly focus on building minority positions in large companies, seek board seats and provide advice on corporate governance and environmental issues. But those familiar with the matter claim that the new fund “won’t write attack letters, launch proxy fights or… Read More
A recent article in Forbes tells the story of EquBot, a San Francisco based ETF advisory firm that uses proprietary software for stock picking. The firm’s chief executive, Chidananda Katua, got the idea during a business school lecture on hedge funds he attended at UC Berkeley four years ago: “Khatua imagined that something powerful might come out of the ability to blend precise financial data with the fuzzier information to be found in annual reports… Read More
An article in Institutional Investor reports that institutions are questioning the value of internal rate of return (IRR), a widely-used measure of portfolio performance. According to Jos van Gisbergen, who runs private equity at Achmea Investment Management, the accuracy of IRR is compromised by the industry’s increased use of subscription credit lines (to finance transactions before funds ask for capital from their investors). In an interview with II, he said that IRR is a “tool… Read More
While many “hot” stocks are still in fashion, a new study by Research Affiliates argues that they haven’t “become permanently more profitable. So, value stocks should eventually outperform simply because their shares are cheaper.” This according to a recent Wall Street Journal article by columnist Jason Zweig. The article reports that over the past year, stocks like Apple and Microsoft have returned 108% and 60%, respectively, “dwarfing the performance of value stocks.” But Research Affiliates… Read More
This article was originally published on March 5, 2018, but the performance and stock list has been updated. By Justin J. Carbonneau (@jjcarbonneau) — There is no shortage of evidence showing value investing works over time. From the actual track records of great investors like Warren Buffett, Mario Gabelli, Bill Ruane and Tom Knapp, who were inspired by value investing techniques developed by Ben Graham and David Dodd, to numerous tests and academic studies that have… Read More
Although 2019 marked a year-long rally for the stock market, a recent Barron’s article notes that, “underneath the broad optimism,” various factor groups moved in and out of favor along with a shifting macroeconomic environment. The article outlined the year’s events and the corresponding impacts: In the first four months of the year, all factor groups were “running close to each other” with high-quality and growth stocks performing slightly better. But the increased tariff on… Read More