Thoughts, ideas and insight from the top minds in the investment world
By Jack Forehand (@practicalquant) — Whenever the market declines, the news is filled with information that can lead investors to panic. That is no surprise since doom and gloom sells. Even with the small pullback we have recently had (we can’t even call it a correction since the market hasn’t declined 10%), there has been no shortage of negative headlines and calls for impending doom. I have previously written about the dangers of letting these headlines… Read More
By Jack Forehand (@practicalquant) — Everyone wants to follow the investing advice of market legends. After all, that level of success is typically not achieved by accident. Investors want to learn from their wisdom. They want to do what they do. In some cases that can be a slippery slope, though, and it is important to consider the advice of market legends in the context of your own personal situation. . Howard Marks’ new Book, Mastering… Read More
According to research conducted by AQR Capital Management, the success of superstar investors such as Warren Buffett and George Soros comes down to a few key strategies. This according to an article in CNBC.com. In a recent podcast, AQR co-founder David Kabiller said, “One big takeaway from Warren Buffett is: Discipline is really important to being a long-term successful investor,” along with patience and conviction in one’s business strategies. AQR’s research revealed that the Berkshire… Read More
An article in Bloomberg last month discusses the potential repercussions of changing the corporate earnings reporting requirement from four times a year to two (as contemplated in one of President Trump’s August tweets). Although supporters of the president’s idea say moving to a biannual reporting requirement would free up U.S. CEOs to focus more on the big picture and give flexibility to small companies, critics say such a switch, “might reduce transparency for the investing… Read More
In a recent Bloomberg article, columnist Barry Ritholtz offers a tongue-in-cheek “after-the-fact explanation in great detail and with complete and utter certainty of what just occurred in the markets, and why.” Ritholtz goes on to explain that hindsight renders last week’s “sudden and unexpected decrease in share prices” as obvious, but adds, “the alternative to this soothing narrative is an unimaginable world of random disconcerting events. This stands in stark contrast to how we prefer… Read More
Morgan Stanley’s chief U.S. equity strategist Michael Wilson believes that there are “ominous trends occurring under the surface of the major indexes.” This according to an article in Barron’s. These trends, Wilson argues, may be signaling that there’s more potential for weakness than we may currently see. In a note to clients, Wilson noted that the U.S. equity market has moved “decidedly more defensive and value is showing more persistent performance versus growth.” He added that… Read More
A Bloomberg Markets Odd Lots podcast last month featured an interview with Howard Schilit, forensic accounting expert and author of “Financial Shenanigans: How To Detect Accounting Gimmicks & Fraud in Financial Reports.” Schilit discussed ways companies can disguise earnings, how accounting rules have lagged behind the times, and how investors can spot red flags. Here are some highlights from the interview: Schilit describes accounting within the context of behavioral science, explaining that companies have to “tell… Read More
Below are links to our most popular posts for this week on Validea’s Guru Investor blog. [1] The Challenges of Market Cycle Timing [2] How to Find Value in a Complicated Market Environment [3] The Best Mutual Funds are Cheap and Boring [4] When Better Profit Margins Aren’t Better ——- Photo: Copyright: arcady31 / 123RF Stock Photo
In an interview with CNBC in September, Bridgewater Associates founder Ray Dalio discussed his new book, “A Template for Understanding Big Debt Crises,” in which he shares lessons learned from history’s financial downturns. Dalio’s book describes the six stages that lead to debt crises. Of these, he says, the most important is the “bubble stage” in which asset prices are rising and people are borrowing excessively. “Central banks don’t pay much attention to the bubble… Read More
A recent article in Forbes outlines what Warren Buffett frequently cites as the central themes of his investing approach—which can be found in two of his favorite books: The Intelligent Investor, by Benjamin Graham, and General Theory by John Maynard Keynes. The article breaks down the three themes as follows: Investment vs. Speculation: Graham’s book differentiates between investing, which consists of “buying stocks for less than they are fundamentally worth,” and speculation, which is “trying… Read More
A recent article by McKinsey & Company argues that there are times when cost cutting and higher prices can hinder a company’s growth and harm its value. Offering several examples, the article argues how cost cutting can be “counterproductive, starving a company of new sources of growth and undermining performance over the long term.” Offering data from a recent study of 615 of the largest nonfinancial companies (from 2001 to 2013), the article reports that… Read More