By Jack Forehand (@practicalquant) — There are many misconceptions about private equity investing. Many investors view it as a domain where the rich and institutions earn outsized returns that are not available to the average person. It is viewed as an exclusive club with huge benefits that only the elite can be part of. But at its core, private equity is just investing in companies much like public investing is. It is a bet on the… Read More
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Learning from Buffett’s Performance
In my last article, I looked at the stocks owned by Warren Buffett and Berkshire Hathaway and asked the question, “How Active is Buffett’s Portfolio?”. As we found out, the answer is very active in terms of how different the equity portfolio looks vs. the broader market index. The combination of Buffett’s portfolio and investing acumen has translated into one of the best investment track records in history. There are some interesting observations we can… Read More
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How Active is Buffett’s Portfolio?
By Justin J. Carbonneau (@jjcarbonneau) — With a $500 billion market capitalization, Berkshire Hathaway is the fifth largest company by market cap in the U.S. stock market and the majority of the company’s value comes from three sources. The first is the 60 or so operating companies Berkshire owns and the future earnings power of those companies. The second is the cash on the balance sheet and the optionality to invest that in in the… Read More
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The Case Against Value Stocks
By Jack Forehand (@practicalquant) — Confirmation bias is one of the biggest problems in investing. We all have a set of core beliefs, and we tend to surround ourselves with people who also believe them and focus on information that validates them. For me, one of those things is that value stocks will beat the market over time. There is no shortage of data to support value. The academic research shows that is has worked historically.… Read More
By Jack Forehand (@practicalquant) — It has been a long time since inflation was a major issue in the US economy. Unless you have been investing forty years, you have likely never experienced a situation where inflation was a significant concern for your portfolio. But with the federal deficit rising and US government debt at historically high levels relative to GDP, many investors worry that the days of benign inflation and low interest rates are coming… Read More
Below are links to our most popular posts for this week on Validea’s Guru Investor blog.- [1] Five Questions: Private Equity in Public Markets with Brian Chingono [2] Emerging Markets Are a Buy [3] The New “Dogs of the Dow” [4] Gundlach Says U.S. Debt is “Horrific” ——- Photo: Copyright: arcady31 / 123RF Stock Photo
The classic, hands-off investing strategy known as the “Dogs of the Dow” kept investors “relatively safe” last year, according to an article in CNBC.com. “If one had bought the 10 highest-yielding stocks in the Dow Jones Industrial Average at the beginning of 2018 and held them all year long, it would have only lost 1.5 percent, versus the Dow’s nearly 6 percent annual loss and the S&P 500’s 62 percent.” According to the article, this… Read More
During his annual “Just Markets” webcast last month, DoubleLine Capital chief investment officer Jeffrey Gundlach called the growth of U.S. national debt a “horrific situation,” likening it to “every household in America maxing out three $5,000 credit cards.” This according to an article in Bloomberg. Here are some other insights Gundlach offered during the webcast: Some recession indicators, such as junk bond spreads, consumer expectations and homebuilder confidence, are “flashing yellow;” If the U.S. dollar… Read More
An article in Fortune reports that, while many including such finance experts as Jeremy Grantham of GMO, Mark Mobius and Rob Arnott of Research Affiliates sing the praises of emerging market stocks, “to commonsense civilians and other skeptics, they look and feel like a trap. Who’s right?” The article outlines some of the risks and opportunities inherent in EM: By wagering on China, Mexico and India, investors are “embarking on a potentially lucrative but almost… Read More
Blackstone vice chairman Byron Wien said he expects a “major comeback to new highs for the stock market in 2019” according to an article in CNBC.com. In an interview with CNBC’s Squawk Box, Wien offered a preview of his 34th annual list of year-ahead economic, financial market and political surprises—a tradition he began in 1986 as chief U.S. investment strategist at Morgan Stanley. Here is a summary of the list: A weakening world economy will… Read More
“There are still lots of opportunities with all the changes going on in the world,” according to Canadian billionaire Jim Pattison, recently profiled by Bloomberg. Canada’s third richest man with a net worth of $6.3 billion, the ninety-year-old Pattison started his career by purchasing a Pontiac dealership in 1961 for C$40,000. He has since built a conglomerate of businesses that operates across 85 countries and includes supermarkets, fisheries, lumber, packaging, and even owns the Ripley… Read More
According to an article in CFA Institute, “The science of evaluating portfolio managers and then determining who to keep and who to send packing is straightforward—or so you would think. But the evidence remains financial advisers and their clients continue to make the same decision mistakes over and over.” The article explains that, typically, the process involves taking stock of percentage returns of different investment strategies and ranking managers against them. As a general rule,… Read More
A Morningstar article posted last month discusses an “emerging body of research that suggests it is possible to successfully time exposure to factors like value, momentum, small size, quality and low volatility,” but adds that “a healthy dose of skepticism is in order.” The article explains that while such factors reflect a strong long-term record, an effective timing strategy could help to offset the inevitable stretches of underperformance. However, it notes that much of the… Read More
According to an article in Institutional Investor, the attempts by active managers to outperform benchmarks by running concentrated portfolios is being undermined by their efforts to “manage risks by diversifying into hundreds of stocks.” The article suggests that the use of “ensemble methods,” which rely on artificial intelligence and machine learning, could afford firms the opportunity to use “the highest conviction picks of multiple managers, rather than the single manager employed by most active funds,… Read More