Expanding the Opportunity Set with Shareholder Yield

When most investors hear the word “yield” they immediately think about dividends. Things like stock buybacks and debt paydown typically don’t come to mind. But those are also yields, or ways companies can return cash to shareholders. When dividends, buybacks and debt paydown are combined, they give us something called shareholder yield. Calculating and sorting stocks by shareholder yield is a systematic way to identify companies that are returning cash to shareholders via these three… Read More

Five Questions: A Wealth Manager’s View of Factors with Michael Batnick

By Jack Forehand (@practicalquant) — Factor Investing poses some interesting challenges for wealth managers. On one hand, the evidence is very strong that investing using factors produces superior to returns to market cap weighted indexes over the long-term. On the other, factor strategies introduce another set of behavioral problems for clients because the extended periods of underperformance that are common in factor investing can lead to bad decision making and underperformance relative to index funds… Read More

Alumni from Airbnb and Uber are Fueling Tech

An article in The New York Times describes a trend in Silicon Valley whereby employees of tech start-ups are leaving to form new businesses, gaining support from “mafia” networks of former alumni. This isn’t a new phenomenon, according to the article, which says the cycle began back in the 1950s when a group of disgruntled Shockley Semiconductor employees (referred to as the “Traitorous Eight”) left to form Fairchild Semiconductor.  The trend continued decades later with… Read More

Warren Buffett’s Next Deal Looms Large

In this year’s letter to Berkshire Hathaway shareholders, billionaire CEO Warren Buffett wrote that the mere thought of completing another big acquisition “is what causes my heart and Charlie’s to beat faster.”  This according to a recent Bloomberg article. Since its last big deal—the 2016 purchase of Precision Castparts for $37 billion– the company has not been able to find another “elephant-sized” channel for its over $100 billion in cash. “Lately,” the article says, “investor… Read More

Successful Investing: Process Elements and Personality Traits

“To be good investors or research analysts, we need the right genetic predisposition and then must create the right circumstances to practice and hone these skills,” writes Joachim Klement, CFA in a recent article for CFA Institute. Klement prefaces his argument with a discussion about how, surprisingly, the influence of genetic traits increases over time, perhaps because our environment “reinforces genetically determined talent and hones this talent through deliberate practice”. He segues the discussion into… Read More

Manager Says Stock Price Gap Signals Opportunity

The valuation dispersion occurring in the market is presenting the “opportunity of a decade,” according to a recent article in Bloomberg. The article reports that a portfolio manager at the Julius Baer Group says the historic spread between the most and least expensive stocks is presenting strong buy opportunities for investors. The article also quotes Kairos Pegasus Fund’s Federico Riggio, who argues that along with above-average earnings growth, the inexpensive segments of the equities market… Read More

Rules for Small-Cap Investing

An article in Bloomberg last month profiles Samantha Lau, co-chief investment officer of small and SMID growth strategies at AllianceBernstein. Lau subscribes to some basic rules of small-cap investing, including: “Never sell half of your position. If you think something is wrong, exit and revisit.” “It’s never too late to sell a loser.” “A good company is not always s a good stock.” The article explains that Lau, along with four co-managers, adhere to a… Read More

Fund Fees, Already Driven to Zero, May Have Farther to Fall

A recent New York Times article reports that “something mind-boggling in on its way” with respect to investment fees, which it says “have dropped so low that you may have assumed they have gone a far as they can.” According to research conducted by the firm Flowspring, major companies will soon be paying customers to invest with them. “As we’ve learned from interest rates, zero is a psychological barrier, not a real one. The fund… Read More

Is There Hope for Value Investing?

A recent article in The Wall Street Journal argues against giving up on value investing notwithstanding more than a decade of poor performance. It contends, however, that there’s more uncertainty about the strategy than there once was because: Value investors have never been “ground down for so long;” If investors understand value’s “great history,” then they are less likely to overreact to bad news, which would mean that value stocks would become less of a… Read More

Gundlach: Modern Monetary Theory ‘Complete Nonsense’

An article in Bloomberg reports that in a recent webcast, DoubleLine Capital’s Jeffrey Gundlach characterized modern monetary theory (MMT) as “a completely fallacious argument.” Gundlach joins a group of critics of the concept– that the U.S. can’t go broke because it borrows in its own currency and can print dollars to cover its obligations—asserting that the idea is “ridiculous…What happens when the economy turns down?” He suggested that it could lead to a “significant boycott”… Read More