Buffett’s Secret to Investing Success

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

When Better Profit Margins Aren’t Better

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

How to Find Value in a Complicated Market Environment

An article in Morningstar outlines a discussion with global equity manager Peter Wilmshurst regarding how his team chooses strong value stocks within an increasingly expensive global environment. Wilmshurst says, “I think when most people make observations about what the share market has done, how expensive it is, they go to the U.S. The U.S. is the biggest market. It’s the biggest country in pretty much all our portfolios at this point in time. But there’s… Read More

The Best Mutual Funds are Cheap and Boring

Cheap mutual funds may save investors from their worst impulses, says an article in Barron’s. According to the article, investors in the highest-cost funds “suffer the double whammy of first being set back by high fees, and then buying and/or selling at the wrong time,” citing supporting data from a recent Morningstar study. One theory, the article explains, is that “investors who buy low-fee funds are smarter than their peers and don’t overtrade.” Another, says CFRA… Read More

The Hedge Fund Strategy That Isn’t Working

Although tracking trends in financial markets was once a profitable investment strategy, the approach has fallen on hard times due to crowding. This according to an article in The Wall Street Journal. Trend-following is explained as follows: “If a security is going up—usually measured by a short-term moving average rising about a long-term moving average—then it’s time to buy. If it falls below, it’s time to sell.” During the 1990s and 2000s, the article reports, these… Read More

The Challenges of Market Cycle Timing

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

How Many Stocks Does it Take to Be Diversified?

“Many people believe that diversification beyond 10 or 20 securities is superfluous despite clear research indicating that the opposite is in fact the case,” says an article in the July issue of the AAII Journal. The article defines different types risk (including firm risk, industry risk and market risk), then cites past research findings and a “history of erroneous reasoning regarding adequate portfolio size.” It outlines the findings of an AAII study to “address the… Read More

Greenblatt Mixes Active and Passive in One Fund

An article in Barron’s profiles the evolution of the Gotham index Plus fund, which was created by Gotham Asset Management founder Joel Greenblatt in an effort to “marry the steadiness of index investing with the market-beating advantage of active management—which, in  this case, means both stock-picking and shorting.” The fund is now three years old, and the article reports it has returned 15.7% annually since its inception, “ahead of the S&P 500’s 13% and 99%… Read More

How Gold Performs in Different Market Scenarios

Proactive Advisor recently published part of a white paper authored by active money manager Flexible Plan Investments regarding what it terms the “gold debate”—a “broad overview of the tangible benefits of portfolio diversification with gold, and some eye-opening data suggesting a much more important role for gold in portfolios that seek optimal risk-adjusted returns.” The article offers arguments in favor of including gold in an investment portfolio, including using it as a: Hedge against inflation… Read More

Could Index Investing Miss the Best Stock Bets?

A “comeback could be in the offing for active managers amid higher market volatility and ongoing geopolitical risks,” according to an article in Barron’s. The article quotes global macro strategist Vincent Deluard of INTL FCStone, who advocates for “identifying and investing in individual gems” that could potentially outperform indexes. Deluard says that the popular stocks in indexes tend to be more expensive, and overvaluation is leading to disappointing performance. The article notes, however, that it’s… Read More