Most Read Post on Validea’s Guru Investor

Below are links to our most popular posts for this week on Validea’s Guru Investor blog. [1] What Gambling and the Oakland A’s Can Teach You about the Importance of Process [2] Value May Be Poised for Performance Over Growth [3] Ken Fisher: Stock Buybacks Are Not Evil [4] How 3% Yields Could Change the Investing Landscape ——- Photo: Copyright: arcady31 / 123RF Stock Photo  

The Former CEO of Alliance Bernstein on Pay-For-Alpha Fee Structure

A recent Bloomberg article recounts an interview with Peter Kraus, the former CEO of Alliance Bernstein and the man who advocated for performance-based fees for fund managers. While Morgan Stanley analysts say that a pay-for-alpha system would halve (if not eradicate) the profits of some active managers, the article argues, “the other way of looking at it is that customers would save a ton of money they currently pay in fees.” Here are some highlights… Read More

Investing: A Historical Perspective

An article in CFA Institute provides a historical overview of the finance industry over the past century, assigning memes to different periods: “Diversify Thy Portfolio: 1924-1974”—The invention of the first open-ended mutual fund in 1924 “kickstarted the diversification era” followed thirty years later by Harry Markowitz’s book “Portfolio Selection” which the article refers to as the seminal text on diversification. “Control Thy Portfolio Expenses: 1975-1994”—This period was marked by the invention of the index fund… Read More

The Active Money Manager Model No Longer Works

“Active money managers have underperformed benchmarks for far too long in one of the greatest bull markets in history,” according to a recent article in Bloomberg. As a result, the article reports, assets continue to flow toward passive investing strategies, “a shift that is shaking up markets in a not-necessarily-good way.” It adds that today’s top students are forgoing the financial services industry in favor of lucrative tech jobs, compared to 2006 when about 12… Read More

Value May Be Poised for Performance Over Growth

As investors are drawn to defensive investments, value stocks may make a comeback beginning this year, says one portfolio manager at Perkins Investment Management in Chicago. This according to a recent article in MarketWatch. The manager, Justin Tugman, says that a combination of higher interest rates and faster inflation bodes well for value strategies, and a potential trade war would “only add fuel to the fire.” While growth has been the better strategy in the… Read More

How 3% Yields Could Change the Investing Landscape

Rising Treasury yields are “prompting investors to dust off their playbooks for how to trade in an era of relatively higher rates,” according to a recent Bloomberg article. The article cites comments by Jim Paulsen, chief investment strategist at Leuthold Group, who wrote in a client note, “Historically, the stock market has done OK with rising inflation, provided economic momentum was also rising.” Paulsen added that stocks have performed well in moderate economic growth climates… Read More

Ken Fisher: Stock Buybacks Are Not Evil

In a recent USA Today article, famed investor Ken Fisher argues against the stance of some politicians that share buybacks should be banned, instead declaring they’re “great—for everyone. When firms repurchase shares, they destroy stock supply. Econ 101 taught us supply and demand move prices. Shrinking supply? Bullish!” Fisher goes on to argue how lower share supply also boosts per-share earnings and that the capital returned to shareholders can then be invested elsewhere. “Buybacks,” he… Read More

What Gambling and the Oakland A’s Can Teach You about the Importance of Process

By Jack Forehand (@practicalquant) —  I have a friend who is an infrequent gambler and won money almost every time he went to the casino. He did it by exclusively playing the slot machines. His approach involved sizing up the room and using his gut feeling to determine which machine to play. He used a similar approach to determine how much to bet. When that gut feeling approach said one machine was no longer likely to… Read More

Goldman and PIMCO Go for Some Battered Corporate Bonds

Goldman Sachs and Pacific Investment Management Co. (PIMCO) see “safe places, even in corporate bonds, to ride out credit and rate risk that loom large over an aging  growth cycle,” according to a recent article in Bloomberg. The sentiment stands in contrast to what Bank of America Merrill Lynch indexes showed as the “steepest first-quarter losses on U.S. investment-grade company bonds since 1996.” In a Bloomberg TV interview, Pimco’s CIO of global credit, Mark Kiesel,… Read More

Are Index Funds as Cheap as You Think?

In a recent Wall Street Journal article, columnist Jason Zweig rebuts an argument that index fund expenses are drastically understated. The argument comes from veteran value investor David Winters, portfolio manager of Wintergreen Fund, who in his latest letter to shareholders says that the typical S&P 500 index fund incurred expenses of over 4.3% in 2016.  Winters argues that index fund managers get away with “overpaying their bosses” more easily, as measured by shareholder votes… Read More