Last week, I said I would preview slides from the 5th Annual Investor Social on January 30th. Before I go any further, I want to announce that we’ve hit capacity on the Investor Social and can’t accept any more RSVPs. We’re going to have to find a new venue for next year! Thank you to everyone that is attending! Last week, I showed a slide that I’ll discuss but offered… Read More
Investment strategies can be trendy. After the tech bubble, real estate investment trusts (REITs) were the rage. Then, just before the 2008 financial crisis, fundamental indexes, which weight stock positions by fundamentals like earnings, took hold. After the 2008 crash, managed futures and other alternatives were all the buzz. Then, it seems like the world couldn’t have enough factor funds. Now, the hottest thing going in the investment business are… Read More
I feel as though I’ve written this article a few too many times: value investing is struggling. Pioneered by Warren Buffett’s mentor Benjamin Graham, value investing is the method of buying stocks inexpensively, with the hope that the current problems that’s causing the cheapness pass, and the stock will rebound sharply. Decades into Buffett’s illustrious career, finance academics found that the process of buying cheap stocks led to higher than… Read More
For almost 50 years, one of the most controversial ideas in finance is that markets are efficient, as presented by Gene Fama’s Efficient Market Hypothesis (EMH) in 1966. Let’s start with a simple definition of EMH: Current market prices incorporate all available information and expectations and are the best approximation of intrinsic value. In some ways, it’s such a simple statement that it’s a little surprising that it’s so controversial…. Read More
Yesterday, the Wall Street Journal (WSJ) printed four articles in what appears to be a 17 article series on what they call ‘the quants.’ I was so excited to see these articles because I think you could fairly describe some of the strategies that we pursue as quantitative in nature. Unfortunately, I was turned off immediately. The second paragraph of the first article talked about how the quants use ‘high… Read More
Last week was particularly tough on retailers thanks to a report that showed online spending increased 1.4 percent while it declined -0.50 percent for brick and mortar stores. Department stores like Nordstrom’s and JC Penny both fell more than -10 percent on earnings and forward guidance news. Even though we don’t own either of these two retailers, we own others and the bad news made its way into the stocks… Read More
This past weekend was the ‘Woodstock for Capitalists,’ otherwise known as the Berkshire Hathaway annual meeting, where each year, tens of thousands of shareholders descend on Omaha, Nebraska to hear from the Oracle of Omaha, Warren Buffett. I’ve never attended myself, but I’ve read the book and watched the documentary (a trailer can be seen here). Before Airbnb, it was next to impossible to find a place to stay and… Read More
One of the most notable market reactions to the election is the rally in small cap stocks. For the month of November, the S&P 600 Small Cap index gained 12.55 percent, compared to a 3.70 percent gain for the S&P 500 index of large cap stocks. It was fourth best month for the S&P 600 Small Cap index since its inception in 1994. While the results were definitely a surprise,… Read More
You may have noticed that the small cap index in the table above, the Russell 2000, has been gaining ground recently on the S&P 500, the benchmark index for large cap stocks. The chart below shows the return for the Russell 2000 (in orange) as nearly caught up with the S&P 500 (in blue). The return difference, as we can see in the table is just one-third of one percent,… Read More
Acropolis diversifies in more ways than you may realize. In addition to the well known methods like single company exposure, sector, industry, geography, creditworthiness and asset classes, we also diversify by risk factors. I’ve written about the equity factors that we use (see a list of our primers on size, value, momentum and quality here), but I think it’s also important to note that there are some factors that we avoid…. Read More
