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
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
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
Value stocks are undoubtedly having a tough time these days. As I first wrote last November (click here for the article), value stocks are undergoing their worst period of underperformance since the tech bubble during the late 1990s. For the 10 years ending January 31st, the Russell 1000 Value index is up 7.03 percent compared to 7.92 percent for the Russell 1000 index of large cap stocks and 8.68 percent… Read More
As I wrote earlier this week, the plunge in oil prices has dramatically cut profits for energy firms (see the article here). Some of those companies have been using their excess cash over the last few years to buy back shares of their own stock, which reduces the number of shares outstanding held by investors. Last year, I looked at buybacks versus dividends (read the article here) and today I… Read More
In recent weeks, I’ve written about two well known risk factors, the size premium and the value premium. Today, I’ve got a more difficult topic to cover: momentum. Virtually everyone agrees that you can find evidence of momentum in the data, but there’s a lot of disagreement about why it exists and how it should or shouldn’t be applied in the real world. In short, momentum is the tendency for stocks that… Read More
