26 Feb 2016

Is Value Investing Dead?

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

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5 Aug 2015

The Secret to Stock Buyback Returns

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

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1 May 2015

Those Brits Know Investing

When academics evaluate a strategy like value or momentum, they test the data in a variety of ways to make sure that the effect that they are studying is real and not spurious (to use their term for bogus). When Rolf Banz first proposed the small cap effect in 1981 (the original study can be found here), he used US return data from 1936 to 1975.  He used the data that was available to him… Read More

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21 Apr 2015

Momentum: A Moving Body in Motion

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

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14 Apr 2015

A Value Investing Primer

Value investing is perhaps the oldest and best-known investment strategy, which basically suggests that cheap stocks tend to outperform expensive ones. The strategy was first popularized by Benjamin Graham, teacher and mentor to Warren Buffett, who also co-wrote one of the most important books in finance, Security Analysis, with David Dodd in 1934. Graham introduced the idea that stocks have an ‘intrinsic’ value that can be roughly estimated with a… Read More

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7 Apr 2015

A Small Cap Primer

In recent weeks, I’ve written about the various risk premiums that have been found in academia that both explain returns and offer some hope of beating the market. Each time, I wished that I could link back to an article that explains the concept more fully, so today, I am going to write the first of a series of articles explaining the well-known risk premiums. First up is the size… Read More

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2 Apr 2015

Equal Weight: Something New Under the Sun?

As you might hope and expect, we are constantly looking for ways to improve returns, reduce risk, or in a perfect world, both.  That means that we are always looking at strategies, evaluating their pros and cons and trying to figure out whether they are better than we are currently doing. One interesting strategy that we’ve looked at over the years that is simple to understand is to buy the… Read More

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28 Jan 2015

Size Matters, If You Control Your Junk

It should be no surprise that small cap stocks struggled last year compared to large cap stocks. While the S&P 500 enjoyed above average results earning 13.7 percent, the Russell 2000 index of small cap stocks only gained 4.9 percent (click here for a chart of major asset class results). A little more than a year ago, I wrote that there is a long-running debate in academia about whether small… Read More

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26 Jan 2015

When a Strategy Stumbles

Last year was tough for some of our stock strategies. For example, we take a portion of our large cap portfolio and invest in ‘value’ stocks. Another, equally sized percentage is invested in a strategy that buys ‘momentum’ stocks. I’m going to oversimplify here, but value stocks can be thought of as ‘cheap’ stocks. For a stock to be cheap, the market value of a company has to be low… Read More

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21 Nov 2014

A Look Inside Superior Performance

On Wednesday, I met with a client that I’ve worked with for more than 10 years. In fact, we signed the new account paperwork the night before my second daughter was born. As you might expect, my wife was not thrilled. In the late 1980s, this couple made a substantial investment with an extremely well known investor – someone I grew up watching on Wall Street Week with Louis Rukeyser…. Read More

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