Monthly Archives: September 2010

The Latest Research on Active versus Passive Management

I thought this article from Morningstar.com was interesting. I will have to read the original studies: Are Fidelity Managers Active Enough?  It’s tough to beat the market by emulating it, but that doesn’t stop money managers at Fidelity and elsewhere … Continue reading

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Chance Favors the Connected Mind

I came across the video below on Paul Kedrosky’s Infectious Greed Blog. The speaker, Steven Johnson, a writer, gives an early shoutout to Matt Ridley and his book The Rational Optimist in which Ridley writes of “ideas having sex.” Johnson … Continue reading

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Michael Porter’s Appearance on CNBC

Michael Porter is a leading thinker on competition and strategy. I incorporate a “Porter” analysis in almost all of my investment decisions. If you have not been exposed to Porter’s five-forces model for analyzing industry competitiveness or heard about his three basic … Continue reading

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Joel Greenblatt’s Appearance on CNBC

Joel Greenblatt is a portfolio manager at Gotham Capital, a value-focused hedge fund, who had a big hit in 1997 with his whimsically titled book, You Can be a Stock Market Genius. Though written for individual investors, it became a must-have book … Continue reading

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How Smart is the “Smart Money?”

I have always been fascinated by the consistent data that show that individual investors are pathetic at timing markets. Continue reading

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Is Value Investing Riskier than Other Investing Strategies?

Efficient Market Hypothesis proponents, like good lawyers, argue that there is absolutely no such thing as a permanent edge in investing and any permanent edge that does exist is riskier than the alternatives. (“Your honor, my client was never in that woman’s apartment and he was only there to return her lost kitten”). I mean, why paint yourself into a corner?

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About this Week’s Barron’s Cover Story: Why do Investors Care?

The cover story of this week’s Barron’s is titled “What’s Ahead for Stocks” and it is accompanied by a cartoon of three strategists who are drawing curves on a white board (three different curves, I should add). The author, Kopin Tan, asks ten Wall Street strategists to predict what will happen to stocks in the near future based largely on their predictions of economic activity. It immediately brought to mind something Buffett once said:

“I’ve never made a dime predicting economic activity. We just try to buy businesses we understand at sensible prices.”[1]

Of course ignoring market prognosticators and buying good businesses at sensible prices is what all good value investors do.
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Beating the Street Redux

I recently re-read Peter Lynch’s One Up on Wall Street to see how it stood against the test of time. One Up was written in 1989 and was an instant hit in large part because Lynch was the successful manager of one of the largest mutual funds in the market—Fidelity Investment’s Magellan Fund.

Many have the impression that Lynch was a rarity: a portfolio manager who did not espouse a value investing philosophy but who consistently beat the market anyway. If that were true, it would mean there were two such investors in recent history: Lynch and Soros. But upon closer inspection, I think we have to scratch Lynch from that rare list. Lynch was a practicing value investor and his bows to value investors Buffett, Templeton, Max Heine, Michael Price, and John Neff and his many references to Ben Graham’s “Mr. Market” are testament to that. There is also this:

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