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Boris Marjanovic  

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  • A New CEO Won't Save Twitter [View article]

    Judging from your angry comment, it's easy to tell that you are a Twitter investor who lost money. It's not a big deal, we all make investment mistakes.

    "Looking for objective views and what might be possible with the right leadership."

    As I mentioned throughout this article, there is no "right leadership." Costolo wasn't as bad as people make him out to be, he was just unlucky in the fact that he was the leader of a bad company. There is a lot of luck involved in corporate performance. The simple fact of the matter is that Twitter does not have the same advantages that Facebook has. Facebook has these advantages, not because it's better managed, but because it was more lucky. It doesn't matter who the new CEO is, Twitter's performance won't change much. The economics of the business itself matter most, not the management team.
    Jul 15, 2015. 01:46 PM | 3 Likes Like |Link to Comment
  • Market Hits New Warning Signal Today [View article]
    The market will eventually crash, no doubt about that. But when exactly this crash will occur is impossible to know precisely. The market looked extremely overpriced in 1997 as well, and yet we went on to experience the strongest bull market in human history. I'm not saying we will experience the same thing this time, just that the future is always full of uncertainty. The best strategy is one that takes advantage of bull markets and hedges against bear markets. This way no useless prediction-making is necessary.
    Jul 14, 2015. 04:26 PM | 1 Like Like |Link to Comment
  • The Unreliability Of Human Judgment [View article]

    Politics and voting is probably one of the most subjective things in existence. For example, most people who vote for a president (or any other politician) do so using their automatic System 1 thinking. Of course, politicians know this . . . so fooling most voters is not all that difficult.

    I remember one voter, on live television, saying that the only reason he voted for Obama was because he was the same skin color as him. This type of decision is automatic and based on pure emotion. It's irrational and not a very good reason to vote for someone. (Disclosure: I myself also voted for Obama, but I tried my best to be more objective about it).
    Jun 27, 2015. 11:07 AM | Likes Like |Link to Comment
  • The Unreliability Of Human Judgment [View article]
    User 8202401,

    "For me it all comes down to the fact that I trust data backed by long-term historical success more than I trust my own visions about the future."

    Couldn't have said it better myself! Objective, empirically tested knowledge is what counts. This is why quant investing is superior to more subjective traditional investing.
    Jun 26, 2015. 11:04 AM | 2 Likes Like |Link to Comment
  • The Unreliability Of Human Judgment [View article]

    That's what happens when you rely on just one biased and overworked editor, who reads dozens of articles per day, to judge quality.

    I've noticed that articles that have a bunch of charts and pictures (which usually add no meaning to the thesis of the article) tend to have a much higher chance of being tagged as an Editors' Pick. Humans are so easy to fool, which is why most things need to be quantified. It's more objective and fair.
    Jun 25, 2015. 06:58 PM | 4 Likes Like |Link to Comment
  • The Unreliability Of Human Judgment [View article]
    It would be like saying "at least a nod to Einstein would have been appropriate" when talking about E = MC^2. Every knowledgeable reader will know this, so no need to waste time writing about it.
    Jun 25, 2015. 06:39 PM | 1 Like Like |Link to Comment
  • Simple Sector Adjustment For Value Investing [View article]

    "While quantitative methods do have have a lot to be said for them, it may not be a good idea to ignore qualitative factors altogether."

    Qualitative factors don't mean much. They are subjective. For instance, does company XYZ have a good management team? Could be yes and no...depends on the person answering the question. If a company happens to be profitable and successful, people usually attribute this to the quality of the management. People never think about the possibility that the reason the company is successful could be purely due to luck.

    Simple statistical models outperform the subjective opinions of experts, not only in investing, but in literally every field -- from medicine to law to politics. It's an undeniable empirical fact. I've written about it here:

    And just FYI, Benjamin Graham only used quantitative factors to select stocks. In fact, he is known as history's first quantitative investor. And the most successful hedge funds in the world are quant funds. I suggest you read about Renaissance Technologies.
    Jun 14, 2015. 12:19 PM | 1 Like Like |Link to Comment
  • Simple Sector Adjustment For Value Investing [View article]
    Very good article! Keep up the great work!
    Jun 8, 2015. 11:23 AM | 1 Like Like |Link to Comment
  • Looking For Stability? Stop Looking For Dividends [View article]

    Neither standard deviation nor beta measure true risk. At best, they are measures of uncertainty. Forget the overly-simplified nonsense you learned at business school. Your portfolio can have a very low standard deviation and still blow up. True risk is losing money, and something like standard deviation can't measure it accurately.

    The strategy I described above, however, does work very well in the long run. Whether you use beta or standard deviation makes little difference -- both measure how much a stock moves around. And the simple empirical fact is that stocks that have lower volatility tend to be more stable companies. This is because there is usually less uncertainty about those companies' futures.
    Jun 4, 2015. 07:14 PM | Likes Like |Link to Comment
  • Looking For Stability? Stop Looking For Dividends [View article]
    I have backtested all of these strategies. What I have found is that combining low volatility and dividends together works far better than using any of the two variables on its own. Low volatility (or low beta) dividend paying stocks are essentially high quality companies that pay dividends, exactly what most people are looking for.
    Jun 4, 2015. 11:27 AM | 4 Likes Like |Link to Comment
  • Price-To-Cash Flow: The Most Important Fundamental Stock Indicator [View article]
    "There are other relevant items such as FCF and EBITDA. They actually produce significantly better historical results."

    I was actually going to mention that. In fact, EBIT and EBITDA/Enterprise Value beat all other valuation ratios over the long run, including Cash Flow-based ratios. Sales/Enterprise Value also works very well (and it is harder to manipulate sales than earnings). Moreover, as you alluded to towards the end of your article, ranking stocks based on multiple different valuation ratios is probably the best overall solution.

    I am also interested in seeing more research like this but using normalized earnings, cash flow, etc. Normalizing might help avoid "value traps" that benefit from one-time events that temporarily boost earnings and/or cash flow. I did my own research on this and the results look pretty good.
    May 31, 2015. 12:45 PM | 5 Likes Like |Link to Comment
  • How Not To Beat The Market [View article]

    Yes, it's a very simple allocation strategy. Nice to see there are people who actually implement it in their portfolios. As you mentioned, over time you should increase it to 80/20, and perhaps even 90/10.
    May 30, 2015. 10:20 AM | 1 Like Like |Link to Comment
  • The No. 1 Stock In The World - Part 2 [View article]
    "What's ignorant about it? And what hand do you recommend they play?"

    The person who said "they have to play the hand they are dealt" must give that answer, since, according to him at least, only skill determines outcomes. What's so ignorant about what he said? Well, the fact that he believes that luck doesn't play a role in life. And he does believe this, just read his ignorant comments. All I said was that good luck + skill = success. It's a very simple equation, but most people don't understand it.
    May 29, 2015. 06:56 PM | 1 Like Like |Link to Comment
  • How Not To Beat The Market [View article]
    Investing Discipline,

    The way I structure my barbell strategy is slightly different from what I described above. Most of my money is invested in my fund (which is a quant fund . . . models chose what to buy/sell, not irrational humans). However, I do use a small amount of my capital in another trading portfolio to speculate. The average person, of course, doesn't have a fund to put money in. So the best solution for them is what I described above. The core of your portfolio goes into a passive index fund (or ETF), the remainder you can use to speculate on individual stocks.
    May 29, 2015. 03:16 PM | Likes Like |Link to Comment
  • A Simple Value Strategy That Kills The S&P 500 [View article]
    Investing Discipline,

    Keep running these backtests and publishing your findings. I am always looking for new ideas that can help improve my quantitative trading process. An article on the best long-term predictive signal would be interesting as well. Valuation is one of the best known long-term predictive signals, but there are others.
    May 29, 2015. 02:59 PM | 1 Like Like |Link to Comment