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Brendan O'Boyle

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  • Making Buffett's Alpha Your Own [View article]
    Ploutos, do you have more recent data for the 3 year rolling performance of high beta vs. low beta? I find it very interesting that the spread there tends to top out very close to bull market tops.

    As for SPLV my only criticism is that utilities are significantly overweight (31%), thus I might advocate going through the prospectus and buying 30 stocks that are the most reasonably valued within SPLVs holdings. See:

    Attractive consumer staples: GIS, PEP, HNZ, KO, PG, MO, PM, SJM.

    Attractive Health Care: JNJ, ABT, MCK, BMY maybe add TEVA

    Attractive Financials: BRK, CB, TRV and I would add ACE and AWH to that list

    Industrials: MMM, WM, RTN, LMT, NOC

    Tech: ADP, IBM

    Telecom: T, VZ

    Cons Disc: MCD, TGT maybe add DG

    Energy: XOM, CVX

    Materials: BMS, VBL, ECL

    then just tag VPU for the utilities exposure you want.

    You could have a nice 30 stock portfolio in a matter of minutes from this list probably with an average beta of 0.7 or so.
    Jan 12, 2013. 02:05 PM | 4 Likes Like |Link to Comment
  • Evidence For Distortion Of The Market Caused By QE3 [View article]
    Sure if you believe modern portfolio theory or an efficient market. However, when you consider the individual companies the argument doesn't make any sense.

    Take what you said and think about it: investing in more highly leveraged companies must yield a higher return. Why? Do you expect their debt to help them grow?

    It's the same with the low beta anomaly, everyone assumes if it moves around a lot (high beta) it should net a higher return. Wrong, academic studies have conclusively shown that lower beta stocks outperform. Furthermore, these stocks did not outperform the market in 2012 prior to the QE3 announcement, just look at the first graph in the article.

    It's not surprising that as the risk premium between a junk bond and safe-haven bond narrows junk rated companies do better (their debt becomes cheaper). But my point is by forcing this to happen the Fed is distorting the market. When the Fed stops buying the market will revert to the mean, as it did in the summer of 2011.

    Every year we get a "dash for trash" in the first quarter, it has never ended well from 2010 until 2012. I doubt 2013 is going to be different
    Jan 11, 2013. 05:54 PM | 4 Likes Like |Link to Comment
  • Kiss Goodbye To The Hidden Risk Of Stock Picking [View article]
    This post doesn't make much intuitive sense to me. Of course if you begin with the axiom: "stock pickers cannot beat the market" you end with the conclusion: "there is no point in owning individual stocks."

    Obviously buying individual stocks creates concentration risk and it stands to reason the variance should be greater. If you own one company of the S&P 500 even in a portfolio of 20 stocks that is much more concentration than if you leave the market 20% of the time.

    Leaving the market 20% of the time means you are fully invested 80% of the time. Owning 20 stocks of the S&P 500 means you are 100% invested in 4% of the market. Clearly concentration risk is greater and if you don't believe you can successfully pick stocks there is no reason to do it.

    I will add: it is very hard to pick which stocks will do better in a year's time. It is very easy to pick stocks that will do better in ten years time and avoid stocks that will do poorly (which is mostly a function of price and hopefully that whatever firms you chose to buy have some form of comparative advantage).
    Dec 19, 2012. 11:18 PM | 4 Likes Like |Link to Comment
  • Shares of Herbalife (HLF -14.5%) take a hit coming off a trading halt and move toward a fresh 52-week low after hedge fund manager Bill Ackman told CNBC that he is "short" the shares, calling the company a "pyramid scheme." [View news story]
    I think it would be more accurate to say: "he put his mouth where his money already was."
    Dec 19, 2012. 11:10 PM | 4 Likes Like |Link to Comment
  • The Selling In PIMCO's High Income Fund Continues [View article]
    I would define it as: Someone who is interested in investing, but not a professional. Maybe "amateur investor" would be better, but I don't recall that being an option.
    Dec 16, 2012. 05:53 PM | 4 Likes Like |Link to Comment
  • "I'm so bearish, I'm bullish," writes BAML chief equity strategist Michael Hartnett. "Fourteen economies, with a combined equity and bond market cap of $65T, now have zero interest rates." Roll that one around in your mind for awhile. Hartnett's firm has made headlines of late for having one of the higher 2013 S&P targets on the Street. [View news story]
    At the top of a speculative boom, such as 1929 or 2007, demand for money is high and interest rates rise ultimately crushing speculators playing with borrowed money. The current situation could not be more different, perhaps we are partying like it's 1937, but we are not partying like it's 1929...
    Dec 13, 2012. 07:20 PM | 4 Likes Like |Link to Comment
  • Don't Fear Margin Compression: The Apple Sell-Off Is Overdone [View article]
    I don't think it's the clueless retail investors who push AAPL stock up and down. Rather it is the clueless institutional and hedge fund investors who have just set up a great buying opportunity.
    Nov 20, 2012. 08:32 PM | 4 Likes Like |Link to Comment
  • Don't Fear Margin Compression: The Apple Sell-Off Is Overdone [View article]
    I have to admit that I don't own a single stock that I expect to quadruple within the next 5 years, so perhaps we have different investment philosophies.

    A 400% gain from a market cap of $500B is difficult to imagine, but getting back to 700 seems to be a reasonably conservative target within 12 months. From today's closing price that would represent a 25% annual return. Was AAPL a good buy at 700? Probably not, but in the mid or low 500s it looks pretty good to me.
    Nov 20, 2012. 07:15 PM | 4 Likes Like |Link to Comment
  • Investors Continue To Reduce U.S. Equity Exposure [View article]
    Your comment doesn't make much sense. Price is proportional to demand and inversely proportional to supply. Thus reduced supply raises price all other things being equal.

    Supply is going to continue to diminish because the cost of debt is lower than the cost of equity. Plenty of companies can now issue debt for less than the cost of paying the dividend on their stock. This is a world built to reduce supply and it is the single most bullish thing the stock market has going for it. Too bad the economy can get out of its funk...
    Oct 21, 2012. 01:23 PM | 4 Likes Like |Link to Comment
  • Don't Be The Equivalent Of A Stock Market Racist [View article]
    This is a fabulous article. I have often had disagreements with investors on this sight who are bearish and think the market is overvalued. I always ask, "is there not a single reasonably valued business on the market?"

    You hit the nail on the head.
    Sep 15, 2012. 08:42 AM | 4 Likes Like |Link to Comment
  • Why ConocoPhillips Has Upside Beyond $60 Per Share [View article]
    FB ; )

    But seriously, COP has great value. I bought a bunch after the spinoff and I'm happy as a clam watching the dividends roll in. There's something so satisfying about a quarterly dividend payment.
    Sep 10, 2012. 06:49 PM | 4 Likes Like |Link to Comment
  • Intel's Q3 Revenue Miss: A Fire Sale For Long-Term Investors [View article]
    Yeah but the 10 year chart is ugly because the stocks were totally overpriced during the tech bubble. Even after the 2000 bear market they were still overpriced. I never would have recommended that anyone should buy CSCO, INTC 12 years ago or even 5 or 10 years ago.

    For example, 5 years ago INTC traded at 18x earnings, now it's more like 10, the share price has been stagnant but EPS has almost doubled. Last year, the multiple finally stopped compressing and they are a shareholder friendly free cash flow machine. 3.7% dividend plus equal money spent on buybacks. INTC at 24 is a great buy considering the S&P 500 is trading for over 15x earnings.

    Just my humble opinion, I think INTC and CSCO will do just fine over the next 5-10 years. The question to ask is if the business model is still sound. I think it is, the report of the PC's death has been greatly exaggerated.
    Sep 8, 2012. 04:20 PM | 4 Likes Like |Link to Comment
  • Bernanke Doubles Down On Fed Put [View article]
    I really don't understand economists. Ben is pushing on a string.

    Doing nothing is a choice, when doing something causes more harm than good it is the best choice.
    Aug 31, 2012. 05:34 PM | 4 Likes Like |Link to Comment
  • Beware the false rally coming soon, says world-renowned bear Marc Faber. He says catalysts are currently in place that could trigger an advance. "We could go to 1450 or even 1500," Faber says. However, he warns that “we’re in the late stage of a mature market and not a new bull.” [View news story]
    The sky is falling narrative always gets more ears than hearing the world will be ok. These guys just say whatever will get them on TV.

    I just wish people would stop listening to these jokers. So he called '87 and '08, so what? If you're constantly bearish for 25 years occasionally you'll be right.
    Aug 16, 2012. 09:43 PM | 4 Likes Like |Link to Comment
  • U.S. Steel: Essentially No Value For Long-Term Investors [View article]
    This really is unfair to the author. He did not recommend going short, he recommended against going long. He is saying there are better stocks out there and I tend to agree with him. If you disagree go long and you could write an article yourself justifying why. But a stock going up for two days does not disprove his thesis.
    Aug 5, 2012. 10:24 PM | 4 Likes Like |Link to Comment