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David Trainer  

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  • Low-Cost Funds Dupe Investors [View article]
    User 6707651,
    Thank you for your comment. Fair enough.... haha.
    Look, the point is that analyzing the quality of holdings is all the more important given that most of the time active mgmt does not add value.

    Don't just buy funds b/c they are cheap. Buy them b/c you believe the mgr has and will continue to pick good stocks.

    It is true that if you have the ability to identify good and bad stocks, then you cold manage your own portfolio.
    Most people do not have time for that, however.
    So they must let someone else manage their portfolio for them.

    Part of my point is that choosing the right fund requires diligence. Don;t just throw money at a fund bc it is cheap.

    Without diligence, you depend on luck. And most of the luck had been extracted from the market.
    Mar 14, 2013. 09:40 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    Qniform:
    Thanks for your comment and analysis of my talent.

    My point is that if no one is analyzing the footnote data, then it is not part of the public intelligence and, therefore, not factored into the market.

    Moreover, the market is not 100% efficient all the time, especially not in the short term. If it were, then we would all be contradicting ourselves by wasting anytime in this business, no?

    Lack of footnotes analysis creates many of the inefficiencies which create opportunity for the more astute investors.

    Now dare you answer the rest of my questions?
    When was the last time you read any footnotes?
    Mar 14, 2013. 06:55 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    Qniform:
    Good point about competing against all investors as the market represents the aggregated analysis of all participants.

    How many people can you name that know how to read footnotes?
    How many have read them for more than one company?
    How many have read them for more than one industry?

    Having analyzed footnotes in 50,000+ filings across all industries, we have additional perspective and a unique ability to compare disclosures and the relative level of aberration. Take my analyses of Eastman Kodak and Delta Airlines - both had quirky accounting, but one is not able to tell how quirky unless he can compare their numbers to all companies and see that certain numbers represent assumptions that are multiple standard deviations away from the norm.

    New Constructs has a highly differentiated capability in footnotes and the MD&A, where more and more data is going to hide.

    Having analyze so many filings, we know all the tricks and have a better ability (aided by a machine with a memory of 50,000 filings) to find and measure the materiality of footnote data.

    Pls let me know if you can name anyone who can match that ability?
    Mar 14, 2013. 05:28 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    cdelaware:
    Thank you for your comment.
    The assumption in the model are clearly presented.
    FCF equals NOPAT less (capex, chgs in net working capital, and acquisitions less divestitures).
    NOPAT does not equal FFO, it is a cleaner version of it.

    Dividends do not equal equal cash flow. They are a use of case not a source of cash and do not reflect the true cash flows of the business.

    My model does not show the current shareholder value as $13.13. That is the value of the business assuming only one year of profit growth. PLs read this article on "How my DCF works": http://bit.ly/ZLgZUD.
    I also recommend the book, Expectations Investing. if you want to become an expert on dynamic DCF modeling like mine.

    I think that will help you understand how my DCF model works.
    Note my model is not a dividend discount model per the distinction between dividends and cash flow above.

    Once you have a better feel for how the model works, I would like to know if your smell test works. If not the smell test, give me the math test - b/c I know that the math works and that is what matters most.
    Mar 14, 2013. 04:06 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    Qniform:
    Thank you for your comment.
    1. Bogle's position was a major advancement at the time. Now, investors deserve a bit more than just "be the market". Plus, given that there are often multiple "index" funds for any given market or sector, investors need a way to distinguish.

    2. I believe we have entered a new age where investors do not have to settle for only cheap funds. They should invest in cheap funds that also hold the best stocks. it is more of a relative call than anything else.

    ETFs are not all made the same even if they have the same label.

    Why not exercise one's right to choose the etf/fund with better holdings if the costs are the same?

    3. The institutional investment community has worked hard to convince investors that only they can assess the quality of stocks. Ergo, investors must reply on on them. And if they cannot rely on institutional investors, then we should give up and just invest in the overall market.

    That may have been true in the past when individual investors did not have access to real research and Wall Street research was still trusted as reliable.

    Investors deserve better and I aim to give it to them.
    Mar 14, 2013. 01:02 PM | 1 Like Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    Ponchovilla:
    Great point about the difficulty of analyzing footnotes.
    I have been focused on it since the mid 1990s. I have been developing technology to aid in the accuracy and efficiency of analyzing footnotes for over a decade.
    My firm, New Constructs, does better than anyone else.
    We have a patent and the track record to prove it.
    Mar 14, 2013. 12:59 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    1900cc:

    Thanks for the heads up. This link should work:
    http://bit.ly/xAUcxA

    If not, go to http://bit.ly/tELcRI and click on Fund Screener
    Mar 14, 2013. 12:55 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    PendragonY:
    You make excellent points.

    I am not saying that all index ETFs are bad, I am saying that some are better than others - and - that INVESTORS DESERVE funds with LOW COSTS & HIGH QUALITY HOLDINGS.

    As I mentioned above, the institutional investment community has worked hard to convince investors that only they can assess the quality of stocks. Ergo, investors must reply on on them. And if they cannot rely on institutional investors, then we should give up and just invest in the overall market.

    That may have been true in the past when individual investors did not have access to real research and Wall Street research was still trusted as reliable.

    I believe we have entered a new age where investors do not have to settle for only cheap funds. They should invest in cheap funds that also hold the best stocks. it is more of a relative call than anything else.

    ETFs are not all made the same even if they have the same label.

    Why not exercise one's right to choose the etf/fund with better holdings if the costs are the same?
    Mar 14, 2013. 12:28 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    webapalooza:
    Excellent point: broad-based indexfunds own just about every stock; so - of course - the fees should be low b/c you are not getting any stock selection.

    yet, we all know that all stocks are not creaed equal.

    Why not cherry pick the bad ones out of allocate more to the good ones?

    I am not sure how you define "attractive". It does not seem consistent with mine.
    "Attractive", for me, fits more of a value style than anything else. TO get an Attractive rating from me at stock has to have high returns on capital, usually rising, and a cheap valuation.

    Simply put, those kinds of stocks offer good risk/reward. Since, as another commenter said, one cannot predict the future, it makes sense to be in stocks where the future embedded in the stock price is very conservative.

    The market makes predictions about the future in every single security it prices, as long as you believe the value of an asset = the present value of future cash flows.

    If so, then, it is best to buy stocks with low expectations for future cash flows especially compares to past.
    This is not a flawless formula, but it, at a minimum, should be the foundation for any long-term investing strategy.
    Mar 14, 2013. 12:21 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    Qniform:
    Thank you for your comment.
    You can see my rankings on ETFs and index funds here: http://bit.ly/Z1HJxW. There are a few that I recommend. And there are several funds with lower entry points than IFPUX as well.

    I am not correcting John Bogle. I agree with him wholeheartedly that investors should not overpay for active mgmt that usually does not pay.

    I am simply adding a bit more to Mr. Bogle's innovation. My addition can be boiled down to:
    when choosing between to low-cost funds, choose the one with better holdings.

    Look, only good holdings can drive performance.
    The problem has been that the institutional investment community has worked hard to convince investors that only they can assess the quality of stocks. Ergo, investors must reply on on them.

    Bogle's perspective suggests that almost no one can assess the quality of stocks, so you should just by the market or an index.

    My research gives investors the ability to intelligently assess the risk/reward of over 3000 stocks based on unrivaled analysis of footnotes.

    So, I am giving investors the ability to have what they deserve = funds that have low costs AND high quality holdings. Seems fair enough.

    Yes, that is strong claim but I back it up in my research. And if you ever want to compare my data set (with footnotes) to any other research or data provider, I am happy to comply. Note that I have done this many times before and always come out on top and won business from some very sophisticated hedge funds.
    Mar 14, 2013. 11:20 AM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    cdelaware:
    Great question.
    I am a big fan of FFO as I think it is a better number than GAAP earnings. GAAP is not very helpful in any industry.
    My NOPAT is a cleaner version of FFO. In fact, my NOPAT for O is higher than FFO over each of the last 6 years.
    My NOPAT for 2012 is $281.81 compared to FFO of $260.86 ($ in millions).
    Since 2007, my NOPAT has grown at 6.2% compounded annually while FFO is at 6.6%.

    This link (http://bit.ly/10LvzwE) shows the DCF model I use to quantity the market expectations in O's stock price to equal 13% growth in (NOPAT) compounded annually over the next 16 years.

    Pls check my math and let me know if you see any error.

    I am not sure that the institutional investors that subscribed to 17+ million shares @ $45.9 performed as much diligence as I did.
    Having been on Wall Street for nearly a decade, I know how little financial diligence goes into investment decisions. Many institutional investors are more concerned about matching performance of their benchmark in the next quarter than they are concerned about the true value and long-term opportunity in a stock. Just look at how much turnover is and how much it has increased since the tech bubble if you don't believe me.
    Mar 14, 2013. 11:10 AM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    Bryce_in_TX:
    Thanks for your comment.
    Past performance means little to future performance unless you are a pure momentum investor.

    Stocks rise too high only to fall far all the time. Many people said BBBY was a great stock before it crashed.

    I recommend focusing on the current fundamentals and how the expectations for future cash flows reflected in the stock price compares to the current fundamentals.

    The current stock price, $44.7, implies the company will grow after-tax cash flow (NOPAT) by 11% compounded annually for 20 years.

    That looks fully priced to me.

    Assuming the stock will continue to go up just b/c it has done so in the past does not see wise to me.
    Mar 13, 2013. 04:55 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    disallusioned:
    Thank you for your comment. You ask an excellent question.

    I am not a quant.
    My research is differentiated from all other by my unrivaled analysis of footnotes. The fundamental analysis we perform on every stock leverages more financial and valuation analysis and diligence than any other research firm.

    For more on why footnote diligence matters: http://bit.ly/13Wo4aP
    Mar 13, 2013. 04:00 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    Pwdrskir:
    Thank you for your comment.
    SCHD is very cheap. My analysis shows its holdings are not bad, but not especially good either. The holdings get my Neutral rating.

    The link below provides a copy of my report on SCHD

    http://bit.ly/Xuz9hL
    Mar 13, 2013. 02:51 PM | Likes Like |Link to Comment
  • Low-Cost Funds Dupe Investors [View article]
    outcastsearcher:
    You make some good points. Thank you for your comment.
    We do run a hedge fund and so we eat our own cooking, so to speak.

    And yes, my research is uniquely value-added b/c it is the only research that does proper diligence in financial footnotes.

    No other firms or analysts analyze footnotes as much or nearly as thoroughly as we do at New Constructs.

    I believe my service empowers individual and institutional investors to make more informed and safer decisions.
    Mar 13, 2013. 02:42 PM | Likes Like |Link to Comment
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