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John P. Reese

 
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  • What Do We Really, Really Hate? The Magic Formula Screen Tells All [View article]
    I have been tracking Greenblatt's Magic Formula since 2006. These are live returns, not back-tested and I run 10 & 20 stock portfolios using a monthly, quarterly or annually rebalanced time period. The best is the Quarterly 10-stock portfolio, up 10.5% per annum vs. 5.5% for the S&P.

    http://bit.ly/S4MEf2

    To your point about the variability of the strategy - all of these value models have a significant amount of year over year variability and many investors have a difficult time sticking with a portfolio that can underperform the market by 10-20% in a given year ... but as Greenblatt points out the fact that investors give up on the strategy is exactly why the strategy, if a good one, will continue to work in the long run.
    Jan 5, 2015. 02:46 PM | Likes Like |Link to Comment
  • Save The Glamour And Glitz For Holiday Decorations -- Not Your Investment Portfolio [View article]
    Interesting theory Andreas, but nope -- I focus on the numbers and only the numbers with my quantitative models. That way I don't do silly things like invest based on past regrets or other emotions.
    Dec 15, 2014. 12:10 PM | Likes Like |Link to Comment
  • The Best Stock Market Guru You've Never Heard Of [View article]
    The max drawdown since inception for the annually rebalanced 10-stock Piotroski portfolio is 64%.

    JR
    Nov 7, 2014. 03:47 PM | Likes Like |Link to Comment
  • The Best Stock Market Guru You've Never Heard Of [View article]
    ElGordo,

    Good question. So I have max drawdowns since inception for my monthly portfolios. (Usually I focus on my monthly rebalanced portfolios; I used annual for Piotroski because that's what he did in his study.) On a monthly rebalanced basis, none of my models has a max drawdown below 20% since inception. But in '08, the Benjamin Graham 10-stock portfolio only lost 14.1% for the full year. (That's full year, not max dd.) Next-best was the Motley Fool-based portfolio, down 25.0% for the year. These are fully-invested 10-stock portfolios, so they tend to be more volatile than the market. I'd think it'd be tough to find many 10-stock portfolios that were fully invested in '08 and had max drawdowns below 20%.

    Let me get back to you on the annually rebalanced Piotroski max drawdown.

    JR
    Nov 6, 2014. 05:15 PM | 1 Like Like |Link to Comment
  • The Best Stock Market Guru You've Never Heard Of [View article]
    Piotroski's own back-test was from 1976-96. My Piotroski-based annually rebalanced 10-stock portfolio's performance for those years:
    '07: -2.4% (vs. +3.5% for S&P)
    '08: -34.0% (vs. -38.5% for S&P)
    '09: +38.4% (vs. +23.5% for S&P)

    The 20-stock annually rebalanced portfolio was down 3.0% in 2007, down 40.1% in 2008, and up 72.2% in 2009.
    Nov 3, 2014. 10:56 AM | 1 Like Like |Link to Comment
  • Be Imperfect When You Pick Stocks [View article]
    Good point, and that's a good example of why investing in a well diversified portfolio is important when using quant strategies. But I'd also note that Greenblatt once did a study examining how investors who picked and chose between magic formula approved stocks did vs. those who simply invested in all of the strategy's top rated stocks. Those who picked and chose did a lot worse because they missed out on the biggest winners, many of which were the stocks with the biggest apparent problems. Remember that such stocks usually have really bad scenarios baked into their prices -- the market knows about PDLI's issues and expects very little, so the company just has to do a little better than that for shares to do well.
    Aug 27, 2014. 01:42 PM | Likes Like |Link to Comment
  • The Truth Behind Stock Prices [View article]
    Like Steven Stills said, love the one you're with!
    Aug 12, 2014. 05:08 PM | Likes Like |Link to Comment
  • The Truth Behind Stock Prices [View article]
    Interesting -- i wasn't familiar with that piece. Thanks for sending -- looking forward to checking it out.
    Aug 12, 2014. 05:05 PM | Likes Like |Link to Comment
  • The Truth Behind Stock Prices [View article]
    Agreed. If you can find good stocks with durable competitive advantages, you can at least keep up with inflation.

    Great old article from Buffett on how companies can keep up with inflation: http://tinyurl.com/l9p...
    Aug 12, 2014. 05:03 PM | Likes Like |Link to Comment
  • The Truth Behind Stock Prices [View article]
    Hi C.J.,

    Thanks so much for reading. So far in 2014, my best performers have been my John Neff-inspired portfolio and my Momentum Investor portfolio, both up 8.2% (through last week). Overall it's been a down year -- on average my 14 portfolios are down 1.9% vs. +4.5% for the S&P. They're coming off a big 2013, though, and since their inception dates (which range from 2003-2005), they're up an average of 10.0% annualized vs an average of 5.9% for the S&P.

    Let me know if you have any other questions.

    JR
    Aug 12, 2014. 04:55 PM | Likes Like |Link to Comment
  • The Truth Behind Stock Prices [View article]
    Hmmm, interesting argument. But I think it's apples and oranges. They're not stripping inflation out of capital gains, per se. They're stripping it out of total returns (capital gains+dividends). The capital gains part is composed of real book value growth, growth in price/book valuation, and inflation.

    Now, inflation is stripped out of book value growth because you're measuring book value today vs book value at a prior point in time. Inflation is a part of the increase. But with dividend yield, I think it's a different story. If they are taking an average annual dividend yield over a certain period, then every annual reading in that set should already include inflation because both the numerator and denominator of dividend yield (dividend payouts and price of the market) are incorporating inflation, no? So don't they cancel each other out, and leave you with a "real" percentage gain?
    Aug 11, 2014. 04:35 PM | Likes Like |Link to Comment
  • Greenblatt's Magic Formula: Quite Simple, But Far From Easy [View article]
    Strange, I'm not sure why BCR wouldn't be there. The only thing I can think of is that the MF site does include this disclaimer:

    "The universe of stocks in the database may exclude ... stocks that have been identified by MagicFormulaInvesting.com LLC (NASDAQ:MFI) as potentially creating conflicts with strategies used by accounts and funds managed by MFI and its affiliates."

    Perhaps that's the case here.
    Jul 21, 2014. 12:51 PM | Likes Like |Link to Comment
  • Buy What You Know - But Do Your Homework, Too [View article]
    That is a good article -- thanks for recommending, Shila!
    Jul 14, 2014. 01:18 PM | Likes Like |Link to Comment
  • Buy What You Know - But Do Your Homework, Too [View article]
    Thanks for sharing -- that's a great example of what Lynch was talking about, I think. Glad it worked out for you!
    Jul 9, 2014. 12:56 PM | Likes Like |Link to Comment
  • Buffett, Piotroski, And An Inflation-Beating Approach [View article]
    Yes, you're correct Paul -- the wording may have been a bit confusing. I meant in one or more of the five ways.
    Jun 24, 2014. 03:24 PM | Likes Like |Link to Comment
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