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Kurtis Hemmerling

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  • The Fed Does As Advertised [View article]
    I am not totally convinced. Can you show a few more charts?
    Jun 21 08:06 AM | 3 Likes Like |Link to Comment
  • 40 Dividend Champions Vs. The S&P 500: 30-Year Backtest [View article]
    You got the creative juices flowing... good job. I'll do a variant followup using his dividend universe.
    Jun 4 09:48 AM | 3 Likes Like |Link to Comment
  • Active Vs. Passive Value Investing: How Much Is Your Time Worth? [View article]
    Many 'active funds' are merely closet index funds that mostly shadow it. This research paper split active funds into two categories: stock picking and market timing. The less similar the fund was to an underlying index the greater 'Active Share' the fund was given. The result was that a well-targeted group of stocks (considered active stock picking as opposed to following a passive fund) outperformed and was persistent in doing so. Too much diversity to lower volatility can kill gains. Beating the market using Modern Portfolio Theory is almost impossible due to funds being pressured to have 150 or even 200 stocks.

    http://bit.ly/IzhgjK
    Apr 28 07:37 AM | 3 Likes Like |Link to Comment
  • Why Rising Oil Will Support Slumping Silver Prices [View article]
    I think the point is that cheap oil and cheap energy means not much interest in alternative energy. Expensive oil gets people re-considering other viable options. Probably more a statement of why the current strong forecast in solar cell market rather than what new areas solar energy will take over.
    Apr 10 05:08 PM | 3 Likes Like |Link to Comment
  • Did Defensive MLPs Protect Against the 2 Week S&P 500 Freefall? [View article]
    I didn't have them in originally but SA woud not publish my article without them. Sorry about that - I think it looks ridiculous too.
    Nov 28 07:09 AM | 3 Likes Like |Link to Comment
  • The Myth Of Defensive Stocks [View article]
    You have a valid point that defensive stocks go down in bad markets. Research does back up that markets are highly correlated, globally in fact, to bear markets. Asia has the weakest correlation though.

    But many people stay invested in defensive sectors instead of rotating their portfolio in some type of market timing. For instance, the trailing 5 years the S&P 500 has dropped over 10% while the Utilities sector (not the spider) has only dropped 2%. Then compare that the S&P 500 has a low yield of 1.5 - 2%. The utilities sector ranges from 4 - 5%, which translates into being up 25 - 30% in 5 years if you use compound growth from re-investing dividends as opposed to break-even after factoring in dividends for the S&P 500.

    A good piece about being wary of short-term 'market timing' defensive stock rotation, but I would be interested to see the comparative performance once you factor in dividends.
    Oct 16 03:45 PM | 3 Likes Like |Link to Comment
  • Screening for Value Stocks With High Growth Potential [View article]
    Thanks for the info. I was merely outlining a process to screen for stocks that have some value and growth based metrics about them. These are screened results, not handpicked stocks. At the end of the article I recommend due diligence as these are quantitative based results... the qualitative is up to you. The last sentence of the article highlights this point succinctly.
    Jul 29 11:30 AM | 3 Likes Like |Link to Comment
  • Are Large And Liquid Stocks Lower Risk? [View article]
    Yes, exactly. I don't exclude large or liquid stocks from any of my models. But as per value, growth and sentiment ranking - they need to beat out their smaller, less liquid counterparts if they are to be included in any model. It does happen but large and liquid stocks often have more difficulty making the cut on average. But if we go through a stage where large caps become undervalued compared to smallcaps - it could also reverse.
    Jan 16 01:51 PM | 2 Likes Like |Link to Comment
  • A Nobel Prize Winner On Alpha [View article]
    It is no surprise that active managers get basically the benchmark on average. For someone to out-perform you also need someone to under-perform and when you take an aggregate - you get the benchmark.

    There is other work that shows that most active managers have 'strong conviction stocks' which have strong alpha but they are pressured to throw in a huge amount of benchmark picks to water down the alpha. Why? Both the company and investors want it.

    The company wants it because a 10 stock fund will not be able to handle much capital and the firm wants dollars.

    The investor wants it because a 10 stock fund looks to volatile and the Sharpe is low. What he doesn't realize is that if managers produced these 10 stock funds of high conviction, he could simply buy 10 of them for a great Sharpe ratio, significant alpha and lower risk. But investors want one-stop shopping and so they pay for it.

    Also, active managers often give up and just produce 'shadow index' funds that appear to be active but are copying an index so they collect their pay and will never under-perform the index. Look up a paper on Active Share and how using this metric can show you where many out-performing managers are.

    One other point is that great managers likely move onto the more lucrative hedge funds for way better pay. Also, mutual fund managers cannot sit on 100% cash even if they did forecast a bear market - so regulations are against these antiquated forms of investing.
    Oct 15 11:17 AM | 2 Likes Like |Link to Comment
  • How To Be Protected Before The Next Market Crash [View article]
    The last chart includes a 1.5% carry cost for shorting and 0.15% slippage for these S&P 500 stocks. With less than 1/2 the drawdown and much higher performance than the market... some would say its too expensive not to instead of the other way around.

    The thing about the PE ratio... its dependent on earnings and price. Earnings are not static and when the economy goes down so do earnings. Your bet is that the next drop the market will go up. Not all investors want to make that bet. In a bad economy your growth stocks won't be and your dividend companies can only pay what they are not earning for so long...

    A long/short portfolio is not dependent on the markets rising which is the point of this article. If the markets are sure to go up long-term - then yes, leverage to the hilt and make money. But you only have one life, and many are not willing to risk it based on a belief that the markets must always go up.
    Apr 7 08:34 PM | 2 Likes Like |Link to Comment
  • How To Be Protected Before The Next Market Crash [View article]
    Thanks... I meant to talk about options but somehow neglected to. The issue I have with options is time decay when long puts. As well, options premiums vary based on the expected volatility so this form of hedging gets more expensive when a crash seems probable.

    I trade options but for the average investor to use these for a clear and simple hedging tool - I am not so sure.
    Apr 7 11:23 AM | 2 Likes Like |Link to Comment
  • My S&P 500 Market-Timing System [View article]
    Sorry for the confusion. You are not to hold 300 of 500 stocks... this is merely to calculate the % invested for the indicator. Like you suggest - the model recommends 60% invested and you can put this anywhere you like including the SPY,
    Apr 1 05:29 PM | 2 Likes Like |Link to Comment
  • One Trick To Protect Against The Next Bear Market [View article]
    Ouch...you think this is easy?

    Fund managers have more regulations and restrictions around them. Open-ended mutual funds cannot sit on 70% cash just because the fund manager wants to.

    As for my strategies... if the lowest turnover is $150K and I invest up to 5% of the turnover and there are 15 stocks in this focused portfolio... that's $112,500 to invest if I equal-weight. If I have numerous strategies this results in a good 'personal fund'. But to a fund manager it is not even worth doing. There are so many more ways to make alpha with $50K than with $50 million and that's the struggle fund managers have.
    Mar 22 11:59 AM | 2 Likes Like |Link to Comment
  • The Hard Truth Of Dividend-Growth Investing [View article]
    I think we are misunderstanding each other Dave. The process is simple and automated by a sophisticated engine and is no different than a total return equal-weighted index.

    Then quant engine at P123 has a set of instructions to look across all North American exchanges and OTC for any stock that has reported 10 years of annual increasing dividends. All stocks are equal-weighted in this instance (and equal-weighting usually improves performance than cap-weighting). Dividends are accounted for and re-invested. On the rebalance date (I did it form one week to one year with only a small variance), the market is re-examined and any stock that now has a 10 year history is included and any stock that failed to pay an increasing dividend is cut. On the rebalance date, the equal weighting is ensured.

    The data is from Compustat and is real point-in-time. The 10 year dividend rule is computed each and every re-balance point.

    This is as close as you can get to actually being there. What I meant by factoring in stocks no longer being listed is that you need a reliable dataset that includes all stocks that existed during the period of your test...which this does. This wasn't some 'by hand' guesstimation I did. There is one inclusion criteria only and it was run by a sophisticated quant engine that has refined its process over the past decade to provide answers such as this.

    But to your point, perhaps a longer test or using different start and stop points would give different answers. Even value and growth go back and forth as to who carries a higher premium. And dividend growth investing can be profitable. But blind investing - whether it be with a hedge fund, mutual fund, dividend growth stock or value stock - will not result in excess gain or less risk of loss over time.

    This research is academic and I like to follow the empiracal evidence but I find that this article has brought out many emotionally charged individuals with their identity wrapped up in dividend growth. But we are merely talking about total return of stocks with certain characteristics over periods of time.
    Feb 22 10:24 AM | 2 Likes Like |Link to Comment
  • A Simple But Powerful Greenblatt Smallcaps System [View article]
    No, I don't choose dividend yields greater than 4%. That has a hypothetical example of how to use absolute rules.

    This article is about relative ranking rules (just 2 of them on the smallcaps index) under the heading of Greenblatt Ranking System.
    Feb 3 12:05 PM | 2 Likes Like |Link to Comment
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