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Kurtis Hemmerling

 
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  • How Not To Re-Balance Your Stock Portfolio [View article]
    When the market goes up 1% - how high on average does the stock go up? 2%? That's a high beta stock. 0.5%? That's a low beta stock. The theory used to be that high beta meant leveraged gains and leveraged losses but this has widely been disproved. It gives indication of volatility... but that's not the same as risk either. Still a useful metric but not the 'be all end all' it was once thought to be decades ago.

    I'm doing a 10 or 12 part blog series called Wall Street Exposed you might enjoy that takes the market from the ground up from uncommon angles.
    http://bit.ly/NHmspw
    Jul 20, 2012. 06:22 PM | 3 Likes Like |Link to Comment
  • The Fed Does As Advertised [View article]
    I am not totally convinced. Can you show a few more charts?
    Jun 21, 2012. 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, 2012. 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, 2012. 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, 2012. 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, 2011. 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, 2011. 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, 2010. 11:30 AM | 3 Likes Like |Link to Comment
  • Dividend Growth + Low Volatility = Winning Combo [View article]
    I am sorry you found this article difficult to read. It is not my intention to try and appear clever. I simply wanted to present some research and these graphs are the output of the screening/backtesting platform I use.

    It is difficult to see the legend in the bottom of the graph - but the red line represents the screen - or the test I am running. The blue line is the benchmark (S&P 500) although I run an actual screen earlier which is a more suitable custom benchmark of all dividend growth stocks. The area below the equity curve shows the % turnover per re-balance period - which in this case is weekly. So you quickly get an idea how many of your stocks you need to replace every week. The bottom bar shows the # of positions held. This varies because the amount of dividend growth stocks vary over time.

    If you have any other questions I would be happy to answer them.
    Aug 29, 2014. 12:00 PM | 2 Likes Like |Link to Comment
  • A Simple Screening Technique To Improve Returns [View article]
    I have written extensively on this topic elsewhere, but in a nutshell - a low PE or a high earnings yield ratio allows for a big dividend yield even in the absence of earnings growth. If the PE is 10, a yield up to 10% is possible without having the payout ratio exceed 100%. So value - particularly price to earnings is directly linked to sustainable big yields.

    Furthermore, when equity is transferred to the shareholder and out of the company - share price drops an equivalent amount. This in turn helps keep deep value - which further supports a low PE ratio which in turn supports the yield. So the dividend mechanism itself supports deep value and high yields.

    All this is true even if earnings growth is zero. If you have deep value and big yields, any amount of future growth will have a positive impact as you also have the potential for an expansion of valuation.

    It is an interesting link that is rooted in logic and concrete processes which I can explain further in SA. It isn't as simple as following a popular saying. I do not create models by curve-fitting factors mindlessly.
    Aug 26, 2014. 08:04 AM | 2 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, 2014. 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, 2013. 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, 2013. 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, 2013. 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, 2013. 05:29 PM | 2 Likes Like |Link to Comment
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