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Marc Gerstein

 
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  • A Different Take On A John Galt Portfolio [View article]
    "What about the Dumbledore portfolio? He liked his sweets, so I'll kick things off with HSY. "

    Hector V,

    I know you meant this tongue-and-cheek.But I have to tell you, I really enjoyed writing this.

    I'm not a Harry Potter fan so a Dumblesore of portfolio wouldn'do for me. But if you want to become a contributor, that could be a cool idea. I'd love to see more fun angles. Everybod and his brother does a Warren Buffett portfolio (and if you hunt far enough back in my previous articles, you'll see I'm guilty), but after tackling John Galt, how about, hmm, perhpas an Alex Portnoy portfolio, or a Simon Cowell or better yet, a Howard Stern portfolio!
    Aug 19 09:00 PM | Likes Like |Link to Comment
  • A Different Take On A John Galt Portfolio [View article]
    Shane,

    You are correct in observing that there are high PB stocks that don;t have G-Scores. Data availability is always a challenge in quant work. Sometimes, it involves a necessary item a company doesn't report. And in a model like this, where some of the factors require five-year averages, some firms will be eliminated due to lack of adequate history. As you get into this sort of endeavor, you'll find yourself having to make choices, such as allowance for shorter histories in some cases, doing without some factors (as I did with advertising intensity), etc. There are no absolutely right or wrong answers.

    Meanwhile, that was a terrific and valid observation you made about the efficacy of a model like this in its ability to weed out losers. The same is so for the F-Score and a lot of earnings quality models. Generally, investors are conditioned to hunt for winners and beat the market. But there's also much to be said for starting with a ordinary list and then, underweighting or eliminating likely dogs. Data published by Mohanram, Piotroski and Beneish (earnings quality M score) all indicate good potential for that sort of approach, and my own testing based on more contemporary data confirms that.
    Aug 18 12:35 AM | Likes Like |Link to Comment
  • A Different Take On A John Galt Portfolio [View article]
    Who cares? In case you hadn't picked up the hints, I found that part of the book an incoherent mess and frankly, had by that point lost interest in the details. For an expression of the philosophy, I rely on The Virtue of Selfishness.
    Aug 17 01:04 PM | 1 Like Like |Link to Comment
  • Reacting To Earnings Reports: Let's Get Real! [View article]
    Hey Mr. Literacy, I never said Apple was a corporate coward. That comes from Small Pharma Analyst, who articulated the essence of corporate cowardice: "Their main concern is they don't want to come out with a flop since it will hurt their image, so they will take the time and energy to make sure their next innovation is truly ground breaking."

    Will Apple actually have another product cycle? Who the hell knows? I'm not a fanboy so I can't go on blind faith.
    Aug 17 12:04 AM | Likes Like |Link to Comment
  • Reacting To Earnings Reports: Let's Get Real! [View article]
    "When Jobs died three years ago, Apple's revenue was $107B. This year they hit $103B in their first two quarters. I'm hoping you are good enough with numbers to see why that is a good thing. If you need help with that one, just ask. "

    No I don't need help with this one. I hadn't realized that all the $103B in revenue they generated in the first two quarters came from products that had nothing to do with Jobs. I was completely unaware that Tim Cook was such a great innovator. Thank you, thank you, thank you. Where else can one be educated so well as in the Seeking Alpha community?
    Aug 16 06:02 PM | Likes Like |Link to Comment
  • Reacting To Earnings Reports: Let's Get Real! [View article]
    "Their main concern is they don't want to come out with a flop since it will hurt their image, so they will take the time and energy to make sure their next innovation is truly ground breaking."

    Steve Jobs, the driving force behind their magnificent innovation wave came out with flops (Anybody own a Lisa? How about a Next?) and it definitely hurt his image. But hey, that's life. If you're scared of failure or worried about image, innovation won't happen. A culture of corporate cowardice is incompatible with ground-breaking innovation.

    Fortunately, for Apple, we need not worry about corporate cowardice. Jobs is way too powerful for that. Oh . . . wait a minute . . . Jobs isn't with us any more.
    Aug 16 08:49 AM | 1 Like Like |Link to Comment
  • The Misleading Story About George Soros's Filing [View article]
    In journalism school, they teach: "If dog bites man, it's not news. If man bites dog, it's news." Notice that accuracy is not part of the adage.
    Aug 16 08:38 AM | 8 Likes Like |Link to Comment
  • Africa Opportunity Fund: Unappreciated, Underestimated And Undervalued. [View article]
    This is a tough one. I have the soul of a contrarian and did well in the '80s and early '90s with developing market closed ends (especially in Latin America), and I've always thought, regarding Africa, that someday it has to happen. So far, though, I've been right to sit out two decades while others (e.g., China) jumped ahead. Yet even now, I still think of Africa as someday . . . .

    But here are my concerns about your thesis.

    1. I wonder if your contarian spirit owes more to habit than genuine analysis. I've noticed from my own work that contrariansim isn't what it used to be. In this, the information age, we can still disagree with Mr. Market, but we should work harder to do so. We can no longer simply brush Mr. Market off as the manic-depressive ignoramus he was back when Graham first spoke of the archetype.

    2. In terms of a case for Africa, I absolutely positively hate the resources angle. I know it's tempting to see this sort of thing in a positive light. But for reasons that perplex the daylights out of me, history is not supportive. Throughout history and right through the present, for whatever reasons, resource-rich countries are and remain hell holes. Case in point: resource-rich Africa still, even through the industrial and now post industrial age, being remaining on a slow cart to nowhere. Venezuela, Russia, and Nigeria are loaded with oil. Anybody want to pack up and move there? Israel is the only Middle East nation with no oil, and the only Middle East nation with a functional society. South America has resources, yet migration continues to flow north, not south. And it may even be more than just resources and countries. I've been in the business world and have covered stocks for a lot of years and any time I heard companies boast about being "asset rich" (including some I had worked for), mediocrity or worse followed. Darned if I know why this is what it is (maybe I'll become a sociologist in my next life and figure it out); maybe it ha something to do with resources-asset endowment leading to complacency. I don't know. But until I see resource rich countries find a way to stop being losers, I'd rather invest in the resource-poor countries that prosper by exploiting them. And speaking of exploitation . . . .

    3. I also hate the Chinese-investment-in-... And I'm not the only one who hates it. So, too, do the Africans, who are getting sick and tired of seeing China pour so much money into the continent in ways that benefit only China and accomplish nothing worthwhile for Africans. You know the story of the ugly American imperialist who is universally hated around the world? That was Chapter 1. Chapter 2 looks like it's becoming the ugly Chinese imperialist that's hated around the world with the beginning of the chapter set in Africa. Unless the Chinese suddenly start caring (cough, cough) invest in China, not their commercial victims.

    4. Are you worried, though, about Chinese corruption? You should be. Burt Africa is part of the problem, not the solution; check the research and indexes from Transparency International. But at least China has domestic peace (so far). That's still not the case in important parts of Africa. Heck, I'm still waiting for Goodluck Jonathan (President of Nigeria) to figure out he really needs to change his first name to something more appropriate to his populous but still horribly messed up (thank you England) country; perhaps Lifesucks Jonathan.

    5. Finally, there's the trading liquidity of this specific fund and the miniscule size of the continent's financial markets. Oy vey.
    Aug 16 01:13 AM | 5 Likes Like |Link to Comment
  • Africa Opportunity Fund: Unappreciated, Underestimated And Undervalued. [View article]
    You may want to check the "Corruption Perception Indexes" from Transparency International (easy to find by Googling). According to their latest (2013) ratings, most of Africa remains pretty bad in this regard.
    Aug 16 12:45 AM | Likes Like |Link to Comment
  • Reacting To Earnings Reports: Let's Get Real! [View article]
    Magnificent article. Thank you!
    Aug 10 11:25 AM | 2 Likes Like |Link to Comment
  • Is It Wrong To Take A Position In A Stock And Then Write About It On Seeking Alpha? [View article]
    "You should have added a Spoiler Alert, Marc - now we know your protagonist/antagonist gets off"

    No worries; dismissal of the case comes just short of the midpoint. There's a lot more after that.
    Aug 8 05:09 PM | 1 Like Like |Link to Comment
  • Is It Wrong To Take A Position In A Stock And Then Write About It On Seeking Alpha? [View article]
    Not a joke! (see meetup.com Astoria Writers Group)
    Aug 8 01:52 PM | Likes Like |Link to Comment
  • Is It Wrong To Take A Position In A Stock And Then Write About It On Seeking Alpha? [View article]
    I like your three-part breakdown. In a world where journalists are taught that news only occurs "when dog bites man," the ones in category 3 are the ones that usually get most of the attention. So the sad thing is that the category 3 authors can cause lots of problems for those in categories 1 and 2.
    Aug 8 10:54 AM | Likes Like |Link to Comment
  • Is It Wrong To Take A Position In A Stock And Then Write About It On Seeking Alpha? [View article]
    I have to take this opportunity to express my heartfelt gratitude to so many members of the Seeking Alpha community.

    In my spare time, so much of it as I have – sigh – I’m working on a novel about a Bernard Madoff-like protagonist who, when his Ponzi scheme hedge fund fails and he is indicted for securities fraud, succeeds in getting the case against him dismissed because of his having filed with the SEC a prospectus setting forth all the details of the Ponzi scheme. And as he looks to raise money for a second go-round, many, even those who lost out in his first fund, clamor to get in. At the writing workshop I attend, members who are not familiar with the investment community express skepticism as to how investors can continue to follow someone who is so clearly acting in a way contrary to their best interests, and I’m constantly having to explain how in the real world, investors are remarkably tolerant of being badly treated by the Street and by commentators.

    I so much appreciate this article and the supportive comments. I definitely plan to save the whole thing. If I ever get my novel finished and published, it will definitely come in handy if my theme is attacked by critics as being implausible. This and similar ones (many of the comments in response to SA articles defending author anonymity as well as one Eli wrote about authors being paid by companies) and especially many gems that appear in the comment threads, will be priceless as evidence that everything I’m saying about the investment community is spot on.

    It’s rare that a satirist is handed such marvelous objective evidence supporting the validity of his thesis. So to all, thank you, thank you, thank you, thank you, thank you!!!!! Heck, I might even wind up with a second novel (BeyondBeta.com, HuntingWinners.com . . . I’ll work on it).

    David, Eli and the rest of the SA team, can you do yourselves and your stakeholders a favor and please step back a moment. Forget, briefly, about internal opinion and that of the SA community.

    Take the time to imagine how stuff like this will play in the world at large. Try to find people you know and respect personally but who aren’t really in tune with what you do for a living. Explain the issues to them without giving them a clue as to where you stand – so personal allegiances to you are off the table – and see how they react. (Or better still, pretend you are on the other side of the controversy and see how supportive they are likely to be.)

    Next, imagine you are sitting in a U.S. Congressional hearing room about to give testimony to a committee considering whether new legislation should be drafted to amend the existing securities laws involving dissemination of investment opinions, and that you are being called upon to detail Seeking Alpha’s stance about “talking book” on illiquid stocks, anonymity, etc. Imagine the tone of the questioning and the reactions.

    I wish I had a nickel for every occasion when I heard a member of the business community or someone speaking on their behalf complaining about government regulation. Well guess what: Every regulation – and I mean ALL of them, each word in the CFR and in state and local equivalents – had its genesis in behavior that was once indisputably legal but ultimately deemed unacceptable. If we ever find ourselves in a world where SA is hamstrung by new and overly harsh regulations governing the dissemination of investment opinion, I hope you’ll remember that it didn’t have to be that way.

    Am I talking nonsense? Yeah, I suppose. Such a scenario has no more chance of happening than a legally mandated ban on investment banking sponsored sell side research. No way. Never happen!

    P.S. to David Van Knapp

    “I don't have a lot of sympathy for readers who claim they were ‘led into’ an investment by an article. Really? Every investor is responsible for his or her own decisions.”

    I hear you, and actually, I agree. But I didn’t make this world and neither did you. We just live in it.
    Aug 8 09:11 AM | 4 Likes Like |Link to Comment
  • Is It Wrong To Take A Position In A Stock And Then Write About It On Seeking Alpha? [View article]
    "Why let everyone know what you own or not? Isnt your portfolio supposed to be kept confident or private away from prying eyes of Wall Street?"

    Yes, absolutely . . . so long as you choose to remain private. But the public markets are subject to certain rules, and when you choose to publicly disseminate your opinions on stocks that you own, you have chosen to waive that right. So if you value privacy, stay private. If you go public, than live with the choice you have made.
    Aug 7 12:28 PM | 5 Likes Like |Link to Comment
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