Seeking Alpha

David Trainer's  Instablog

David Trainer
  • on ETF Quick Picks And Lists
Send Message
Follow me on Twitter: @NewConstructs David is CEO of New Constructs (www.newconstructs.com), an independent research that specializes in unearthing key insights from the Financial Footnotes of Annual Reports. Having analyzed over 50,000 annual reports and their Financial Footnotes, New... More
My company:
New Constructs
My blog:
The Diligence Institute
My book:
The Valuation Handbook
Back To David Trainer's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (12)
Track new comments
  • Qniform
    , contributor
    Comments (2603) | Send Message
     
    So let me get this straight - you say that active management (stock picking) can do better than passive management (Index)? Even assuming that any empirical research has ever demonstrated your thesis (none has), how do you guarantee that any ETF won't sell the good and buy the bad tomorrow? Let me guess... past performance? Just for a laugh I went to your site and got your top "attractive" large cap pick Lexmark and charted it against the #1 "most dangerous" large cap pick Akamai for 1, 3, 5, or 10 years. Heh.
    13 Dec 2012, 08:29 PM Reply Like
  • David Trainer
    , contributor
    Comments (993) | Send Message
     
    Author’s reply » Qniform:
    Thank you for your comment.
    I am not sure you understand my research. Past performance has little to nothing to do with my ratings.

     

    I so not say that active mgmt is better than passive.

     

    My key point is that higher fees need to be justified by superior management. Details here: http://bit.ly/Uh1z84.

     

    As for your analysis of Lexmark, which I did not verify...it must be based on reports 3+ months old b/c those reports are the only ones you can access.
    14 Dec 2012, 10:43 AM Reply Like
  • Qniform
    , contributor
    Comments (2603) | Send Message
     
    I think I do understand. You just said that superior management can justify higher fees. How do you judge superior management, if not by results (past performance)? Your own site says proof is in the performance.

     

    Yes, you did present the Lexmark/Akamai evaluations on 10/5/10. Afterward Lexmark went up from $29 to $38 in 2/11 and Akamai went from $23 to $38 over the same time frame. Since then, Lexmark is down to $23 and Akamai has traded pretty flat at $39. But my point is don't feel bad, no one does better (consistently). Stock picking is by definition active. Indexing requires no management, being totally passive. Q.E.D.
    14 Dec 2012, 07:19 PM Reply Like
  • David Trainer
    , contributor
    Comments (993) | Send Message
     
    Author’s reply » My ETF and mutual fund ratings are not based on past performance.
    My definition of good portfolio management is here: http://bit.ly/12hKq43

     

    My Portfolio Management ratings are based on the quality of holdings in each ETF pr mutual fund.

     

    Past performance is not necessarily indicative of future performance.
    16 Dec 2012, 11:26 AM Reply Like
  • Qniform
    , contributor
    Comments (2603) | Send Message
     
    <sigh>
    16 Dec 2012, 08:13 PM Reply Like
  • David Trainer
    , contributor
    Comments (993) | Send Message
     
    Author’s reply » Yes, there is a big difference in my rating system which assesses the quality of earnings and valuation for each fund holding and the purely backward-looking star rating system of Morningstar and other traditional rating systems.

     

    It is a about time that fund research were closer in quality to stock research.
    17 Dec 2012, 09:37 AM Reply Like
  • Qniform
    , contributor
    Comments (2603) | Send Message
     
    Terrific. Since stock picking works so well, apply the same technique to funds...
    17 Dec 2012, 09:37 PM Reply Like
  • JamieI
    , contributor
    Comments (4) | Send Message
     
    Qniform - check out Dorsey Wright research and tell me there is no evidence of active management. Or you could look at SPY v PDP.
    5 Mar 2013, 06:05 AM Reply Like
  • Qniform
    , contributor
    Comments (2603) | Send Message
     
    Looks like these guys http://dorseywright.com - technical analysts who designed a TA ETF.
    5 Mar 2013, 06:42 PM Reply Like
  • Qniform
    , contributor
    Comments (2603) | Send Message
     
    Look, clearly you do not understand what I'm talking about if you cite one ETF with a 4 year history. If I tell you my grandpa smoked and drank for 80 years and died at 100, will you decide than there is no validity to life expectancy research?

     

    Here is some material to review to develop an understanding of this issue. Both points of view and research on each side are presented, but note that the active management proponents tend to come from the investment advisory community - so there may be some bias to their position.

     

    1. Barnes, Jonathan. “Active vs. Passive Investing.” CFA Magazine. Jan 2003: 28-30.

     

    2. Chen, Hsui-Lang, Narasimhan Jegadeesh, and Russ Wermers. “The Value of Active Mutual Fund Management: An Examination of the Stockholdings and Trades of Fund Managers.” Journal of Financial and Quantitative Analysis. 35.3 (2008): 342-368

     

    3. French, Kenneth. “Presidential Address: The Cost of Active Investing.” Journal of Finance. 63.4 (2008): 1537-1573

     

    4. Goldman Sachs. “Re-thinking the Active vs. Passive Debate.”Asset Management. 12 Nov 2010. Web. 1 Oct 2011

     

    5. Mamudi, Sam. “Active vs. Passive: The Debate Heats Up.” Wall Street Journal. 29 Aug 2009. Web. 21 Nov. 2011

     

    6. Sharpe, William. “The Arithmetic of Active Management.” Financial Analysts Journal. 47.1 (1991): 7-9
    5 Mar 2013, 07:03 PM Reply Like
  • David Trainer
    , contributor
    Comments (993) | Send Message
     
    Author’s reply » Jamiel:
    Thank you for your comment,
    Would you please provide a bit more detail, such as the Dorsey Wright research to which you refer?
    5 Mar 2013, 10:22 AM Reply Like
Full index of posts »
Latest Followers

StockTalks

More »

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.