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cstauffer

cstauffer
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  • Perspectives On Friday's Sell Off [View article]
    C, I have read through this thread and frankly I find your "predictions" to be nothing more than prognostications that frankly any "hard money" Austrian economic theory person makes almost perenially. No one has accurately made the bear market calls that you claim to have made with the exception of the Peter Schiff's of the world who make such calls year in and year out for decades with a record of being wrong 90% of the time. I am unimpressed.
    Jan 26, 2014. 04:39 PM | 3 Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry, I read the CBS article and frankly I think that a scientific study of Buffett, which reverse engineers his portfolio after the fact and concludes that doing so indicates that it was not the stocks that he picked, but the types of stocks that he picked, that drove his outperformance is garbage science. That is like Nissan buying a Ferrari, tearing it apart and building a Nissan with similar spec's indicates that it was not Ferrari's superior engineering that lead to building a great car, but it was instead there use of certain technology and design elements in concert that resulted in a great car. That's crazy, it is saying the same thing, Buffett's stock selection process that he developed, lead to him owning a particular portfolio of stocks. His conviction and discipline as an investor led to him being able to stick with his strategy and that combination produced his outperformance. Stock selection is a function of process and discipline. But at the core of the equation is selecting the right combination of stocks and buying them at the right price. That my friend is stock selection. One can reverse engineer that and overlay the portfolio in RETROSPECT with indices and say that stock selection did not really matter, but that leads to the same "junk science" that leads to academia concluding that active managers cannot beat a passive index. Those studies use diversified active mutual funds to represent the active manager, when most of those mutual funds are so widely diversified and end up with a very high R square. Thus they are closet index funds, with a level of fees which make it impossible for them to outperform.
    Nov 27, 2013. 09:45 AM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Hhmiles,

    Do you need a job? :)
    Nov 21, 2013. 06:32 PM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Hhmiles,

    Congratulations for going back into the market in late 2008! Getting out when you did was just lucky, getting back in required a level head and concept of value. You are unusual because the temperment which got you out does not usually co-exist with the temperment which got you back in.
    Nov 21, 2013. 05:48 PM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    I am a big fan of Maubossin's work. By the way I love St. Louis, I spent a week out there two summers in a row with my daughter who played in an invitational junior tennis tournament that takes place in St. Louis every year. It was very hot, but the people were some of the friendliest I have ever experienced.
    Nov 21, 2013. 01:42 PM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry, in an industry filled with pretenders, even though we approach our work very differently, I have concluded that you are indeed a shining example of someone who adds value for their clients. At the end of the day, that is what matters. I am now following you on SA and I may even buy some of your books. :)
    Nov 21, 2013. 11:58 AM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Thanks Larry, I have really enjoyed this dialog. At the end of the day, one of the main reasons that some investors seek out professionals such as myself is that they are people who like the idea of being invested in the upside of well managed growing businesses, as opposed to "areas of a market". I have found that when times get difficult in the markets, such as 2008 and early 2009, individuals exposed to baskets of stocks with very little transparency, just want to get out of the market. However, individuals who understand business derive comfort in knowing what they own during times like that and are more inclined to hold on or even take advantage of non-rational pricing of these assets.
    Nov 21, 2013. 11:37 AM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry,

    Please comment if you are so inclined on the mutual fund run by my mentor from my early years in the business. The fund is CCASX. When I worked for the lead manager of this fund he was underperforming for several years in a row in the late 90's because his fundamentally driven stock selection process would not allow him to participate in the dot.com mania that was driving the market. He kept telling me not to be concerned about under-performing during a market like this because it will result in a very bad ending for those who are playing that game. By the way, that would have included passive investors. Looking back over the last 1,3,5 & 10 year periods his actively managed stock picking has allowed this fund to best its benchmark and peer group materially in all time periods. I could not be more proud to have learned from someone like this.
    Nov 21, 2013. 10:33 AM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Hi again Larry,

    I don't know if I can have any affect on how you characterize stock selection, but I will try. I really wish that you would not classify picking stocks as a loser's game in absolute terms. I agree that most people will fail at picking stocks, but even you have to admit that some people can "pick stocks" very successfully. I personally do not think that they have a god given ability, but instead that they do the hard work necessary and have the temperment to go against conventional wisdom and hold strong convictions. I agree with much of what you say, but I think to be fair you should qualify a statements which seem to indicate that you don't believe that anyone can be good at buying low and selling high when it comes to stocks. Obviously some people can identify under-valued companies, otherwise there would be no M&A activity. Identifying under-valued companies is not rocket science, however pinpointing when that under-valued situation will turn around is where many investors fail because they lack conviction, they instead are really just guessing and because of that they are weak-handed investors and get scared out of their investments. Thus they fail.
    Nov 21, 2013. 12:01 AM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry,

    My definition of trying to beat the market is first defining the market, then attempting to add value by either under-weighting or over-weighting individual securities, sectors, industries, or asset classes. I personally think that attempting to do that is mostly futile and a guessing game that very few people can be successful at, especially in any consistent manner. Many very smart people have tried doing this in the name of sector rotation, global macro, etc. and their records are inconclusive at best. Just look at Ray Dalio's performance this year.
    Nov 19, 2013. 12:16 PM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Hhmiles,

    Excuse me Larry, I thought that I would jump in on this dialog briefly. Hhmiles, outperforming the market is not what a "wealth management" client is paying for IMO. You may have noticed my dialog with Larry on this thread and I am an active asset manager, therefore one would think more inclined to try to "beat the market" than someone like Larry. From what I gather from hearing Larry, he provides a valuable service for most investors who are inclined to seek out professional investment/financial planning services. Seeking out someone to beat the market is a trap that many investors fall into. Most investors do not need to assume the risk inherent with the game of trying to beat the market. If an asset manager's objective is to try to beat the market every year, this will lead the asset manager to highly market correlated investments and thus an assumption of a market level risk. This leads a portfolio manager to over-weight what the market over-weights and under-weighting what the market under-weights, thus in 1999 one would have had to been significantly over-weighted in technology stocks and in 2007 one would have had to have 20% + in financial service stocks. If an asset manager has the freedom to pursue an absolute return commenserate with what a client needs to successfully execute on a client's financial plan, one could have significantly under-weighted technology stocks in 1999 and not be worried about under-performing the market in the short-term.
    Nov 19, 2013. 10:35 AM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Finding the appropriate benchmark is the key and I have yet to do that given that I hold so few stocks and they range from a stock as small as United Online (a special situation stock), owned over the last 15 months until recently sold, FaceBook, owned since March, Microsoft, owned for four months earlier in the year from $25 to $35, Greenbrier, owned for 10 months, LIFE, owned for over a year and sold recently after it was acquired by TMO, CELG, owned for over a year and still holding, Tesla, owned for two months from $44 to $85, and SBS, owned for four years until sold earlier this year. These were are a sampling of very successful holdings, but as you can see they range from small-cap, to Mega-cap, to speculative, to large-cap growth, to international mid-cap value. I don't discriminate, just look for value or misunderstood situations and I stick to an objective buy/sell discipline. All of these were bought without any pre-conceived notion of how long they would be held, but with the intention to hold them until we deem that they are no longer under-valued or until certain indentify catalysts occur.

    Regarding your bond strategy, that would not be of any interest to me because I do believe that high quality highly liquid bonds are priced extremely efficiently. Even when it comes to bonds, I search for value, therefore I tend to source the type of bonds that institutional buyers are not active in. I have the luxury of doing this because I can buy small lots and I have the skills to analyze the bond structure because in past life I was trained as a credit analyst.
    Nov 17, 2013. 07:32 PM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry,

    Thank you for taking the time to respond. I admittedly have not read any of your books, although I know several people who have and they are highly recommended. You would be surprised to know that I have recommended quite a few prospective clients to contact Vanguard and work with one of their advisers. I personally believe most investors are better served by low cost passive management, however where we depart is that I do not believe that most mass affluent ($1,000,000 to $3,000,000) or high net worth investors ($3,000,000 to $10,000,000) are served well by passive investing. We probably agree that the vast majority of all investors who are paying active management fees/wrap fees to own a diversified portfolio actively managed funds, or separate accounts weighted most heavily toward U.S. large-cap are not receiving any value at all. I have carved out a small niche regionally and run all-cap, all-style, global concentrated equity portfolios and special situation individual bond portfolios most focused on non-rated municipal bonds. I also allocate 20% to 30% of most portfolios to non-traditional areas such as real estate and private equity through non-traded vehicles. My clients do not measure their portfolios against market benchmarks, but instead the focus is on a "personal benchmark", which reflects an average annual return which we agree will enable them to meet their long-term goals.

    Again, thanks for your time and I did enjoy reading your post.
    Nov 17, 2013. 06:46 PM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry,

    As Swensen notes, in his argument that security selection can indeed play in important role in performance outcomes, what about a one stock portfolio, or a 5 stock portfolio? One certainly has to admit that in each of these cases security selection is extremely important in return outcomes. You can attempt to measure an all-cap, all-world, style agnotic concentrated portfolio that is actively managed, but I contend that you will have a very difficult time doing so. Most of the investors that I admire, Marty Whitman, Peter Lynch, Mario Gabelli run largely uncontrained strategies that do not attempt to track any particular indices, but instead focus on long-term value creation. The asset management industry has largely conformed to the model that you speak of that is concerned with style boxes, R squared and tracking error and this is exactly why the vast majority of actively managed mutual funds have very little active share, thus are essentially closet index funds doomed to under-performance.
    Nov 17, 2013. 12:57 PM | Likes Like |Link to Comment
  • It's A Stock Picker's Year [View article]
    Larry, on the point of not believing in owning individual stocks, if every investor adopted that believe we would cease having a functioning market. It is the price discovery provided by the buying and selling of individual stocks which creates a market and make being able to by entire asset classes and index ETF's and funds possible.
    Nov 17, 2013. 10:39 AM | 1 Like Like |Link to Comment
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