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connellybarnes

connellybarnes
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  • Be A Value Investor Without Doing The Work II: Alternatives To The Magic Formula [View article]
    Nice article.

    Given the extensive research showing the difficulty of outperforming the market, I personally tend to just go for minimizing fees. I consider a 0.7% per year fee very high, because that gives 7% of one's money to an "investment manager" over a decade. I prefer fees in the Vanguard or DIY investing range, like 0.2% per year. But even lower is better -- the Merrill Edge does look like a good option.

    I suppose if a website like magicformulainvesting.com went down, someone would put up another one. Programmers can also build screens from less reliable data than Compustat, such as Yahoo data. This would not be totally ideal for retail investors, because the screen would make some errors, but the upside is I think some random Internet denizen could create such a screen in short order. So I'm not really worried about Magic Formula screens going away.

    FYI, the Compustat data can also be accessed by most academics for non-profit uses. I haven't read the terms closely but I would guess publishing academic papers about stocks counts as a non-profit use. Interestingly, despite its generally high quality, Compustat still suffers from survivorship bias -- one can find obscure Ben Graham stocks from long ago that don't show up in it, and it excludes some bankrupt companies.

    I'm curious, how much does the short rebate typically give in terms of return per year for IB?
    May 26, 2015. 07:59 AM | Likes Like |Link to Comment
  • When To Sell Net-Nets [View article]
    Nice article Ruerd.

    I periodically build lists of net nets that I passively follow, but they usually lose money in aggregate, so I end up not pursuing this strategy. For example, one list I made contained AMIN, EDCI, SCMR, TAIT, and IOT (you discussed the last two in this article). This portfolio showed a -24% return since creation about a year ago.

    Do you have any comments about how I could improve these portfolios? My thoughts were (1) These were mostly U.S. based net-nets, which I think may be quite bad companies, so non-U.S. ones may do better; (2) The sample size is too small; and (3) Maybe the portfolio-level returns of net-nets are inherently highly volatile. But I don't have much experience with net-nets so I don't know what the explanation is.
    May 26, 2015. 07:11 AM | Likes Like |Link to Comment
  • UVXY: What The 5-To-1 Reverse Split Means For You [View article]
    @Noah: American options include the right to exercise the option before the expiration. So if you are short the option, you do have an obligation, and could end up being assigned.

    However, option traders can close out a short option position by simply purchasing back an equal quantity of options as were sold. This leaves one with zero of the given options, so the obligation is gone.

    Opening and closing options though can be a bit costly because the spreads can be higher due to the illiquidity of the option.
    May 19, 2015. 02:25 PM | Likes Like |Link to Comment
  • The Biffy Butler Bidet Sprayer/Digital Accessory Caddy Of Investments  [View instapost]
    Correction to my previous comment:

    The maximum gain of UVXY over its previous low would have been 16x, from 2007-02-22 (UVXY price of $1,900,608) to 2008-11-20 (UVXY price of $30,637,770). This is using the backfilled data. So position sizing should be even smaller than what I previously implied.

    I had a spreadsheet error in my previous data.
    May 18, 2015. 05:42 PM | Likes Like |Link to Comment
  • Risk And Reward With Xinyuan Real Estate [View article]
    For Xinyuan Real Estate the basic share count since 2010 has been roughly flat while the diluted shares has increased. I'm not sure why the diluted shares have increased so much in the last fiscal year.

    Shares outstanding for XIN on December 31 of each year (from [1]), in millions:

    Year Diluted Basic
    2010 155.4 152.6
    2011 151.3 151.3
    2012 144.7 144.3
    2013 149.5 145.7
    2014 177.1 151.9

    [1]. http://1.usa.gov/1PoK9XR
    May 15, 2015. 06:49 PM | Likes Like |Link to Comment
  • How To Work Remotely [View instapost]
    I read this nice post of yours while enjoying a lake view in Kerry, Ireland. I recommend Ireland for people who are into great views, nature, whole foods, castles, fishing, and/or cheap real estate. Next up are work and/or vacation in Scotland, France, and China.

    I completely agree that liberty is wasted if one doesn't take advantage of it. I'm an adventurer/wanderer at heart. So I wander around building technologies, and exploring natural areas, and cultures. It makes a lot of sense to me to spend one's very limited time on Earth according to one's own terms.
    May 15, 2015. 08:22 AM | 1 Like Like |Link to Comment
  • ASB Hawaii Is About To Erupt [View article]
    The theory is splendid. But in practice, as soon as it comes time to enjoy the benefit of renewable power sources, public officials start fighting to minimize renewable power and maximize "revenue" instead.

    For example, SolarCity and Arizona public utilities such as Salt River Project have recently been fighting over whether the public utilities can charge customers with solar cells exorbitant fees due to lost revenue. SolarCity claims in a lawsuit that "New applications [in the area] have plunged 96 percent since December."

    http://bit.ly/1DXHSIE
    http://bit.ly/1wBI3b7

    Of course this just increases the attack surface on government waste. Now Tesla can sell people giant batteries (Powerwall) so they don't need to use the grid.

    Another example would be all the legislators who banned Tesla from directly selling cars in their states:

    http://bit.ly/1DXIcXI
    May 3, 2015. 10:17 PM | 1 Like Like |Link to Comment
  • Using Yield Spreads To Assess The Relative Value Of The Mesabi Trust [View article]
    Hi James. Thanks for your thoughtful update on the Mesabi Trust. I might pick up some MSB if the iron ore price stabilizes and I get a better sense of what the Mesabi Trust and Cliffs' financials look like at the lower iron ore price.
    May 3, 2015. 06:30 PM | 1 Like Like |Link to Comment
  • Mesabi Royalty Trust - A Long-Life Asset With Massive Operating Leverage [View article]
    Thanks Nat for your updated thoughts on MSB! I don't really know enough about iron ore to value this trust with any great conviction. On the other hand it is interestingly cheap. If the iron ore prices stabilize and I get more sense of the MSB financials in a lower iron ore price regime, I might buy some.
    May 3, 2015. 06:24 PM | Likes Like |Link to Comment
  • Quote Of The Day – Saturday, May 2, 2015 [View instapost]
    Actually now that I think about it more, I really admire the bets of early-to-mid period employees of Google and Onshape (a Cambridge startup that three of my friends joined).

    It's basically a "rapidly growing company has tons of capital" arbitrage.

    The companies were already flush with cash, and rapidly growing, so employees got salary competitive with the Old Tech behemoths, and some free optionality for 10 or 100 baggers. Unlike in the earliest stage of setting up the company, it was already a high probability success bet, and easier to "replicate" by just joining such companies at that stage. Even if the bet "failed" -- which would be low probability -- they would just go to some other large tech company and still make good salary.
    May 3, 2015. 02:24 PM | Likes Like |Link to Comment
  • Quote Of The Day – Saturday, May 2, 2015 [View instapost]
    I generally admire the tech people who create useful companies, but with two caveats: (1) I would not want to live in SF, and (2) I think their bets would be more admirable if the outcomes (ex ante) were all succeed and get rich, instead of 90% chance to fail vs 10% chance to succeed and get rich.

    With that said, some of the best tech entrepreneurs took a bunch of one-way bets. However, I'm kind of at a loss for how to replicate their strategies.

    One nice thing about the professor job though is that one can spin-off businesses on the side. I haven't done that yet.
    May 3, 2015. 12:38 PM | 1 Like Like |Link to Comment
  • Got Alpha. Now What? A New Way To Kill Spiders (SPY) [View article]
    I have never entered an order that is not a limit. I have recurring nightmares that I will order something like a cheesecake without a labelled price that turns out to be $5,000. The medical system -- with its absence of price tags -- is psychologically traumatizing for me. I don't know how some people can go through life without quoted prices and clear terms.
    Apr 28, 2015. 10:13 PM | 1 Like Like |Link to Comment
  • Risk And Portfolio Management Similarities Between Joel Greenblatt And Stanley Druckenmiller [View article]
    Also, congratulations on new family members!
    Apr 28, 2015. 09:56 AM | Likes Like |Link to Comment
  • Risk And Portfolio Management Similarities Between Joel Greenblatt And Stanley Druckenmiller [View article]
    Thanks for a nice article John. I'm a fan of concentration where it is limited to not get too extreme. Also thanks Diego for the Druckenmiller speech -- that was nice.
    Apr 27, 2015. 10:56 PM | Likes Like |Link to Comment
  • Mesabi Royalty Trust - A Long-Life Asset With Massive Operating Leverage [View article]
    Hi Nat.

    Thanks for this nice article about MSB as a long-term holding.

    Do you have any new thoughts on MSB, given the challenging 2015 iron ore price environment?
    Apr 26, 2015. 02:11 PM | Likes Like |Link to Comment
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