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finsovet

finsovet
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  • Weight Watchers: Excellent Business At A Fire Sale Price [View article]
    I've been watching the Watchers (pun not intended) since January, and I think they are very discounted vs. intrinsic value. Ownership by Gotham capital, Whitebox advisors indicate they attract some interest of the value shops. The article is very timely and useful to build the case.
    Mar 29 12:48 PM | 2 Likes Like |Link to Comment
  • The Super Investors Of Graham And Doddsville [View article]
    Hi Larry,
    why would you not comment on my Jan 26th comment citing the 20 year data via MFO and M* huge alfa for SEQUX for 15 years?
    Thanks.
    Mar 1 04:06 PM | Likes Like |Link to Comment
  • The Super Investors Of Graham And Doddsville [View article]
    I would rather consider Mutual Fund Observer to compare the funds. It also uses risk metrics and goes back 20 years for that, unlike M*. Here is a 20 year record:
    SEQUX: APR 12.3%; Max DD -40.7%; Sharpe: 0.64
    TBGVX: APR 9.9%; Max DD -47.1%; Sharpe: 0.56
    VTSMX-20Y: APR 9.2%; Max DD -50.9%; Sharpe 0.4
    ACIxUS-20Y: APR 6.3%; Max DD -57.4%; Sharpe 0.2
    Source: http://bit.ly/1ffr8mA

    Even with a 15-year M* record you will see SEQUX alpha vs S&P500 is 3.8
    Source: http://bit.ly/1ffr7PD
    Jan 26 04:20 AM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Larry,
    we may or may not discuss terminology here, but your strategy boils down to active bets on concrete asset classes. Your 'active decision to allocate capital' (using passive implementation for the asset classes) is a huge deviation from the 'lazy' benchmark, and we know how hard it is to beat the latter. It may have significant implications for the investors, and in that regard it is not very different from Gross and others' are doing.
    Hope this makes sense.
    Jan 19 08:49 AM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Larry, thank you. No dispute when you talk about value and MOM. You accept the market correctly pricing assets WITHIN asset classes, but not the asset classes, since you deviate from a passive asset allocation portfolio -- a mix of major world betas, cap-weighted, fixed income and equities. You advocated such type of 'lazy' portfolios as I mentioned earlier. Now you are actively picking or timing the asset classes - this is where you are trying to create alpha. It looks very active and similar to what Bill Gross or any other gurus are doing (except probably for Boggle the senior).
    Jan 18 01:02 AM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Larry, thank you. I will be watching for your book.
    As to my earlier comment, do you agree that your Larry Portfolio is another facet of active management and alpha-seeking on the asset class level? Do you know better than the market? This would be the hat of financial pundits and prognosticators that you seem to be criticizing. Also on security selection level, you seem to be okay exploiting the inefficiencies which are academically proven (value and momentum screens). What if these inefficiencies also become traded away by the ETFs who seek those strategies actively and building their asset base rapidly?
    Best wishes.
    Jan 11 02:22 AM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Larry, I think earlier you quoted or referred to a study about success factors behind Buffett's model, and according to that study quality IS a factor. And that's why Buffett and Yacktman have persistently outperformed.
    Thank you.
    Jan 8 05:55 AM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    A better way to put it (if I may correct the pros): the evidence shows success based on return factors such as: valuation, size, quality and momentum. Proper dividend screens and in-depth look into fundamentals may help not only get you exposure to the value factor but to quality as well (think Buffett-style). DGI never look at dividends per se (high dividend paying companies would sometimes be junk), they look at fundamentals too: cash flow stability, moats, management policies, etc. Companies with long histories of dividend growth (dividend achievers) tend to be higher quality companies. Factors can get pricey or cheap.
    As per Morningstar P/E of VIG ETF holdings (DGI strategy) is 16.45, for VTI (total stock market) - 17.08, VBR (size and value factors a-la LP) - 17.55). At first glance DGI does not look very expensive (given higher quality of constituents) now!
    Jan 7 02:49 PM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Larry,

    My definition of active management is different. While you are not picking stocks or timing the market, you pick asset classes, which should be no different. It implies that you know better than the market and seeking alpha on the asset class level. I referred to the 'lazy portfolios' on MarketWatch (yours including) and Big Rocks portfolio in one of your books as examples of a truly passive approach. Has it stopped working?

    I am trying hard to understand your way of thinking about commodities but I am getting stuck.
    My understanding of shorting - betting on price decline by selling borrowed stuff or contracts. How can demand for commodities be likened to shorting them? When we are 'short' of energy we consume it, but I hope you are not saying that we short energy (contracts) because we are consumers of energy. Otherwise this should work for all other goods and services: everyone shorting almost everything.

    There is no 'tech' factor discovered yet, but my theory: knowledge and innovation leading to 'creative destruction' IS a factor. True, the users get all the benefits, but from the producer perspective in terms of market share and profits the pioneers get it all, disrupting all the rest. The problem is how to identify and quantify this factor for investment management - perhaps a topic for the next Nobel prize. In the meantime indexing tech seems to be a prudent way to go: the leaders would climb up the chart naturally. Again, this is just my humble thoughts. I am only conscious that LP investors will miss many opportunities (due to your active management approach). I wonder if fiduciaries should warn the clients about such risks?
    Jan 7 01:58 PM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    I agree that dividend growth investing is an effective way to screen for quality companies and a viable approach overall. All things equal it is safer than total market investing since return of capital represents shorter asset duration. You get a vehicle which is closer to bonds by investment characteristics. That said, there are times and cases when this approach would not work (likewise, any other approach can experience such times), i.e. when the dividend stocks are overvalued. Bonds can be overvalued too!

    Larry, there is no point arguing which approach is superior. As J-M Eveillard said something along the lines - the worst single mistake an investor can make is not being a value investor. Used properly dividend paying companies can well emulate exposure to such factors as value and quality.
    Jan 7 06:52 AM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Thanks Larry.

    Airlines being short fuel/crude? I thought they'd rather buy calls or use other types of hedging. I don't think shorting has anything to do with fundamentals of an asset class. On the contrary, tech is becoming a mature asset class and every industry is 'becoming' tech rapidly. It would make sense to compare tech with SV in 30 years or so.

    We can go on hypothesizing, but hey, there is an elephant in the room! Does not LP embody active management and alpha-seeking? At least this is what I see in your significantly overweighting and underweighting entire sectors. Are you claiming an edge in the markets? What are efficient markets thinking? Hello, Lake Wobegon?

    I appreciate the time you are putting in here.
    Jan 7 06:21 AM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Thanks Larry.
    Something to take in. Quick final thoughts on commodities- human ingenuity and entrepreneurship are better remedies to any supply shock. Companies will adapt, and by the way, they already OWN commodities big time! The only situation when commodities would make sense is when the on-going concern is broken and the companies are valued at fire-sale / liquidation prices with a truly apocalyptic outlook. And even then, you would probably prefer real stuff like water, coal/wood etc., not the contracts. It is an artificial asset class (and a huge source of all sorts of fees, of course) even if it adds diversification benefits (maybe in the same way as weather contracts or other bets).
    I wish you good luck for the next 20 years with LP approach. I just wonder how are your clients okay that they are missing returns from googles, amazons and biotech pioneers of the world?
    Jan 5 02:58 PM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Larry,

    thanks for your explanations. This does not make more sense to me however.

    When did we last see supply shock, how often they occur and is there a reason to hedge them at all? Granted, adding some CCF would give your portfolio a smoother ride, but at the end of the day most investors' goal should be terminal value of the portfolio, no matter correlations. Shocks will always be there.

    Stocks being a 'worse inflation hedge'. Again you are talking correlations here. Would appreciate your providing any evidence that the terminal value of an all-stock portfolio would be less than all-commodities portfolio for the full history of whatever market data is available.

    Risk parity. It worked until it stopped working, and sure your backtests would make a point. U.S. bonds by and large ensure 'return-free risk' these days (maybe except for munies, but we 'know' that EMH would not allow that to last for too long - you are making quite a call here). Anyway, looking forward when your new book is out.

    As to SV, when I refer to a factor I mean it can get relatively expensive and provide relatively poor returns. Stating the opposite renders investing into all large growth companies meaningless at all times. If it is seems so easy to you and your clients, take all the SV and ban LG from your portfolios - this will create a good opportunity for others. I can't imagine you got so active in your approach, quite a style drift.

    Happy New Year and best wishes!
    Dec 31 12:54 PM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Larry,
    thank you, this is a comprehensive explanation. One of the best inflation hedges is cash, so I can get that: the shorter bond duration is (and the more TIPS exposure is) the less you need commodities. However I remain unconvinced:
    1) Tail risk? I wonder how commodities mitigated one in 2008?
    2) Commodities do not have risk premium, and high stock market beta exposure is in fact a better hedge from inflation, provided you stick to value investing principles.
    3) Risk parity locks in small returns due to high allocation to quality fixed income. Will your portfolio always hold small value stocks irrespective of their valuation? Sometimes small value get pricey. Some people find more value in U.S. megacaps today. Why not start with those in 2014?
    Dec 30 01:20 PM | Likes Like |Link to Comment
  • Larry Swedroe Positions For 2014: Risky Equities Always Trump Chasing Yield [View article]
    Interesting piece and a vibrant thread! Thank you and congratulations Larry.
    What about commodities for diversification purposes? I remember you recommended them in your books as part of a passive strategy.
    Dec 29 08:28 AM | Likes Like |Link to Comment
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