Who To Follow, Part II: Financial Advisors' Daily Digest

Summary

• Rob Marstrand takes sometimes bewildering concepts, such as discounted cash flow analysis, and makes them intelligible.
• Roger Nusbaum routinely displays the least common quality in investing, which, of course, is common sense.
• Eric Basmajian has a talent for observing and documenting economic changes, and then providing his opinion about their investment implications.

Growing up in an immigrant family of modest means, I had no knowledge of the stock market or investing, and no interest either. When my Dad tried to foist the business section of the newspaper on me, I pushed it right back.

It wasn’t until I married and my wife and I opened our wedding presents that I found myself endowed for the first time in my life with a surplus of money from our guests’ generous gifts, whereupon investing entered my mind as a worthy concept. I hurried over to the local bookstore, picked up a popular investing magazine with a cringe-worthy headline to the effect of “Top 10 Hottest Mutual Funds to Buy Now” and read it from cover to cover.

With the hubris of youth, I felt I really understood investing. I started looking at Value Line in the local library, and even had the temerity to write analyses with investment recommendations for a subscription newsletter I wrote nighttimes after work (the gig didn’t last that long).

All this happened long enough ago for traces of embarrassment to subside, but for lessons to emerge. Investing seems easy and exciting – read Money magazine once and you’ve got your PhD – but no one has figured out the magic ratio that entitles you to investment riches in perpetuity. It’s art and science both, and knowledge, experience and discipline are all required to succeed at it. Older and wiser, I prefer to think long and hard about investment decisions, and I value the guidance of those with demonstrated wisdom to offer.

Last October, I wrote an article called “3 Top SA Authors for FA Readers, Part I” in which I suggested readers would benefit from following Kevin Wilson, Jeff Miller and Jim Sloan in this regard. Several of my SA colleagues added their thoughts in a series that came to be called “Who To Follow,” where these articles are archived. Today I would like to add three more authors to this August group.

Rob Marstrand meets the qualifications as a suitable guide for investors. The Buenos Aires-based publisher of investment newsletters has extensive investment experience cutting deals for UBS Group in London, Zurich and Hong Kong. But his resume is of interest only because his investment advice is sound, principled and practical. (In other words, when someone pushes his resume as a primary qualification in this industry, run away fast! Most strategists, unfortunately, are just not that helpful, and often the opposite.)

Rob takes sometimes bewildering concepts, such as discounted cash flow (DCF) analysis, and makes them intelligible. His ability to do so is based on his depth of knowledge of investing, and an even rarer skill at communicating that knowledge. For example, in the above-linked article, he explains how DCF analysis works in short, clear and precise sentences. He then nearly apologizes for the mental work-out, but explains why it was important, thus reinforcing the will to learn:

I appreciate that this all sounds highly technical. But it has some really interesting implications for all investors, especially in stock markets.

In short, it turns out that loads of the value of all stocks is derived from things that will happen way into the future. In fact, for some stocks 90% or more of their presumed value rests on everything going right for the next 20 years.

That said, for stocks of more solid companies that figure drops to less than 40%, which means much more value derives from the nearer future.”

Roger Nusbaum routinely displays the least common quality in investing, which, of course, is common sense. A problem endemic to the investing industry is obfuscation. Perhaps because investing is not rocket science, professionals feel a need to make it sound like it is to accord themselves status, or just to keep investors’ fees coming their way. Roger is completely unpretentious and he has a knack for cutting to the chase each time, addressing what is genuinely important. His most recent article is a classic example of his common sense and honesty:

You have no doubt heard/read the concept of borrowing from future returns when getting high current returns. Have the last nine years borrowed or taken in some part of what investors might hope for over the next nine years or some other period? The answer isn’t knowable, but it is an appropriate question.

It is also appropriate to have something in mind if the next ten years return less than half of the previous ten years, at least where the S&P 500 is concerned.”

Eric Basmajian is a shrewd interpreter of economic trends. The economy is a dynamic organism, always changing, and those changes have investment implications. Eric has a talent for observing and documenting those changes, and then providing his opinion about their investment implications. What’s more he carries out each of those steps clearly – in understandable sentences, comprehensible graphs and with unambiguous conclusions. Here’s a snippet from his latest analysis of the housing market:

Even though the move in interest rates has only taken place over a few weeks, and most of the action has been on the short-end of the curve, the rising rates have already started to impact the housing market. The economic data for the housing sector has started to drastically miss expectations and has moved into contractionary territory.

Mortgage rates have risen recently which has impacted the housing market. It is surprising how quickly the impact was felt from such a short move and truthfully, not a big one on the long end.”

To follow these superb Seeking Alpha analysts, you can click on their above-linked names and then click “follow” to get e-mail alerts of their articles, or click on the RSS symbol to follow their work on your RSS reader.

Please share your thoughts on this issue in our comments section. The Financial Advisors’ Daily Digest will resume publication on Monday. In the meantime, find more content geared to FAs at SA’s Financial Advisor Center.

Comments

[harikaagarwal]

its really helpfull

[natashaaboehm]

well that is really helpfull as for me

[SA For FAs]

You're welcome mojako et al. And you're right -- learning is the name of the game!

[Lily Jackson]

You are really nice SA

[mojako]

Thank you very much Gil. Your insights are very helpful. The names you’ve mentioned are more than worthy of great learnings.
Good vibes to you.

[SDS (Seductive Dividend Stocks)]

Thank you, Gil.
It is hard to find real gems anywhere and SA is not exclusion. Most SA articles remind me Gunduz Aghayev "Attractive TV" piece (see http://bit.ly/2t8AEb2). I'll read other parts in http://bit.ly/2h1dECt.

SDS

[David Jackson]

Just wanted to add that by following someone, you can view their new articles and comments in the People section of the website, in the top nav.

[fujilomi]

The more smart people you follow, the better results you will have. Keep tabs on how their predictions come out though, some smart people are only broken clocks and will be right only occasionally. Pick the smart people who are right more often, reasonable predictions/arguments that rarely come true will hurt more than help.

[hawkeyec]

Let me add my voice to your support of Mr. Basmajian's emphasis on the need to understand trends in the business environment. Understanding the environment of business, and not just the financial environment, is critical to understanding what makes business firms successful. Success, of the kind Warren Buffett talks about so often, is dependent on a management's understanding of the expected behavior of its customers, its competitors, its suppliers and its other key stakeholders, as well as the expected behavior of the economy. The ability of a firm to create and sustain a competitive advantage is essential to its success, including the creation of the future value that will make the firm an attractive investment, Too often we are tempted to try to pick investments based on their share price trends. Those are results, dog tails as it were, and trends of results that do not account for the underlying reasons for the results are not going to be stable. What people like Buffett realize is that business outcomes are dependent on underlying business practice and a firm's response to its environment. It is the drivers of business outcomes we need to understand first. Benjamin Graham understood that, as does Buffett.

[Rob Marstrand]

Many thanks also, and exactly what Eric said above!

[Eric Basmajian]

Thank you, Gil! I am humbled to have made your list.

Cheers,
Eric