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Friday, 25 June 2021
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The story of Mr Market originated with Ben Graham and was further popularised by Warren Buffett, but does it still hold true? Based on experience, the two-investor scheme looks hopelessly oversimplified.
Investing is a field where experience matters, but we all operate with a set of beliefs. Staying on top of market research gives useful lessons for investors and challenges common assumptions.
Investing in a traditional index can be compared with taking the main road to a destination, but if you know the backroads and traffic conditions, you coud reach your goal quicker.
Where once the name plates of exciting new fund managers proudly displayed, now there are blank spaces. What is happening in the industry that so many talented people are closing the doors?
Many active managers are closet indexers. The real cost of forcing a skilled manager into a low tracking error is the limit to the upside.
The long bull market allowed passive investing to prosper, but over a whole cycle, companies with better fundamentals will outperform weak ones. The market is finally showing some dispersion.
Active managers trade more often and in larger amounts than passive managers do. Costs incurred from trading, in aggregate, can be substantial and ought to be considered in the decision to use active strategies.
The concept of factor investing has been around for decades and features in many portfolios. A considered and patient use of factors can enhance investment performance but not short term in all market conditions.
Inefficiencies in the small caps index means outperformance is common but that should not cost 60% more in fees than large caps. Large caps have outperformed small caps over the long term but with significant variability.
It’s worth deciphering how active 'active managers' are, whether their outperformance is sustainable, whether they cancel each other out and whether they are true to label. Know what you're paying for.
The active v passive debate has deflected attention from a more important issue, a focus on managing to client goals. Plus active management has suffered relative to passive by the central bank-driven uplift of all assets.
Most people focus on the threat of passive funds and ETFs to active investment management, but in this seminal paper exclusive to Cuffelinks, Jack Gray warns that Artificial Intelligence has barely scratched the surface.
Among the share success stories is a poor personal experience as Telstra's service needs improving. Plus why the new budget announcements on downsizing and buying a home don't deserve the super hype.
Jeremy Grantham has seen it all before, with bubbles every 15 years or so. The higher you go, the longer and greater the fall. You can have a high-priced asset or a high-yielding asset, but not both at the same time.
The focus on predicting the recovery from the pandemic is the wrong emphasis. Better to identify great companies benefitting from market changes over a three- to five-year horizon with or without COVID.
Don’t look at an earnings forecast or a DCF valuation or a broker target price for a mining company. Share price forecasts are only as good as the commodity price assumptions they are based on, and they are a guess.
Blink and it happened. If announcements in this sector were made by a producer of iron ore, gas, copper or some new tech, the news would have been splashed across the front pages. Have we witnessed a major change?
A comprehensive review of dozens of LICs shows how they performed in the crucial 'peak to peak' of COVID. This 14 months tested the mettle and strategies of a sector often under fire, with many strong results.