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The Stingy News Weekly (02/13/2011)
New @ StingyInvestor Your Roadmap to Investment Success "I was pleased to talk at The Investment Show where I made the case that novice investors should opt for low-fee balanced funds. I then moved on to more advanced topics including dividend investing and value investing. Here are the slides that were used..." Stingy Links Love the downgrade "It would appear that as long as they spell your company’s name right,upgrades and downgrades are both good news for your stock." Rethinking Stocks for the Long Haul "Put yourself in the shoes of an intrepid investor in 1900. Both the U.S. and Argentine equity markets looked extremely attractive. Yet the buy-and-hold investor would have pocketed a small fortune in U.S. equities and would have been essentially wiped out in Argentina over the course of the century. 'We don't know what the equity premium will be over the next 30 years,' says Pastor. 'And that uncertainty compounds with time.'" Expectation Errors in Value/Glamour Strategies "This paper uses financial statement analysis to identify expectation errors regarding future firm performance embedded in the prices of value and glamour firms. We contrast performance expectations implied by firms’ value/glamour classification against a simple, financial statement analysis-based metric that differentiates improving versus deteriorating financial performance. We find that the value/glamour effect is concentrated among firms whose financial performance conflicts with implied expectations. Corroborating evidence of predictable expectation errors exists for future analyst forecast errors, forecast revisions, earnings announcement-window returns, and momentum reversals. Together, the results suggest that the value/glamour effect is an artifact of erroneous performance expectations that are predictable from financial statement analysis." Canada is 'a purely random success story': Shiller "Robert Shiller, the Yale professor who correctly predicted the 1987 stock market collapse and the recent U.S. housing market meltdown, said Canada’s robust financial health compared to other nations is largely due to a random run-up in oil prices in the midst of the global financial crisis. “It’s a major export for Canada and it went to US$140 a barrel in 2008, right when Canada needed it,” Prof. Shiller said in an interview Tuesday. Canada’s economic output fell roughly 4.2% from its peak in 2007 to its trough in 2009 — even with the oil price surge, while the U.S. saw a near-identical decline. “It seems that if the country didn’t have that boost from oil, it would have done worse than the United States,” Prof. Shiller said." How Great Entrepreneurs Think "Sarasvathy likes to compare expert entrepreneurs to Iron Chefs: at their best when presented with an assortment of motley ingredients and challenged to whip up whatever dish expediency and imagination suggest. Corporate leaders, by contrast, decide they are going to make Swedish meatballs. They then proceed to shop, measure, mix, and cook Swedish meatballs in the most efficient, cost-effective manner possible. That is not to say entrepreneurs don't have goals, only that those goals are broad and—like luggage—may shift during flight. Rather than meticulously segment customers according to potential return, they itch to get to market as quickly and cheaply as possible, a principle Sarasvathy calls affordable loss. Repeatedly, the entrepreneurs in her study expressed impatience with anything that smacked of extensive planning, particularly traditional market research." People play events into biases "I'm a big believer in Jonathan Haidt's characterization of our brains as articulate confabulators, primarily engaged in rationalizing our prejudices. I have rarely witnessed someone change their mind on something important to them based on any one fact sure, disinterested people do, but not anyone who's invested several years on a subject. Last week's John Tierney's NYT article on academics highlights they are just as biased as the uneducated, even though they consider them paragons of rational, unbiased thought" Celebrating 75 Years Of Sloth "Wharton professor Jeremy Siegel pointed out in his 2005 book, The Future for Investors, that the original S&P 500 stocks in 1950 outperformed the annually reconstituted index from 1950 through 2003. Interestingly, many of the largest stocks from the original S&P 500 Index are also in this fund's portfolio, including ATandT, ExxonMobil, and DuPont (DD). The fund's winning streak has continued since 2003, too, as it has beaten the S&P 500 Index by 2.5 and 1.5 percentage points annualized over the trailing five- and 10-year periods, respectively. The fund has benefited from the same dynamics that have powered the returns of the original S&P 500 constituents. In fact, the fund has returned an annualized 11.1% since 1970 (which is as far back as our database goes) versus 9% for the S&P 500. It has also beaten the 17 actively managed equity funds introduced in 1935 or earlier." Land of the free lunch "In short, America is the ultimate example of survivorship bias. Go back to 1900 and you might have picked Argentina or Russia as emerging nations with the ability to rival the US but each proved to be a huge disappointment." A License to Shampoo "Amid calls for shrinking government, lawmakers across the country are vowing to cut regulations that crimp economic growth. President Barack Obama recently said it's time to root out laws that 'are just plain dumb.' Tell that to the cat groomers, tattoo artists, tree trimmers and about a dozen other specialists across the country who are clamoring for more rules governing small businesses." Super Rich "In both authors' works, it's difficult to find concrete business lessons. And perhaps that's the point. For example, writes Chopra: 'Your body is a constant projection of you in the world. Every cell eavesdrops on your thoughts.' The author views our metabolisms as chat rooms, with epidermal cells listening in to what's going on in the cranium. If you don't understand what he means, your foot can explain it to you." State Budget Bunk "When Arizona claimed to be selling its government buildings, it was engaging in a far more deceptive kind of borrowing—a gimmick known as “tax-exempt certificates of participation” and even more preposterous than the Daily Show correspondent realized. There was no new owner in this so-called sale. Rather, the state floated more than $1 billion of notes, promising to repay bondholders with the “rent” that it would pay to lease the buildings. Since rent, not tax revenues, technically would repay the certificates, Arizona could borrow the money, even though it exceeded the state’s constitutional debt limit. Yet Arizona will pay the rent on the buildings with tax revenues, so the impact on taxpayers is exactly the same as more borrowing would have been: in this case, $1.5 billion in future taxes." Hedging Bankers Skirt Efforts to Overhaul Pay "Intent on fixing a banking system that contributed heavily to the recent financial crisis, lawmakers and regulators pushed Wall Street to overhaul its pay practices. Big banks responded by shifting more compensation into stock, a move intended to align employees’ interests more closely with those of investors and discourage excessive risk-taking. But it turns out that executives have a way to get around those best-laid plans. Using complex investment transactions, they can limit the downside on their holdings, or even profit, as other shareholders are suffering." DOW 30 Value Screens
S&P/TSX60 Value Screens
The Rothery Report (Learn More | Subscribe Today) The Rothery Report provides research on select deep-value stocks in North America. Discover overlooked and undervalued stocks in quarterly investment reports which provide detailed analysis of Canadian and U.S. stocks. Weekly email news and additional updates keep subscribers informed about new opportunities and developments.
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| Disclaimers: Consult with a qualified investment adviser before trading. Past performance is a poor indicator of future performance. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, financial advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. More... | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
