The Stingy News Weekly (07/24/2011)
A contrarian case for following the herd
"Price momentum has succeeded in the face of a couple of intuitive objections. One is that buying winners inherently conflicts with a contrarian philosophy that is deeply ingrained within many successful investors. The second is that the simplicity of analysis needed to build a portfolio is troubling to adherents of the belief that markets are at least reasonably efficient. While the skeptics may lurk in the shadows when the strategy is successful, they are eager to speak up when momentum fails. And it is hard for the practitioners of a momentum strategy to launch a vigorous defense while looking foolish for having recently lost money with a portfolio of stocks bought simply on the basis of having recently gone up."
Mining the portfolio
"Mining the portfolio, in essence, is taking information and news from current portfolio holdings, and using it, and the second order effects stemming from that information, to allocate capital in other investments."
Is he economically rational?
"I think of it as training to understand managements — see if they act like owners maximizing long-term profits, or as workers aiming to maximize their pay packets. You will earn more with companies that think like owners."
Catch and release
"Spencer Lanthier, who serves on a variety of boards, recently asserted during a speech in Toronto that, despite recent advances in regulation and enforcement, large frauds still unfold in Canada largely with impunity. He claimed this country has “the weakest standards of enforcement in the G8.” Other critics routinely call for speedier investigations, more charges and more serious punishments. Even IMET superintendent Dean Buzza concedes that his units haven’t lived up to expectations. “We overpromised and underachieved,” he says."
Nothing for money
"While the major stock exchanges, securities regulators and police have made significant progress in the past dozen years purging the old-style boiler rooms and pump-and-dump schemes from the public markets, the marketing of suspect securities continues to thrive in the private domain. Typically, a company advertises or otherwise promotes a particular venture to investors, usually at a fixed price and for a fixed term. At the end of the term, the asset (usually real estate) is meant to be sold, and investors get their money. Sometimes, it begins producing an income stream for the investors. At least, that’s how it works in theory."
"Among the index-beaters, Mawer Canadian Equity, which is run by Jim Hall of Mawer Investment Management Inc., led the way with a 7.1-per-cent gain. Mr. Hall has been cautious on commodity stocks, a stance that helped his fund gain 8.5 per cent for the first six months of this year. A common thread among many of the outperformers was low fees, with most charging well below 2 per cent."
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