Valeant: Position Crowding, Intrinsic Value – an Update20160608130525

Valeant: Position Crowding, Intrinsic Value – an Update

In January, we wrote a post on Position Crowding and Valeant – the poster child in 2015 for a crowded hedge fund name.  One of the points we made was that “intrinsic value” can be highly uncertain when it’s based on forecasts of earnings and cash flow.  We expanded on this when we wrote about how va...
Brexit in 22 Days?20160601165828

Brexit in 22 Days?

June 1, 2016Research
A new Guardian poll reveals a 52 – 48 split among Britons in favor of leaving the EU. The alarming result represents a sharp decline in support for the Remain camp, which held a comfortable ten point lead as recently as mid-May. Commentators attribute Remain’s reversal of fortune to a combination of...
Chasing Fund Returns is a Very, Very Bad Idea20160509183323

Chasing Fund Returns is a Very, Very Bad Idea

How does a fund earn over $500 million in management fees yet lose over $1 billion for investors since inception?No, sorry.  It’s not a hedge fund.  It’s a mutual fund:  the Marketfield Fund, arguably the poster child for returns chasing in the liquid alts space.Here’s the background. The Marketfiel...
Why Apple is NOT a Top Ten Holding of 93% of Hedge Funds20160308151554

Why Apple is NOT a Top Ten Holding of 93% of Hedge Funds

To infinity and beyondBuzz Lightyear A recent report by Goldman Sachs describes Apple (AAPL) as a “Very Important Position” (top ten holding) for 47 hedge funds. Overlooked is that fact that it’s not a significant position for 93% of the hedge funds in the survey and represents only a 1-2% over...
Is Warren Buffett a Value Investor?20160229081145

Is Warren Buffett a Value Investor?

February 29, 2016Research
 The best business to own is one that over an extended period can employ large amounts of incremental capital at very high rates of return.Warren BuffettThe quote above is a far cry from value investing as described in such canonical works as Graham and Dodd’s Security Analysis (1934). Those wo...
When a Client Asks, “What is Brexit?” Here’s Your Quick Guide20160225100755

When a Client Asks, “What is Brexit?” Here’s Your Quick Guide

February 25, 2016Research, ,
As we discussed in a post on Market Psychology and the Investor Narrative, the markets get very volatile when a new, large and unfamiliar risk surfaces. Brexit, or the possibility that the UK will decide to exit the European Union, is one such risk. Will it happen? Right now opinion polls are roughl...
Market Pundits in 2016 – A Reality Check20160218134045

Market Pundits in 2016 – A Reality Check

February 18, 2016Research
Most successful pundits are selected for being opinionated, because it's interesting, and the penalties for incorrect predictions are negligible. You can make predictions, and a year later people won't remember them.Daniel Kahneman (Nobel Prize winner in Economics for Behavioral Finance theory)It’s ...
How Smart is Smart Beta?20160216090029

How Smart is Smart Beta?

February 16, 2016Research
If smart beta is smart, is my beta dumb?First, a definition:  smart beta strategies are (allegedly) better ways of getting exposure to equities, bonds and other asset classes than via traditional indices.  What precisely does this mean?Let’s assume my core equity allocation is an S&P 500 index f...
The Commodity Head Fake20160209104553

The Commodity Head Fake

February 9, 2016Research
Prediction is very difficult, especially if it’s about the future.Niels BohrIn the annals of modern portfolio theory, commodities deserve an award for the biggest diversification head fake of all time.By 2006, commodities looked like the ideal diversifier.  Academic studies demonstrated that commodi...
The Trouble with Oil (Part Three)20160201205252

The Trouble with Oil (Part Three)

February 1, 2016Research
One thing that I’ve realized is that there’s a disconnect in how different investors think about oil. For asset allocators, oil and commodities are a financial asset. Volatility and drawdowns are viewed like those of a stock. Oil down 20% feels a lot like a stock down 20%.For investors in oil compan...