Looking For a Ten Bagger?

The other day I looked at a common theme among the decade’s biggest winners; they tended to be very expensive relative to their peers based on traditional valuation metrics. Today I want to look at another trait these winners share, volatility and big drawdowns. A few things really stand out in this table. Nine of…

Do Expensive Stocks Price In Future Growth?

One of the common themes among the very best performing stocks is that they are attached to a high price-to-earnings ratio. It makes sense that the fastest growing companies deserve a higher multiple than the average stock. You’ll notice in the table below that nine out of ten of the strongest stocks over the past…

Can Stock Market Forecasters Forecast?

Long before Jim Cramer’s record was being dissected, Alfred Cowles was skeptical of the claims made by stock market pundits.  Cowles, who later founded the Cowles Foundation for Research and Economics, spent years working on a paper published in 1933, “Can Stock Market Forecasters Forecast? His mission: “It seemed a plausible assumption that if we could…

Calling It Versus Nailing It

It’s one thing to call a trade, it’s another thing entirely to profit off that call. First, there’s the issue of timing. Then you have to be able to execute; when to get in, press your bet, take profits, etc. The excerpt below is from Gregory Zuckerman’s The Greatest Trade Ever (emphasis mine). Investment advisor Peter…

Thinning of the Herd

  There has been a lot of talk lately about the lack of participation; how only a few stocks are actually rewarding shareholders while so many have been burning them. Winners have been few and far between but it’s not as if the index is exactly on fire. While it’s true that without Amazon and…

Tis The Season

I tend to be on the skeptical side when it comes to investing based on seasonal trends. I’m almost always of the mind that less is more and seasonality encourages more decision making, not less. Making changes to your portfolio based on this type of study would probably not be in your best interest when…

Preparing For Lower Returns

John Bogle, Cliff Asness, and Ray Dalio are just a few of the juggernauts that have recently been vocal about expecting lower returns. What is an advisor supposed to do when people like this are all on the same side of a very important issue? Here are a few ideas: Lower your expectations, literally. In the…

The Upward Drift

Cliff Asness is out with a new interesting paper, “Market Timing Is Back In The Hunt For Investors.” In it, he discusses the efficacy of using valuations, specifically the CAPE ratio, to help time the market. One thing Asness addresses is the valuation drift upward which U.S. stocks have experienced over the last century. Here’s Cliff:…

Do People Want to be Fooled?

“Magicians are the most honest people in the world. They tell you they’re gonna fool you, and then they do it.” -James Randi I recently watched “An Honest Liar” on Netflix, which is the story of The Amazing Randi, a magician and escape artist who dedicated his life to unveiling the charlatans. He went on…

Right Place, Right Time

Amazing things can come to people that work hard, persevere, and are lucky enough to be born in the right place at the right time. Malcolm Gladwell talks a lot about this in his book Outliers: The Story of Success, in which he explains why two-thirds of Canada’s pro hockey players were born in January…