Hottest links for Saturday and Sunday October 19th – 20th, 2013 the on time edition (see Friday’s edition of hottest links). Get our free daily newsletter (which is being updated to make it even better) and never miss a single linkfest.

Top stories for today can be found below; Lots of good valuation analysis articles on some stocks in the UK, US etc. Some great behavioral finance, some insightful behavioral finance articles, some funny and insightful ones on Morgan and the Venezuelan stock market, Mark Cuban related, VIX creator says you are guaranteed to lose money in the VIX ETNs (a friend gave me the idea to short them a couple of years ago, but I never acted on it, not sure if it would work), and some interesting hedge fund related news including an activist fighting the activist himself, Carl Icahn. Check it out below.

Hottest Links

Value Investing

Incentives, edges, and closed end funds

I’ve made no secret of my theory of having an “edge” when investing and that incentives matter. I’ve also previously discussed my love of the Special Opportunity fund (SPE). [Whopper Investments]

Investors Have Poor Memories. Keep a Journal (and Good Records)

In 2005, a team of researchers from Stanford, Carnegie Mellon, and the University of Iowa gave a group of participants $20 each. They were then made an offer: You can flip a coin up to 20 times. If you lose the coin toss, you owe $1. If you win, you get $2.50. [Morgan Housel, The Motley Fool]

How I’m betting against Neil Woodford

What Woodford’s departure isn’t a problem for – in the short-term – is The Edinburgh Investment Trust plc (LON:EDIN), an income investment trust he has managed for the past few years. [ Monevator]

Strayer Education: An In-Depth Analysis

The main reason the fund has underperformed the S&P 500 (INDEXSP:.INX) over the last couple of years is due to our more than 30 percent allocation in Strayer Education Inc (NASDAQ:STRA). [Michael Shearn, BeyondProxy]

Why You Need to Own Japanese Equities

Since the end of 1990, the TOPIX Index has annualized a whopping –1.96% through August 2013 in yen terms, trapping investors as it brutally dished out 15 different head fakes and false starts. [Daniel Kim, CFA Institute]

Is SABMiller’s recent poor performance a buying opportunity?

SABMiller plc (ADR) (OTCMKTS:SBMRY) (LON:SAB) is right near the top of my list of companies to buy.  It’s one of the most successful companies in the FTSE 100 (INDEXFTSE:UKX) and has nearly tripled in value since the financial crisis. [John Kingham, UK Value Investor]

Benjamin Moore Paint: Centuries of Repute

A case in point is the news surrounding last week’s and last year’s firings by Berkshire Hathaway Inc. (NYSE:BRK.A) (NYSE:BRK.B) of the CEOs of its subsidiary, Benjamin Moore & Co. But the values that Benjamin Moore has embraced for more than a century and those Berkshire has embraced for nearly half a century speak louder than the gossipy whispers associated with these two sad episodes. [Larry Cunningham, BeyondProxy]

Fama Is Suffering from Confirmation Bias

Here is a list of ten investors who prove Fama is suffering from confirmation bias. [Tren Griffen, 25iq]

More information might not improve your ability to make decisions

Situations in life often permit no delay; and when we cannot determine the course which is certainly best, we must follow the one which is probably the best… This frame of mind freed me also from the repentance and remorse commonly felt by those vacillating individuals who are always seeking as worthwhile things which they later judge to be bad. — Rene Descartes, Discourse on Method. [Shane Parrish, Farnam Street]

A Quick Tour of Emerging-Markets Value

After the sharp summer sell-off, emerging-markets assets have strengthened. Not everything is cheap, but there are bargains. [Michael Hood, Institutional Investors]

Hedge Funds

Hedge Funds Seek to Trade in Comfort as Bankruptcy Insiders

Hedge funds that invest in bankrupt companies are demanding protection from insider-trading lawsuits before agreeing to take part in restructuring talks — a reaction by the industry’s top performers to an obscure court decision involving the 2008 collapse of WMI Holdings Corp (OTCMKTS:WAMUQ).  [Tiffany Kary, Bloomberg]

Expanding Your Financial Portfolio WTF is a hedge fund?

The market has an endless number of investment opportunities and hedge funds are among the most popular. But what’s a hedge fund and why should you go for it? According to Business Insider magazine (May 2012), here’s a list of the 20 stocks best loved by hedge funds: Apple Inc. (NASDAQ:AAPL), Google Inc (NASDAQ:GOOG), Express Scripts Holding Company (NASDAQ:ESRX), Microsoft Corporation (NASDAQ:MSFT), Citigroup Inc (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM) and more. [Maria Frangieh, RagMag]

Hedge fund manager Hempton on Herbalife

Hempton’s decision to take the other side of Ackman is curious because Chanos, the man many compare his investing style to, has been in and out of shorting Herbalife Ltd. (NYSE:HLF). [Jennifer Ablan and Matthew Goldstein, Reuters]

Kyle Bass Bets On A J.C. Penney Stabilization

Expectation for outsize gains on the downtrodden shares of J.C. Penney Company, Inc. (NYSE:JCP) purchased by major hedge fund firms have deflated like a punctured balloon. [Robert Stowe England, Institutional Investor]

Activist Irony–Attacking Carl Icahn…ballsy!

Interestingly enough, Farpoint Capital Management, LLC recently filed a 13D…AGAINST Carl Icahn. The greatest activist investor of all-time is now being called out for being a terrible steward of shareholder capital. [Wesley R. Gray, Turnkey Analyst]

Burned-out fund managers show reality of City life’s “easy option”

When Sanjeev Shah quit his job last month, eyebrows were raised. This wasn’t another burned-out banker: The 43-year-old was a successful fund manager running 2.8 billion pounds ($4.5 billion) for Fidelity Worldwide Fund (MUTF:FWWFX), reaping big returns. [Sinead Cruise and Tom Bill, Reuters]

AIMA: Valuation Sound Practices Updated

The Alternative Investment Management Association has updated its Guide to Sound Practices for Hedge Fund Valuation, producing a Third Edition of a document previously published in 2005 and 2007. [Cfaille, AllAboutAlpha.com]

Asset Allocation

The Perfect Asset Class

I wanted to design a truly awesome hedge for this portfolio.  Kind of the “perfect asset class” or a hedge fund’s dream.  It would have the same return as US stocks, but a totally negative correlation.  You can see a chart of the asset below since 1900. [Mebane Faber]

Hottest links assest class

 

Fraudish…

Avoid Companies That Are Too Chummy With Select Analysts

In April, BCG Partners analyst Colin Gillis claimed he was excluded from the Q&A on the earnings call of Amazon.com, Inc. (NASDAQ:AMZN), on whose shares he had been bearish. More humorously, the study excerpts a series of exchanges from a 2007 call by the big chemical producer Sealed Air Corp (NYSE:SEE) to highlight extreme familiarity and joshing banter among CEO Bill Hickey and analysts. [Michael Santoli, Unexpected Returns]

Sell-side optimism detailed

We are beasts of the calendar. January nurtures dreams and good intentions, while October is the month that slaps you round the face and demands you get a grip before the year is out. [Dan McCrum, FT Alphaville]

Insider Trading as Private Corruption

Fighting insider trading is clearly at the top of law enforcement’s agenda. In May 2011, Raj Rajaratnam, the former head of the Galleon Group hedge fund, received an eleven-year prison sentence for insider trading, the longest ever imposed. [June Rhee, Law.Harvard.edu]

Lurching Gold Prices Mystify Traders

The half-dozen mammoth orders whipsawed prices and disrupted trade in the CME Group Inc

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