Hottest links for Thursday, February 20th, the late edition. Get our free daily newsletter and never miss a single linkfest. Also, now if you sign up you will get our new e-book on value investing.
Top stories for today are included below. For your Thursday viewing pleasure, we’ve got some fascinating stories, including an update on the “Warren Buffett Indicator,” the two biggest mistakes ETF investors make, and a think-piece on chasing that ever-elusive alpha.
Hottest Links: Stories
Value Investing
Adaptation
It’s not an accident that the greatest pure money manager of all time, Peter Lynch, was nicknamed The Chameleon. He earned the Chameleon moniker because he perceived the changing environments he found himself in and adapted his style accordingly. [Joshua M Brown, The Reformed Broker]
Emerging markets series part 1: Ashmore Group PLC (ISIN GB00B132NW22)
Ashmore Group plc (LON:ASHM) (OTCMKTS:AJMPF) is a kind of “intermediate” step in this regard: They are a UK-based asset manager who specialises exclusively in Emerging markets. [Memyselfandi, Value And Oppurtunity]
Mob Mentality Psychology And Crisis Investing
Crisis investing involves employing a contrarian investing philosophy by seeking out temporary crises and panics that can naturally spark a mob mentality psychology in unweary stock market participants. [Contrarian Ville]
Seeing the Big Picture
Barry’s wonderful blog – although you may be re-thinking its wonderfulness given that I’m here – is, as you obviously know, called The Big Picture. His idea is to look at the investment universe using a very wide lens for a very broad audience, governed only by “facts, statistics, and informed, data-driven opinions.” [Barry Ritholtz, The Big Picture]
OptimizeRx – A Little Company in the Sweet Spot of a Massive Industry
OptimizeRx Corporation(NDA) (OTCMKTS:OPRX), through its SampleMD software, provides a platform that allows doctors to print and electronically distribute sample vouchers and co-pay coupons for prescriptions. [Mackie, Moatology]
Funds
Investor Pessimism on Gold: It’s Gone!
The attached chart shows the NDR Gold Sentiment Composite index, which is an amalgamation of a few polls on investor sentiment toward the metal. The red line spent most of 2013 in the territory index creator Ned Davis Research dubs “extreme pessimism.” [Brendan Conway, Focus on Funds]
“The Warren Buffet Indicator” At Most Extreme Level Since December 2000
The ratio of the market value of equities outstanding to nominal GDP aka “The Warren Buffet Indicator” is at the highest level in about 13 years. This ratio became associated with Warren Buffet after he remarked in a 2001 Fortune Magazine article that this “is probably the best single measure of where valuations stand at any given moment”. [GaveKal Capital Blog]
ETF Investors’ Two Biggest Mistakes
The first can happen in any investment — individual stocks, ETFs, even mutual funds. An individual investor who trades too much is giving up one of his only advantages versus Wall Street: The ability to wait. You don’t report to anxious shareholders who demand returns every quarter. [Brendan Conway, Focus on Funds]
Star Stock Picker Warns Small Caps Richly Valued
T. Rowe Price Group Inc (NASDAQ:TROW) portfolio manager Henry Ellenbogen said last year’s rally in shares of companies with diminutive market values—or so-called “small-caps”—has put these stocks “at levels that may raise a caution flag.” [Matt Jarzemsky, MoneyBeat]
Forever Elusive Alpha
Humans have been repeating this inefficient ritual for more than 700 years, with the first known origins were then in Europe. There sprung lenders and insurers who assessed the relative merits of individual commercial risk. [Salil Mehta, Pragmatic Capitalism]
World stock markets: How historic returns have varied by country
Deciding you should invest outside of the UK but then electing to put all your money in China is a case of out of the frying pan and into the wok. [The Investor, Monevator]
| Equities | Bonds | |||
| Annualized real return | Cumulative since 19001 | Annualized real return | Cumulative since 19002 | |
| Australia | 7.4% | 3,332 | 1.5% | 5.7 |
| Austria | 0.7% | 2.1 | -4.1% | 0.0 |
| Belgium | 2.6% | 19.3 | 0.2% | 1.3 |
| Canada | 5.7% | 583 | 2.1% | 11.1 |
| China | -3.8%3 | 0.4 | 1.6% | 1.4 |
| Denmark | 5.2% | 325 | 3.1% | 32.1 |
| Finland | 5.3% | 364 | 0.0% | 1.0 |
| France | 3.2% | 35 | 0.0% | 1.0 |
| Germany | 3.2% | 38 | -1.6% | 0.2 |
| Ireland | 4.1% | 97 | 1.4% | 4.9 |
| Italy | 1.9% | 9 | -1.5% | 0.2 |
| Japan | 4.1% | 98 | -1.0% | 0.3 |
| Netherlands | 4.9% | 246 | 1.5% | 5.5 |
| N. Zealand | 6.0% | 778 | 2.0% | 10.0 |
| Norway | 4.3% | 116 | 1.8% | 7.4 |
| Portugal | 3.7% | 60 | 0.6% | 2.0 |
| Russia | 5.8%4 | 2.9 | 6.1% | 3.1 |
| S. Africa | 7.4% | 3,372 | 1.8% | 8.1 |
| Spain | 3.6% | 57 | 1.4% | 5.1 |
| Sweden | 5.8% | 601 | 2.6% | 17.7 |
| Switzerland | 4.4% | 137 | 2.2% | 12.3 |
| U.K. | 5.3% | 372 | 1.4% | 4.9 |
| U.S.A. | 6.5% | 1,248 | 1.9% | 8.2 |
| World | 5.2% | 314 | 1.8% | 7.6 |
Repeated Good Fortune in Timing of C.E.O.’s Stock Sale
Questcor Pharmaceuticals Inc (NASDAQ:QCOR) is a biotechnology company with a $4 billion market capitalization. Good things keep happening to Questcor in the middle of the month. [Jesse Eisinger, The New York Times]
New Push to Throw Assets Overboard
Companies ranging from chemical giants to restaurant chains have come under fire from shareholders wanting to break them apart, arguing that businesses perform better when they aren’t part of a sprawling conglomerate. The year isn’t even two months old, and already five companies have been targeted by investors pushing them to sell or spin off pieces, according to FactSet SharkWatch, which tracks such… [David Benoit, The Wall Street Journal]
Thoughts on financial modeling
As the title says- NPV modeling (scenario) vs Monte Carlo. Obviously, Monte Carlo modeling is the superior approach from a technical standpoint, but from a practical investment-making decision standpoint, it’s been discussed- that the spread of outcomes from MC’s in the gold mining sector (on a project by project basis) world would make any logical investment decisions exceedingly difficult- aside from the added effort/cost in forming the more complex model. [Phoneonbook, Reddit]
Activists on the Rise: ‘Event Driven’ Hedge Fund Flows Hit Three-Year High
Nelson Peltz versus PepsiCo, Inc. (NYSE:PEP). Carl Icahn and Apple Inc. (NASDAQ:AAPL). No wonder investors are excited about shareholder activism. [Brendan Conway, Focus on Funds] Related: “The Outsiders: Eight Unconventional CEOs and Their Radically Rational Blueprint for Success” has created a buzz among the activist community for laying out in plain English what the activists are often arguing for. [David Benoit, MoneyBeat] Related: Investment funds managed by Trian Fund Management, L.P. (collectively “Trian”) beneficially own approximately $1.2bn of PepsiCo, Inc. (NYSE:PEP) common stock. [ValueWalk]
Google offered to buy WhatsApp for $10 billion
Two separate sources have told me that’s how much Google Inc (NASDAQ:GOOG) offered to purchase WhatsApp. The bid did not come with promise of a board seat, unlike the Facebook Inc (NASDAQ:FB) agreement. [Jessi Hempel, CNNMoney]
Great Rotation
The markets’ Great Rotation is not sop much from global bonds to stocks, but from US investors into European equities. [Cliff Kule]
Hottest Links: Not The Onion
200-Year-Old Douche Discovered at City Hall
“At first we thought it was maybe a spice-grinder or needle case,” an archeologist told DNA Info of the relic found during a dig near New York City Hall. “We were stumped.” The hollow cylinder made of mammal bone, three inches long, turned out to be historic: a vintage douche, likely from between 1803 and 1815, making it “one of the earliest documented feminine hygiene products in New York.” But, for history buffs, it gets even better. [Joe Coscarelli, New York Magazine]
