Hottest links for Wednesday October 24th, 2013 the finally was supposed to be on time edition but got delayed (see Wednesday’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. Some great valuation and behavioral finance pieces; Will a robot take your analyst job? Some good pieces on accounting; Great piece on JPMorgan, and lots more (make sure to check not the onion today); Sorry folks but we made a no Carl Icahn Apple rule today so you will not see any news on that here (although you can find elsewhere on ValueWalk).
Hottest Links
Value Investing
TransDigm Group Analysis
TransDigm Group Incorporated (NYSE:TDG) has grown cash flow at 25%/year since 1993 through internal growth and acquisitions (which Thorndike calls an “exceptionally effective acquisition program”). [KK, Brooklyn Investor]
Investing As A Hobby
Investing is a serious business. We are talking about your future here, people. So should investing ever be a hobby? Admittedly the lure of investing in individual stocks, ETFs, currencies is strong. As I wrote in my book; Abnormal Returns: Winning Strategies from the Frontlines of the Investment Blogosphere. [Tadas Viskanta, Abnormal Returns]
Most Of What You Are Going To Do Or Say Today Is Not Essential
“Worldly wisdom,” writes John Maynard Keynes in The General Theory of Employment, Interest, and Money, “teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” [Shane Parrish, Farnam Street]
Kazakhmys as a spinoff situation
I would argue that the disposal is very much in the nature of a spin-off. The returns on Eurasian Natural Resources Corporation (LON:ENRC) have been poor for Kazakhmys plc (LON:KAZ) (OTCMKTS:KZMYY), and its disposal will fetch $850m. It intends to buy back 77m of its own shares, which will cost about £200m at today’s prices. [Mark Carter, Mcturra2000]
Arrivederci Spinoff! Proposed Telecom Italia Spinoff Possibly Shelved
The death knell appears to be ringing for Telecom Italia SpA (ADR) (NYSE:TI) (BIT:TIT)’s fixed line spinoff. Apparently, Spain’s Telefonica S.A. (ADR) (NYSE:TEF) (MCE:TEF), which recently upped its stake in the company to a controlling position, has other plans for turning around the business. [Spin Doctor, Stocks Spinoffs]
Buffett: Why I didn’t buy the Washington Post
Participating in a Q&A last week at The Washington Post Company (NYSE:WPO)’s Metropolitan Club, Warren Buffett, 83, spoke of his long-term affection for the paper and said he had “briefly” considered buying it when it went on sale earlier this year. [Carol Loomis, Term Sheet]
Funds
ETF Investors Now More Deeply Invested In Dividend Funds
ETF investors now have more money in dividend-themed funds than they do in ETFs devoted to Treasury bonds. Vanguard Dividend Appreciation ETF (NYSEARCA:VIG), the category leader, has enjoyed $3.2 billion inflows this year, while SPDR S&P Dividend (ETF) (NYSEARCA:SDY) has taken in $1.2 billion. The figure for Vanguard High Dividend Yield ETF (NYSEARCA:VYM) is $1.6 billion. Meanwhile, iShares Barclays TIPS Bond Fund (ETF) (NYSEARCA:TIP) has lost $6.9 billion to outflows and funds such as iShares Barclays 3-7 Year Treasry Bnd Fd (NYSEARCA:IEI) have seen several hundred million out the door. [Brendan Conway, Barron’s]
Vanguard Launches ‘Assault’ On ETFs
Vanguard this week substantially lowered the barrier for advisors to access its lowest-cost “Admiral” share class for a wide variety of its index mutual funds. [Matt Hougan, IndexUniverse]
Hedge Funders Couldn’t Be Happier About This Politician
Booker, now the mayor of Newark, has received financial support from some of the biggest names in investing. Backers include Seth Klarman of Baupost Group, Julian Robertson of Tiger Management, retired hedge fund pioneer Michael Steinhardt, Bill Ackman of Pershing Square Capital Management, John Griffin of Blue Ridge Capital, David Greenspan of Slate Path Capital and Rick Gerson of Falcon Edge Capital. [Lawrence Delevingne, CNBC]
Strategy
Minimum Variance Portfolios
I’ve been working through mean-variance-analysis and came across the good old-fashioned “Mean Variance Frontier.” [Wesley R. Gray, Turnkey Analyst]
Risk Parity: The Gateway Drug
Yes, there was a growth of 43% in the use of risk parity products by all participants in 2013, but there was also a decrease of 63% among those who claim they plan to increase their use of risk parity products in the next 12 months. [Angelo A. Calvello, aiCIO]
Good Charts
700 Years Of Data Into 12 Charts
The Societe Generale SA (ADR) (OTCMKTS:SCGLY) (EPA:GLE) asset allocation team predicts the S&P 500 (INDEXSP:.INX) will fall by around 15% when the Federal Reserve winds down its quantitative easing program, then go nowhere for years. [Matthew Boesler, Busniess Insider]
Accounting
Deloitte Pays Another Fine And Then Moves On
The Public Company Accounting Oversight Board censured Deloitte & Touche LLP yesterday and imposed a $2 million civil penalty against the firm for violating the Sarbanes-Oxley Act and PCAOB rules when it permitted Christopher E. Anderson, a former partner to perform or continue to perform activities as an “associated person” that were prohibited while he was subject to a PCAOB suspension order. [Francine McKenna, re: The Auditors]
The Path Forward on Disclosure
The NACD has also been a very important partner to the SEC—providing valuable input on a number of our rulemaking efforts that affect companies and their boards of directors. [Mary Jo White, Law.Harward.edu]
Misc
Analysts Beware! A Machine Has Its Eye On Your Job
In late May, at Michael Milken’s annual gathering of financial notables in Los Angeles, one center-stage topic was the impact of increasingly powerful computers and software and their ability to extract meaning from the gaint data sets. [S.L. Mintz, Institutional Investor]
Compliance Pros Acting Lawfully Should Not Fear Enforcement
Securities and Exchange Commission Chairwoman Mary Jo White assured compliance officers Tuesday that if they act “within the law” they should not fear enforcement action. [Melanie Waddell, ThinkAdvisor]
Don’t Worry, Jamie, Lloyd’s Shown the Way
As for Mr. Dimon, he had to meet with Attorney General Eric H. Holder Jr. and suffer a modicum of humiliation. But, ultimately, he was personally able to hash out a $13 billion mortgage securities settlement for JPMorgan Chase & Co. (NYSE:JPM), the bank he heads. [Jesse Eisinger, Propublica]
Has China’s Debt Crisis Moment Arrived?
China’s National Audit Office last estimated in 2010 that local-government debt stood at 10.72 trillion yuan ($1.75 trillion), or 27% of GDP. [Michael J. Casey, MoneyBeat]
Hottest Links: Not The Onion
Clowns Deny Involvement In Killing Of Drug Cartel Leader
Clowns from all over the world in attendance at the 17th International Clown Convention have denied any of their colleagues were involved in the killing of drug cartel leader. [Christina Finn, thejournal.ie]
