Enough said.She cites a joint paper from the Center for Applied Research and the Fletcher School of Law and Diplomacy at Tufts University that found that less than 1 percent of 2,076 U.S. mutual funds tracked between 1976 and 2006 achieved superior returns after costs.
Higgenbotham wrote: > Has Schwab done a disservice to their clients? Not necessarily,
> because they may have low ratings on high fliers that will
> outperform when everything is being bid up, but will underperform
> in a bear market.
> Likewise, a stock picker who has outperformed during a bull market
> may have only done so because he picked the high fliers and his
> performance will fall apart when the market turns down.
> So I go back to Ellis. He too has been advocating that investment
> managers return to the business of providing tailored advice. He
> says it’s the one service they can consistently deliver. Managers
> who promise steady outperformance can’t make good on the
> pledge. “But what about David Swensen,” I say, trying to speak
> softly as my voice booms in a cavernous room on the second floor
> of the Yale Club in Midtown Manhattan. “How can you so staunchly
> believe that investment managers can’t outperform, when you
> watched David do it for so many years?” (Even with the losses of
> 2008, Yale’s endowment returned 13.7 percent a year over the two
> decades ended June 30, 2012.)
> Ellis is undeterred, making the case that Swensen’s skill is not
> unlike that of a Picasso or a Renoir. “He’s the most rigorous
> thinker about investments in the world,” says Ellis.
Higgenbotham wrote: > That's not enough. He hasn't invested through a severe bear market
> yet. Fortunately for a Picasso, he can toss his crappy paintings
> out and nobody ever sees them, but somebody who manages a Yale
> endowment has to gamble all the time.
The observations I would make about this are:John wrote: There's no way to get answers to these questions, but I just
don't think the rise of algos is the core reason.
The same reason could also explain why stock analysts are now failing.
If people are unwilling to spend money on people or employees, they're
also unwilling to spend money on stocks according to metrics that
prevailed in the 1980s and 1990s.
Why are earnings growing twice as fast as revenue? Are theyHiggenbotham wrote: > Schwab currently has Domino's Pizza stock rated an F. I agree
> Domino's stock has been too expensive for quite some time, but up
> and up it goes, through thick and thin, all the way to its all
> time high of the past couple weeks.
> Domino's is a good company, don't get me wrong; it's just that I
> think the stock is too expensive. One thing I don't like about the
> valuation is that earnings are growing about twice as fast as
> revenues. The earnings growth may justify the price, but the
> revenue growth does not, and the lagging of revenue growth behind
> earnings growth probably indicates the earnings growth is
> unsustainable at recent levels. But apparently nobody
> cares.
Supposedly their ingredients got a lot better when they revamped their recipe a few years ago based on customer feedback. Beyond that, I only remember seeing comments about the fact that their ingredient costs have decreased. My thought at the time was, in a business like this, how the heck do you continue to grow earnings at ~20% per year while revenues are growing at ~10% per year after 4 years of already having done so. That's with 2017 profit margin at 10%, which seems high to me in a business like this. What also seems high is the PE of 40.John wrote:Why are earnings growing twice as fast as revenue? Are theyHiggenbotham wrote: > Schwab currently has Domino's Pizza stock rated an F. I agree
> Domino's stock has been too expensive for quite some time, but up
> and up it goes, through thick and thin, all the way to its all
> time high of the past couple weeks.
> Domino's is a good company, don't get me wrong; it's just that I
> think the stock is too expensive. One thing I don't like about the
> valuation is that earnings are growing about twice as fast as
> revenues. The earnings growth may justify the price, but the
> revenue growth does not, and the lagging of revenue growth behind
> earnings growth probably indicates the earnings growth is
> unsustainable at recent levels. But apparently nobody
> cares.
using robots to make pizzas? Are they using cheap ingredients?
Maybe more needs to be said for those who are going to protest that mutual fund managers are way different than hedge fund managers.Higgenbotham wrote:https://www.youtube.com/watch?time_cont ... 7G0OfJUON8
How about these guys? While there is some good information here, I will not go to the effort of picking it apart. Suffice it to say the just because somebody is a "professional trader" it does not mean they can beat the market.
Enough said.She cites a joint paper from the Center for Applied Research and the Fletcher School of Law and Diplomacy at Tufts University that found that less than 1 percent of 2,076 U.S. mutual funds tracked between 1976 and 2006 achieved superior returns after costs.
http://www.berkshirehathaway.com/letters/2016ltr.pdfWarren Buffett wrote:Now, to my bet and its history. In Berkshire’s 2005 annual report, I argued that active investment
management by professionals – in aggregate – would over a period of years underperform the returns achieved by
rank amateurs who simply sat still. I explained that the massive fees levied by a variety of “helpers” would leave
their clients – again in aggregate – worse off than if the amateurs simply invested in an unmanaged low-cost index
fund. (See pages 114 - 115 for a reprint of the argument as I originally stated it in the 2005 report.)
Subsequently, I publicly offered to wager $500,000 that no investment pro could select a set of at least
five hedge funds – wildly-popular and high-fee investing vehicles – that would over an extended period match
the performance of an unmanaged S&P-500 index fund charging only token fees. I suggested a ten-year bet and
named a low-cost Vanguard S&P fund as my contender. I then sat back and waited expectantly for a parade of
fund managers – who could include their own fund as one of the five – to come forth and defend their
occupation. After all, these managers urged others to bet billions on their abilities. Why should they fear putting
a little of their own money on the line?
What followed was the sound of silence. Though there are thousands of professional investment managers
who have amassed staggering fortunes by touting their stock-selecting prowess, only one man – Ted Seides –
stepped up to my challenge. Ted was a co-manager of Protégé Partners, an asset manager that had raised money
from limited partners to form a fund-of-funds – in other words, a fund that invests in multiple hedge funds.
I hadn’t known Ted before our wager, but I like him and admire his willingness to put his money where
his mouth was. He has been both straight-forward with me and meticulous in supplying all the data that both he
and I have needed to monitor the bet.
For Protégé Partners’ side of our ten-year bet, Ted picked five funds-of-funds whose results were to be
averaged and compared against my Vanguard S&P index fund. The five he selected had invested their money in
more than 100 hedge funds, which meant that the overall performance of the funds-of-funds would not be
distorted by the good or poor results of a single manager.
Each fund-of-funds, of course, operated with a layer of fees that sat above the fees charged by the hedge
funds in which it had invested. In this doubling-up arrangement, the larger fees were levied by the underlying
hedge funds; each of the fund-of-funds imposed an additional fee for its presumed skills in selecting hedge-fund
managers.
Here are the results for the first nine years of the bet – figures leaving no doubt that Girls Inc. of Omaha,
the charitable beneficiary I designated to get any bet winnings I earned, will be the organization eagerly opening
the mail next January.
Footnote: Under my agreement with Protégé Partners, the names of these funds-of-funds have never
been publicly disclosed. I, however, see their annual audits.
The compounded annual increase to date for the index fund is 7.1%, which is a return that could easily
prove typical for the stock market over time. That’s an important fact: A particularly weak nine years for the
market over the lifetime of this bet would have probably helped the relative performance of the hedge funds,
because many hold large “short” positions. Conversely, nine years of exceptionally high returns from stocks
would have provided a tailwind for index funds.
Instead we operated in what I would call a “neutral” environment. In it, the five funds-of-funds
delivered, through 2016, an average of only 2.2%, compounded annually. That means $1 million invested in
those funds would have gained $220,000. The index fund would meanwhile have gained $854,000.
Bear in mind that every one of the 100-plus managers of the underlying hedge funds had a huge
financial incentive to do his or her best. Moreover, the five funds-of-funds managers that Ted selected were
similarly incentivized to select the best hedge-fund managers possible because the five were entitled to
performance fees based on the results of the underlying funds.
I’m certain that in almost all cases the managers at both levels were honest and intelligent people. But
the results for their investors were dismal – really dismal.
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