Articles

Articles Written by Validea Founder John Reese

2/21/2017

John Reese Forbes Articles
Forbes

4 Legendary Investor Picks For The Trump Rally

It may seem counterintuitive to talk about shopping for value stocks when the market isn't exactly full of bargains. The Trump rally continues, with U.S. stocks reaching new records yet again this week, and market volatility has dropped to the lowest level in ten years. Continued optimism around promises of tax reform, deregulation and super-sized infrastructure spending is keeping things upbeat. But whether or not the market is overbought shouldn't matter to a true value investor.

2/14/2017

John Reese NASDAQ Articles
NASDAQ.com

Finding the Gems in the Dow

In late January, the Dow Jones Industrial Average hit 20,000, a milestone that was met with plenty of fanfare. Like many stock market-related headlines, however, the Dow's big day should be taken with a grain of salt. Yes, it represents a rise in the index, and that's not a bad thing, but the number itself really isn't significant. As a matter of fact, breaking 20,000 isn't even that remarkable when you consider the trajectory of the Dow since its inception in 1896. It took over a decade to reach 100, then 66 years to reach 1,000, then another 41 years to make 15,000 (in May 2013). In fact, it hovered around 10,000 for a decade:

2/8/2017

John Reese Globe and Mail Articles
The Globe and Mail

What Warren Buffett's Breakfast Routine Can Teach Us About Strategy

Markets have a psychological effect on spending habits, even for billionaires, it seems. When markets are up, confidence rises and people are apt to spend a little more. They feel they can splurge on that trip or go out to an expensive restaurant. Conversely, when markets are down, confidence wanes and people tend to rein in spending. In a new documentary from HBO titled Becoming Warren Buffett, we get insights into the many habits and traits of potentially the greatest long-term investor of all time.

2/8/2017

John Reese TheStreet.com Articles
TheStreet.com

Want to Profit by Investing Like a Great Contrarian? Here's How

Kiplinger once referred to value investor David Dreman as "the consummate contrarian." Author of five books, a Forbes contributor, and the founder of Dreman Value Management, this against-the-grain investor has built a long and successful career by following his own path.

2/7/2017

John Reese Forbes Articles
Forbes

Apple And 3 Other Warren Buffett Fat-Pitch Stocks

In the HBO documentary "Becoming Warren Buffett," the Omaha native takes the viewer down a hallway of his Berkshire Hathaway office, pointing to a framed New York Times front page from 1929. "I wanted to put on the walls days of extreme pain on Wall Street," he explains, "just as a reminder that anything can happen in this world. It's instructive art." Throughout the countless sound bites, interviews, articles and quotes attributed to the billionaire legend, the consistent message is how Buffett has always remained steadfast in his, well, steadfastness. A staunch believer in level-headed, well-informed investing, Buffett argues, "There's a temptation for people to act far too frequently in stocks, simply because they're so liquid." He says, "If you're emotional about investing, you're not going to do well. You may have all these feelings about a stock, but the stock has no feelings about you."

2/1/2017

John Reese Globe and Mail Articles
The Globe and Mail

These Three Stocks Fit Peter Lynch's Investment Philosophy

Peter Lynch's remarkable run as manager of Fidelity's Magellan fund throughout the 1980s made him a household name, and he was often called on to talk to investment groups and the public about his secret to picking stocks. In his 1993 book Beating the Street, he wrote down a list of maxims, which can be summarized along three broad themes: Do your homework, invest for the long term and only buy what you understand. Mr. Lynch was big on doing research before investing, and he emphasized keeping a clear head about it. He developed a way to measure the value of stocks by dividing a stock's price-to-earnings ratio by its long-term growth rate. When a company generates healthy growth, an investor should be willing to pay a little bit more for it. With slow-growing stocks, he also looked at some other measures, including sales against inventory and debt over equity. He also examined free cash flow as it related to the stock price, with anything over 35 per cent being a buying opportunity.

1/31/2017

John Reese Forbes Articles
Forbes

Four Retail Stocks That Could Perform Well Under Stress

The retail industry has seen some rough sledding over the past year or so, with many segments experiencing depressed sales and major department stores such as Macy's and Sear's announcing dozens of store closures. The industry contends with a laundry list of challenges, including fickle customers, malleable consumer tastes, consistently declining price expectations and an ever-increasing shift toward e-commerce. Add into the mix President Trump's promise to raise import taxes, and you have a formidable threat to already thinning margins. While these hurdles have led to a battering of retail share prices, they could also present value opportunities for well-informed, careful investors.

1/31/2017

John Reese NASDAQ Articles
NASDAQ.com

A Fundamentally Focused Momentum Stock Model

Momentum investing, or buying stocks that have been performing well based on the assumption that they will continue to do so, is counter-intuitive and often misunderstood because it resembles performance-chasing, an investing no-no. In fact, however, investors subscribing to a momentum strategy are really capitalizing on the emotional and irrational reactions of performance chasers by systematically identifying and buying stocks that are on the rise. Momentum investors, while gravitating toward well-performing stocks, are doing so in; (1) a rule-based manner with entry and exit plans in place, and (2) with a view toward the short- and intermediate- term, rather than the long-term view of value investors.

1/24/2017

John Reese TheStreet.com Articles
TheStreet.com

Billionaire Warren Buffett Loves These 4 Small-Cap Stocks, Should You?

Becoming Warren Buffett, a HBO documentary that chronicles the life of the legendary investor, will air on Monday. A few weeks later, his much-anticipated letter to Berkshire Hathaway shareholders will be released, no doubt flush with insights on macro issues and updates on the holding company's myriad business interests. Neither event will probably be terribly revelatory, however, at least not with respect to the origins of Buffett's fortune. He dipped his toe into the insurance business in 1967 when, two years after purchasing the ailing textile company Berkshire Hathaway, he bought National Indemnity. And that is where the seeds of his success remained firmly planted.

1/23/2017

John Reese NASDAQ Articles
NASDAQ.com

Four High-Quality Stocks with 3% Dividend Yields

When Warren Buffett is looking for strong companies to invest in, he employs both qualitative and quantitative tests to find the best candidates. Durable competitive advantage and strong management are among the key qualitative measures, and a go-to quantitative metric in the Oracle's arsenal is return-on-equity. The formula for ROE is simple-net income divided by shareholder's equity (total assets minus total liabilities)-and tells an investor how much cash a company is generating from its existing base of assets. For example, if the ROE is 15%, then 15 cents of assets are created for every dollar originally invested. A steadily increasing ROE is a clue that management is putting its investors' capital to good use.

1/16/2017

John Reese Forbes Articles
Forbes

How To Profit From The Quarter Of A Million Dollar Price Tag Of Raising Kids

When a couple learns that a baby is on the way, the range of ensuing emotions is vast and far-reaching to be sure. Typically, however, a price tag exceeding a quarter of a million dollars isn't at the top of the list. When a couple learns that a baby is on the way, the range of ensuing emotions is vast and far-reaching to be sure. Typically, however, a price tag exceeding a quarter of a million dollars isn't at the top of the list. But the expense of child-rearing extends well beyond basic care-and-feeding. In our society, businesses view children as consumers and, in fact, encourage them whenever and wherever possible.

1/15/2017

John Reese Globe and Mail Articles
The Globe and Mail

Three Stocks That Score High In 'Margin Of Safety' Strategy

Buying something for less than it is worth would seem like the most basic of rules, but it wasn't until Benjamin Graham popularized the concept of a "margin of safety" that it sank in with investors. Mr. Graham's margin of safety described the difference between a company's actual value - its net-working capital minus debt - and the value at which its shares sold in the market. Presumably the shares were selling for lower, and the bigger the gap, the more limited the downside risk of the stock to the investor. This concept was a way of helping investors overcome their individual biases and avoid major mistakes. If you could acquire a company's hard assets and the goodwill on its books for free and sit back and wait for the upside in the stock knowing it probably had very little downside, why would you pass up the chance?

1/11/2017

John Reese TheStreet.com Articles
TheStreet.com

Here Is Why These 5 Emerging-Market Picks Are Poised for Growth

Toward the end of 2015, while flying under the investing world's radar, Brazilian billionaire Luiz Alves Paes de Barros bought a large stake in Magazine Luiza. Shares of the Brazil-based retailer had hit a record low but became one of the largest holdings of his investment company Alaska Investimentos. Since that time, the stock has surged by more than 1,000% to become one of the Brazilian stock market's top performers, according to a recent Bloomberg article. Rob Arnott, chief executive of Research Affiliates, thinks that emerging-market stocks offer an attractive combination of depressed currencies, low valuations and strong momentum, according to a recent InvestmentNews article. Even though valuations have swelled since he first recommended the asset class a year ago, he thinks that it shouldn't deter investors.

1/9/2017

John Reese Forbes Articles
Forbes

Dodd-Frank Repeal Could Be Boon For Small, Regional Financials

Former Fed Chairman Alan Greenspan called it a "disastrous mistake." A Georgetown University professor called it a "deeply flawed bill that contains many different laws thrown together." A former U.S. senator called it a "sound regulatory foundation to protect consumers." There may be as many opinions about the Dodd-Frank Wall Street Reform and Consumer Protection Act (commonly referred to as Dodd-Frank) as there are pages in it (which number in the thousands). Signed into law by President Obama in July 2010, Dodd-Frank was created with the intention of avoiding a financial crisis like that of 2008. By many accounts, however, the reform has ended up creating a hornet's nest of regulation that has effectively crippled many financial institutions, particularly smaller ones such as community banks.

12/28/2016

John Reese Globe and Mail Articles
The Globe and Mail

The 10 Most Fundamentally Attractive Stocks in the S&P 500

At a time when the Standard & Poor's 500 index is beating records on a regular basis and most professional managers are underperforming it, it might seem impossible to beat the benchmark merely by holding the same exact stocks within it. But long-term data suggest you can beat the market by doing exactly that. As its name suggests, the S&P 500 holds 500 stocks, but each is held in proportion to its market capitalization. That makes it skewed toward large companies, such as technology giant Apple and the energy stalwart Exxon Mobil.

12/28/2016

John Reese TheStreet.com Articles
TheStreet.com

These 7 Small-Cap Growth Stocks Have Big Upside Potential in 2017

In a 2014 Bloomberg View interview with Barry Ritholtz, legendary investor James O'Shaughnessy summarized the human condition as it relates to investing: "Let's be wise in the Socratic sense, by knowing how little we know." Some, including Ritholtz, would argue that O'Shaughnessy's highly celebrated book What Works on Wall Street (1996) blazed a trail in the quantitative-investment realm. In it, the famous investor documented findings from his extensive study of dozens of investment strategies, conducted using Standard & Poor's' Compustat database, to back-test a host of quantitative approaches over several decades. In addition to finding out how certain strategies performed in terms of returns, O'Shaughnessy's study also allowed him to determine the level of risk or volatility associated with these strategies.

12/27/2016

John Reese NASDAQ Articles
NASDAQ.com

As Inflation Looms, These Commodity Stocks Could Shine

Inflation has been low for decades and commodity prices have lacked the luster they enjoyed from the late 1990s through the financial crisis, when most experienced double-digit annual (inflation-adjusted) price growth. According to a 2013 paper published by Pimco, this period--known as the commodity "supercycle"-saw price growth in oil, copper and corn to the tune of 1,062%, 487% and 240%, respectfully. But the outlook for this asset class could be shifting. The Fed has upgraded its growth and inflation forecasts--along with its announcement of a rate increase (and three more to come in 2017)--as summarized in its latest summary of economic projections.

12/20/2016

John Reese TheStreet.com Articles
TheStreet.com

Cash Flow Is a Company's Life Blood: These 6 Stocks Fit the Bill

Cash flow is a concept that applies to anyone trying to create and stick to a budget. The idea is straightforward: Don't spend more cash than what is coming in. But free cash flow is also an important indicator when considering investing in a company as it reflects the financial strength and viability of the underlying business. There are numerous metrics that should be considered when purchasing a stock, such as the dividend yield, earnings and the price-earnings ratio. But a company's free cash flow, defined as the amount of money generated from operations less capital expenditures, offers investors a clue as to how well a company can sustain its operations and, subsequently, build wealth for shareholders. A healthy level of cash generation allows a company to buy back shares, make acquisitions, pay dividends and/or repay debt.

12/15/2016

John Reese Globe and Mail Articles
The Globe and Mail

Can a Factor-Based Strategy Emulate Styles of Buffett and Soros?

A new body of research shows being an extraordinary investor such as Warren Buffett or George Soros may in fact be possible for other investors if they use a few tried and true yardsticks to evaluate stocks. The report, titled Alternative Thinking: Superstar Investors, was produced by AQR Capital Management, the program-driven investment firm. The researchers compared returns for superstar investors to portfolios it constructed with a small set of buy and sell signals that tracked the investing styles of Mr. Buffett, Mr. Soros and others. It managed to get results that were pretty close to the real thing. The conclusion of AQR's research is investors don't have to pick exactly the same stocks as the masters to generate benchmark-beating returns.

12/13/2016

John Reese CNBC Articles
CNBC

Would You Bail On Warren Buffett? Investors Make That Mistake All The Time

Even the best ideas flounder some of the time. The overwhelming majority of top mutual fund managers - those who had the best record over a decade - spent at least three years lagging well behind others during that time, according to Joel Greenblatt, a hedge fund manager and author of the "The Little Book That Still Beats the Market." More than three-fourths of these star managers spent three years at the very bottom of the performance ladder, something short-term-minded investors tend to flee. But too bad for them. These managers all outperformed over the longer run - the decade-long period through the end of 2009.

12/12/2016

John Reese Forbes Articles
Forbes

Tale Of Two Types Of Quant Strategies

If you're following the developments in the asset management space you may think that quantitative investing is a development that just recently came on the scene. Articles in Forbes, The Wall Street Journal, Bloomberg, as well the proliferation in factor-based strategies and ETFs, would make one think that quantitative investing has just emerged. However, there's more to the story.

12/12/2016

John Reese TheStreet.com Articles
TheStreet.com

Here Are 5 Value Stocks Sporting Dividend Yields of More Than 5%

When choosing stocks to buy, some investors focus heavily on the potential for capital gains, the increase in share value due to a rise in price. Although this is an important metric and has gained attention during what has become an enduring bull market such gains are subject to the whims of market shifts. Another avenue for income-potential is through dividends periodic -- typically quarterly -- payments to shareholders that represent a portion of a company's profits. The search for dividends, however, is more involved than picking a Chance card on the Monopoly board. Bigger isn't always better, and just because a stock has a high dividend yield -- annual dividend divided by share price -- that doesn't necessarily mean that it is a better investment than one with a lower yield.

12/5/2016

John Reese Globe and Mail Articles
The Globe and Mail

Three U.S. Stocks Benjamin Graham Probably Would Have Loved

Call it the revenge of the underappreciated. A 10-stock portfolio of U.S. stocks modelled on the investment philosophy of Benjamin Graham, the "Father of Value Investing," is up 33.2 per cent this year, beating the 7.9-per-cent gain in the Standard & Poor's 500. Since 2003, the portfolio is up 345.4 per cent, and it has returned 11.8 per cent annually compared with the 6.1-per-cent return of the broad market. The value rebound is happening in Canada as well, and the Graham Canadian model I run is up 27.7 per cent so far for the year versus 15.3 per cent for the TSX. Its annualized return since 2010 is 6.0 per cent against 3.9 per cent for the Canadian benchmark. If only it were that easy.

12/5/2016

John Reese NASDAQ Articles
NASDAQ.com

Five Low Price-to-Sales Stocks That Could Run with the Bull

The bull market is still plugging along, albeit with gray whiskers. The post-election surge still has some spring in its step, and the major indexes are hitting highs. But if you were to ask billionaire investor Ken Fisher for his take on things, he might cite businessman John Templeton's market maxim that bulls are "born on pessimism, grow on skepticism, mature on optimism and die on euphoria." In a September issue of MarketWatch Fisher said, "I think this is going to be the longest bull market in history and, arguably, the most joyless."

12/5/2016

John Reese TheStreet.com Articles
TheStreet.com

Here's What We Can Learn About Market Timing From the Trump Rally

No matter how often we hear that stock market timing is an ill-fated pursuit, there are still those among us who fall victim to elections, emotions or headlines. More often than not, this can lead to the unfortunate scenario of buying high, selling low and missing out on returns. The latest move in the market since Donald Trump's victory in the presidential election is a perfect example. Those investors with heavy cash positions or conservatively invested going into the election saw the market move dramatically in its wake.