Articles

Articles Written by Validea Founder John Reese

4/19/2017

John Reese NASDAQ Articles
NASDAQ.com

Five Stock Picks for the Level-Headed Investor

The story centered around his highly-intelligent, "switched-on" friend Art, who would become extremely reactive when the market rose, call O'Shaughnessy and instruct him to go "all in" on his most aggressive strategy-one which would have done well over the prior several years. O'Shaughnessy (founder of the asset management firm bearing his name) would advise his friend against the move, but to no avail. At which point, O'Shaughnessy recalled, "I would hang up the phone, get on the speaker so that everyone in the office could hear and say, 'We've just called a market top.'"

4/18/2017

John Reese Forbes Articles
Forbes

Stock Picking Robots Are Coming

The use of robots in the workplace has allowed companies to lower production costs, increase efficiency, and fatten margins. Although it's unlikely that machines will completely displace humans-at least in our lifetime--the conversation is gaining momentum in the world of investing. Money managers are allocating more resources to quantitative model-building and the bot-versus-human narrative has amplified as firms are turning to stock-picking algorithms to entice clients seeking low-cost alpha. According to PricewaterhouseCoopers, robotic process automation (RPA) concepts--logic-driven robots that execute pre-programmed rules-"have been around for nearly a decade, and they've advanced quickly. In financial services, insurance carriers have used RPA in claims processing for quite a while. Capital markets firms are now turning to 'automation' to reduce costs, provide better service, and even make complex regulatory implementations work more efficiently."

4/16/2017

John Reese Globe and Mail Articles
The Globe and Mail

If You Can't Find a Good Fund Manager, Turn to ETFs

Warren Buffett, the billionaire famous for selecting stocks that become winning investments, has long said investors would be better off ditching high-fee actively managed funds and putting their money in low-cost indexing strategies. That is because active managers often go through droughts during which they lag the market. Mr. Buffett wrote about this in his recent annual shareholder letter, repeating advice he gave shareholders in 2005, when he said professional investors - over a period of years - will underperform the returns achieved by amateurs doing nothing more than putting their money in an index fund.

4/12/2017

John Reese Forbes Articles
Forbes

Five Small-Caps For The Long-Term Investor

Small-cap stocks enjoyed a shot in the arm in the wake of the Trump victory last November, as the markets reflected anticipation and excitement around the new president's domestically-centered, Make-America-Great-Again policy agenda. Since then, however, the small-cap rally has all but ground to a halt. An aborted health care vote and other missteps have raised some doubt as to how effective the president will be in effecting the changes he promised the country, including sweeping tax reform, deregulation, increased infrastructure spending and improved trade agreements. Small-caps are more sensitive to these policy shifts due to their disproportionate amount of domestic revenue (and higher effective tax rates than multinational companies), and stand to benefit from Trump's plan to bring overseas production back within U.S. borders.

4/4/2017

John Reese Forbes Articles
Forbes

Five Stocks For The Smart Contrarian Investor

The Citigroup Economic Surprise Index, which measures how current economic data is comparing to expectations, has been rising for months and is now at a three-year high--which really isn't much of a surprise. Consumer confidence is up, the economy continues to expand, and investors remain pretty optimistic. The elevated index, however, could be a warning sign for stocks. Historically, markets perform best not during times of economic prosperity but rather when the economy is booming despite diminished expectations . When things are plugging along as they are in today's market, forecasters tend to extrapolate forward using recent trends and assume the good news will continue. Unfortunately, however, stocks don't necessarily follow suit.

3/29/2017

John Reese NASDAQ Articles
NASDAQ.com

Four Magic Formula Picks For a Richly Valued Market

"Frothy." "Pricey." "Stretched." These are among the adjectives used to describe the stock market's valuation these days -- and they're not even the most ominous. When you consider the cardinal rule of investing-buy low, sell high-such descriptors could discourage the most intrepid investor. Unless you subscribe to the view of one of the greatest investors of all time, that is. Warren Buffett not only believes that the U.S. stock market is a good bet, he declared in a recent CNBC interview, "If there's a game it's very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it-is a terrible mistake."

3/29/2017

John Reese TheStreet.com Articles
TheStreet.com

Buffett, Rail Investors Could Be on the Right Track

When you land on one of the railroads in a game of Monopoly, there's a good reason not to pass on buying it. In his recently released 2016 letter to Berkshire Hathaway (BRK.A) (BRK.B) shareholders, Warren Buffett sings the praises of his company's ownership of Burlington Northern Santa Fe by describing the resilience of the railroad's operations. With respect to the company's debt, Buffett says that it has "earning power that, even under terrible economic conditions, would far exceed its interest requirements."

3/28/2017

John Reese Forbes Articles
Forbes

Quant Guru Explains Why Reactive Investing Undermines Success

The knee-jerk, media-sensitive mindset of most investors gets in the way of their success. At least that's the gist of comments made by James O'Shaughnessy, CEO of O'Shaughnessy Asset Management, in a recent Bloomberg interview. O'Shaughnessy, whose philosophy inspired one of my guru-based stock screening models, is a quantitative investor who uses concrete metrics to evaluate stocks. In his 1996 book What Works on Wall Street, he outlined the results of an in-depth, quantitative stock market study (one of the most detailed in history) in which he back-tested the performance of dozens of stock-picking approaches spanning more than four decades (from the early 1950s to the mid-1990s).

3/28/2017

John Reese TheStreet.com Articles
TheStreet.com

European Picks That Could Be Worth the Trip

Even before German Chancellor Angela Merkel's irksome summit with President Donald Trump, uncertainty had been looming across the pond. As the slow march toward Britain's exit from the EU continues and the tense French presidential election nears, there's a lot to keep track of with respect to the European markets. Add to the mix the European Central Bank's fairly loose grip on the interest rate reigns--even though economic data is on the upswing--and you've got more than a few plates in the air. According to an article last month in the Wall Street Journal, in February the Eurozone Economic Sentiment Indicator hit its highest level since March 2011, and "the world economy is enjoying unusually synchronized strength."

3/21/2017

John Reese Globe and Mail Articles
The Globe and Mail

Five Stock Picks Inspired by 3G Capital and Buffett Strategies

The Brazilian billionaire partners at the private-equity firm 3G Capital have often been compared to Berkshire Hathaway billionaire Warren Buffett. The two big investors have teamed up on some high-profile deals, notably the acquisition of H.J. Heinz and the subsequent merger of Heinz and Kraft, not to mention the recently abandoned approach by Kraft Heinz to buy Unilever. But while Berkshire Hathaway's portfolio is weighted heavily to stocks of consumer-goods companies and - owing to a big bet on Apple and IBM - technology, 3G's stock holdings include a heavy dose of energy, basic materials and telecommunication shares.

3/20/2017

John Reese Forbes Articles
Forbes

Is The Market Expensive? Buffett Says No

"Frothy." "Pricey." "Stretched." These are among the adjectives used to describe the stock market--and they're not even the most ominous. When you consider the cardinal rule of investing-buy low, sell high-such descriptors could discourage the most intrepid investor. Unless you subscribe to the view of one of the greatest investors of all time, that is. Warren Buffett not only believes that the U.S. stock market is a good bet, he declared in a recent CNBC interview, "If there's a game it's very good to be in for the rest of your life, the idea to stay out of it because you think you know when to enter it-is a terrible mistake."

3/20/2017

John Reese Globe and Mail Articles
The Globe and Mail

Warren Buffett Pushes Back at Critics of Stock Buybacks

Warren Buffett's Berkshire Hathaway currently has $86-billion (U.S.) cash at its disposal to acquire companies or take bigger stakes in existing stock holdings, as it did with Apple shares in the final three months of 2016. Shareholders and followers of Mr. Buffett have come to expect big moves from the billionaire, who is known for focusing on the long term. But in his annual letter to shareholders last month he spent some time trying to talk readers into accepting a practice that has been vilified for encouraging short-term thinking: share buybacks.

3/10/2017

John Reese TheStreet.com Articles
TheStreet.com

4 Value Stock Picks for an Elevated Market

If you ever shopped for a DVD in a video store you would typically walk past a bin of cheap movies on the way to the new-release rack. The new titles would be pricey, so you might turn to the jagged bargain pile, the top layer picked over because it was too hard to rummage through without work gloves and a lot of patience. But if you committed to scouring carefully and systematically, you could sometimes find a jewel. The bargain-bin pickings in today's market are slim, to be sure, but that doesn't mean there are none to be found. True value investors understand that shopping for good deals goes much deeper than the sticker price.

3/9/2017

John Reese TheStreet.com Articles
TheStreet.com

General Motors 1 of 6 Picks for Main Street Investors

President Trump's promise to "Make America great again" -- by creating jobs, pushing for tax reforms and deregulation, and renegotiating trade agreements with a view toward strengthening domestic businesses -- has brought Main Street back into focus. According to the 2017 Business Leaders Outlook survey from JPMorgan Chase, optimism is at its highest level (and pessimism at its lowest) since 2010. Michael Hartnett, chief investment strategist for Bank of America Merrill Lynch, recently told WealthTrack's Consuelo Mack that the past decade of slow growth, low interest rates and nonexistent inflation was "great for what the rich people buy and own."

3/7/2017

John Reese Forbes Articles
Forbes

6 High-Dividend Picks For The Careful Income Investor

You should never take a job for the money, borrow from friends or date someone based solely on their bank account. Similarly, you should never reach for just any high-dividend stock. In recent years of low rates and paltry returns, yield-hungry investors have been drawn to dividend stocks which, at one time, traded at discounts to the rest of the market. However, this valuation advantage has since diminished, raising the question of whether these stocks have become overbought.

2/27/2017

John Reese NASDAQ Articles
NASDAQ.com

Five Investments for the Common Sense Investor

Is a corporate culture that encourages "the type of kindness that compels you to let someone know they have something stuck in their teeth even though it's a little awkward" a good investment opportunity? The description comes from Snapchat Inc.'s S-1 filing for its upcoming IPO. In the document, founders Evan Spiegel and Bobby Murphy emphasize the company's focus on providing employees the space and courage to create in a supportive environment as well as its belief in giving back to society. The filing also reveals that the company has no headquarters (operations are "dispersed through various cities"), doesn't like the media, and that the IPO will offer no voting stock. Last but certainly not least, the financial information reflects net losses of $522 million.

2/26/2017

John Reese Globe and Mail Articles
The Globe and Mail

Six Stock Picks For The 'Joe Six Pack' Investor

When I hear "Davos Man," I expect to see a chiselled superhero swooping down to the rescue within nanoseconds of intergalactic calamity. Not even close. Coined by political scientist Samuel P. Huntington, the term Davos Man was originally meant to identify attendees of the World Economic Forum in Davos, Switzerland, but the term has evolved to represent unscrupulous bankers and Wall Street bigwigs - hardly the embodiments of a superhero.

2/24/2017

John Reese CNBC Articles
CNBC

Why It's Usually OK When Warren Buffett Violates His No. 1 Rule of Investing

Warren Buffett's No. 1 rule of investing is "never lose money," followed quickly by his second rule - "Repeat No. 1." But it's OK to bend this rule - ignore it during times when a stock is purchased at a price that may seem high and make a short-term decline more likely. Berkshire Hathaway does when it buys stocks of companies that pay hefty dividends and buy back their shares. Berkshire owns 81 million shares of IBM and another 61 million shares of Apple, a stake that was increased considerably in the fourth quarter. Some consider Berkshire's interest in IBM and Apple a curiosity. Both of these technology giants are leaders in their sectors but many believe their best days are behind them.

2/24/2017

John Reese Forbes Articles
Forbes

IBM And Apple: The Truth About Buffett's Technology Buys

So far this year, the Nasdaq composite has been the best performer out of the three major indices. Investors seem to be warming up to tech, particularly some of the larger players in the technology space, and while it might seem like a disconnect to talk about technology and Warren Buffett, the Oracle of Omaha has broken his longstanding "no tech" rule with major investments in both Apple (AAPL) and IBM (IBM).

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.