Lynch & Buffett: A Dynamic Duo?

Legendary investors Peter Lynch and Warren Buffett have each posted exceptional returns on their own, so what would happen if they teamed up to pick stocks? In a “Number Cruncher” column for Canada’s Globe and Mail, John Heinzl uses Validea Canada’s guru-based screeners to try to answer that question. In January, Globe and Mail put together a nine-stock portfolio of Canadian stocks that passed both Validea Canada’s Lynch- and Buffett-inspired strategies. And while it’s still early, the results have been very strong: “From the inception date on Jan. 18 through March 28, eight of the nine stocks rose, led by […]

High-Quality — Not Value — Key To Buffett’s Success

Warren Buffett is known as a value investor, but a recently released research paper has found that most of Buffett’s success over the long term is due not to value investing, but to his focus on high-quality companies. The paper, “Betting Against Beta” (click here for a PDF copy), was authored by Andrea Frazzini of AQR, a quantitative fund manager, and Lasse Pedersen of AQR and New York University’s Stern business school, and was highlighted recently by the Financial Times’ James Mackintosh. “Value has helped, but accounts for only a couple of percentage points of outperformance each year, against the 15 […]

Berkowitz’s Checklist and Lessons

After struggling in 2011, Morningstar Fund Manager of the Decade Bruce Berkowitz is rebounding strong in 2012, with his Fairholme fund in the top 1% of funds in its category year-to-date, according to Morningstar.com. And at a recent Columbia Investment Management Association conference, Berkowitz laid out his checklist for analyzing a company and its stock, and Market Folly offered a summary: 1. Can you kill it? Is there adult supervision at the company? 2. Is the company essential? Does it depend upon the kindness of strangers? 3. What can the company make? Profitability for owners. 4. Management – honest in past […]

Little-Known Manager, Huge Returns

A recent article in Investment News highlights a mutual fund manager you probably don’t know — but you should. The manager, James Wang of the Oceanstone Fund, has returned 41% over the past five years — annualized. That beats the S&P 500 by about 39% per year. “Indeed, a $10,000 investment at the fund’s inception would be worth more than $65,000 today,” writes Jason Kephart. The fund has trounced the market since the March 2009 bottom, but also managed to limit losses to just 9% in 2008, a remarkable feat. Wang is a bit of a recluse, refusing interviews and […]

Valuation Expert Says Market Only “Slightly Expensive”

An expert on stock valuation who warned about the late-1990s Internet bubble says that stocks aren’t near bubble territory today.  Stocks are only “slightly expensive relative to their long-term average,” John Campbell, who is the chairman of Harvard’s Economics Department — and who was with Robert Shiller the co-author of a late-1996 paper that warned Federal Reserve officials of a stock market bubble — tells MarketWatch’s Mark Hulbert. Back when they presented their paper to Fed Chairman Alan Greenspan and other Fed officials in the 90s, Campbell and Shiller warned that the cyclically adjusted price/earnings ratio (CAPE ) was nearly 28, among […]