It’s Time To Get Into The Rebalancing Act

By John P. Reese — If it ain’t broke, don’t fix it can be a useful mantra in many walks of life, but investors should be wary when applying this idea to asset allocations. Movements in the market can shift allocations and result in concentrations that might not necessarily fit your risk profile and/or investment goals. Suppose, for example, you create a portfolio comprised of 60% stocks and 40% bonds. If stocks see a period of large returns and the allocation shifts to, say, a 70% stock allocation, you might consider leaving things alone in the hopes that the trend will […]

The Investor as a Storyteller

By John P. Reese — The celebrated author Mark Twain said, “It’s not what you don’t know that kills you, it’s what you know for sure that ain’t true.” Twain’s point is well taken, and a keen interpretation of the human condition. As a species, we are extremely accomplished at spinning tales and making meaning, whether based in logic or not, and formulating decisions based on those stories. A precarious tendency when it comes to investing. The award-winning journalist and novelist Will Storr’s book The Unpersuadables: Adventures with the Enemies of Science (2014 Picador/Overlook) delves into the psychology and neuroscience […]

Preserve and Grow Your Wealth With Good Habits & Discipline

By John P. Reese — In a classic episode of the comedy television series Seinfeld, Jerry is told by a rental car agent that although they had his reservation in their system, they had run out of cars. He responded in his inimitable, singular style, with: “You know how to take the reservation, but you don’t know how to hold the reservation. And that’s really the most important part.” I was reminded of the scene while reading an article from earlier this year by Collaborative Fund’s Morgan Housel titled “Getting Rich vs. Staying Rich” in which he recounted the decidedly […]

Finding Stocks Using the Investment Criteria of Great Investors

By John P. Reese — It’s the time of year when notebooks and pencils (okay, iPads and styluses) are replacing flip-flops and swimsuits. Go into any store and you’ll see all the trappings; every food item imaginable in snack-size packaging, backpacks, dorm room accoutrements, and a sea of organizational shelves, bags and boxes. Maybe it’s also a good time to evaluate how organized you are with respect to your investment portfolio. Do you have a solid, go-to approach that is aligned with your risk profile and future goals? Are you sticking to that approach no matter what you hear on […]

Master Investors Marks, Dalio & Gundlach Issue Cautionary Views on Markets

By John P. Reese — The waning days of August leave many parents looking forward to the start of school and many investors bracing for September, the month that is historically the worst of the calendar year for stocks. Add the increasing uncertainty coming out of Washington and stock valuations that look increasingly overheated, and it’s enough for a few prominent investors to warn that a pullback is probably on its way. That may not be a bad thing. The widely watched Dow Jones industrial average has hit more than two dozen record highs this year, blowing past 21,000 in […]

Investors: Become “Unshakeable” With These Five Investing Commandments

By John P. Reese — Keep Calm and Carry On was a motivational poster produced by the British government in 1939 in preparation for World War II. The poster was intended to raise the morale of the British public as they faced the threat of mass air attacks. Today, the motto can be found on a seemingly endless array of merchandise ranging from coffee mugs to car seat covers. If only the notion was as widely embraced by investors as it is by slogan-loving shoppers. During these days when watching the news can be a disconcerting experience (on a good day), it’s especially paramount to keep calm and […]

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Building an Investment Checklist

By John P. Reese —  In this year’s letter to Berkshire Hathaway shareholders, Warren Buffett refers to the conglomerate’s “gradual shift from a company obtaining most of its gains from investment activities to one that grows in value by owning businesses.” An article in the Wall Street Journal last month titled, “Warren Buffett’s Berkshire Moves Away from Stock Picking,” underscores the shift in the context of the conglomerate’s offer to purchase power-transmission firm Energy Future Holdings for $9 billion in cash. But the two activities are really horns on the same goat, and together represent what Buffett later calls a “two-pronged approach” […]

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Investors Who Dare to Be Different Stand a Better Chance for Success

By John P. Reese In 2006, Oaktree Capital co-chairman Howard Marks wrote a memo titled Dare to Be Great in which he delivered a simple but provocative statement about investing: “This just in: you can’t take the same actions as everyone else and expect to outperform.” Being different, he argues, is “absolutely essential if you want a chance at being superior.” Going against the herd, however, runs counter to human nature and can be exceedingly tough for investors. Just ask famed investor James O’Shaughnessy (a market guru who inspired one of the stock screening models I created for Validea) who […]

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Investing Like Buffett Means More is Not Always Better

By John P. Reese —  When Warren Buffett was a kid, he liked to read. More than most kids. And we’re not talking comic books and bubble gum wrappers, either. He once recalled receiving the World Almanac as a gift when he was a young boy. “It was like heaven to me,” he says. Is it a coincidence that this voracious reader became one of the most successful investors of all time? Maybe not. When asked about the key to his success, Buffett puts reading at the top of the list. “That’s how knowledge works,” he said, “It builds up, […]

Market Indicators Only Part of the Story, Plus Five Fundamentally Strong Stocks

By John P. Reese Among the myriad guidelines that the wise investor follows, diversification sits front and center: Don’t put all your eggs in one basket, either with respect to equities or asset classes. But the notion of diversification extends beyond the process of deciding what to buy. It also applies to the assessment of the market as a whole and the factors affecting it at any given time. The universe of indicators available to investors is vast to say the very least, and there is no shortage of opinion or controversy around them and their relevance at any given […]

Underperforming Canadian Stocks with Solid Potential

As major benchmarks continue their “seemingly unstoppable march upward,” writes Validea CEO John Reese in a recent article for The Globe and Mail, “it’s hard for investors to avoid being skeptical”—especially those that got hit hard by the 2000 dot-com bubble and/or the 2008 financial crisis. While he argues that “pessimism is an investing survival instinct,” Reese juxtaposes Warren Buffett’s investing philosophy that “over the long term, a careful investor will see gains.” He explains, “A hot stock attracts a lot of attention, even though taking a moment to think about it might lead to the conclusion that it has […]

Stocks that Could Appeal to the Value Investor

In a recent article for The Globe and Mail, Validea CEO John Reese discusses the hefty divergence between growth and value stock performance so far this year and offers insights as to the various factors at play. He references the current market’s stretched valuations, noting that “it may be hard to see value” given that the market multiple is above its historical average. “But remember,” he argues, “a big driver of that is the overweighting and outperformance of a handful of big tech stocks.” Reese suggests that investors with a long-term view might consider “strategically shifting, or tilting, some of […]

Five Picks for Investing in a Bull Market Without Getting Trampled

In a recent article for Forbes, Validea CEO John Reese discussed how investors can take advantage of the ongoing bull market without getting trampled. He refers to the strategy of Warren Buffett who, Reese writes, “would probably answer this question by advising investors to be prepared–to stick to business fundamentals rather than stock market trends when deciding what to buy.” Using the stock screening models he created based on the investment philosophy of Buffett and other legendary market investors, Reese identified the following high-scoring stocks: Tractor Supply Company (TSCO)is an operator of rural lifestyle retail stores in the U.S. that […]

Piotroski and Book/Market-Based Investing

 In a recent article for Nasdaq, Validea CEO John Reese shares insights on quantitative investing and outlines the approach of Stanford University accounting professor Joesph Piotroski (a market guru that inspired one of the stock screening models Reese created for Validea). Piotroski, writes Reese, was a trailblazer in the investment approach, turning heads on Wall Street in 2000 with his research on unpopular companies with high book-market ratios (defined as total assets minus total liabilities divided by market capitalization). Reese offers an explanation of Piotroski’s approach and the metrics he used, as well as an overview of the Validea portfolio […]

Buffett, Bank of America, and Five Financials

Warren Buffett’s decision to exercise Berkshire Hathaway’s warrants to purchase 700 million shares of Bank of America common stock will make it the bank’s biggest shareholder, writes Validea CEO John Reese in a recent Forbes article. Reese provides an overview of Berkshire’s history with Bank of America, explaining that this transaction will be the company’s most profitable in the financial sector. He also underscores the fact that financials have become a “cornerstone of Berkshire Hathaway’s holdings.” Using the stock screening models he created based on the investment philosophy of Warren Buffett and other market gurus, Reese identified the following five […]