Former Franklin Templeton CEO Says Stick to your Discipline

Over a more than 46-year investment career, former Franklin Templeton portfolio manager Don Reed has learned patience, says a recent Morningstar article. In an interview on January 31st (the formal date of his retirement), Reed offers investors the following insights: Sticking to your guns can be tough: During the tech bull market of the late 1990s, Reed recalls, Templeton owned no tech stocks because the companies didn’t meet the firm’s valuation criteria. With some stocks, patient and long-term investing go hand in hand: Reed says, “The turnover in the Templeton International Stock fund last year was 16%. We didn’t have […]

Why Value Investors Need “Mental Toughness”  

At the end of the Super Bowl, a jubilant Tom Brady attributed the Patriot’s win to the “mental toughness” the team had demonstrated all year–which, no doubt, came in handy when they entered the fourth quarter trailing the Falcons by ten points. Unless we’re talking about basis points, things would be pretty dismal for any investor entering the fourth quarter down by ten. But the idea of mental toughness applies to investing as well as to football, whether it be for a day, month, quarter or, for that matter, a year. Value investing is a perfect example of this. We […]

Swensen’s Yale Endowment Model Not a One Size Fits all Investing Approach

The evolution of Yale University’s endowment fund has become something of legend, as described in a recent article in Chief Investment Officer. In the mid-80’s, as the story goes, the Ivy League university’s CIO David Swensen shifted the $25.4 billion fund from a traditional mix of primarily bonds and a few equities into “carefully selected alternative investments—hedge funds, private equity, and venture capital—using external managers to capture the so-called illiquidity premium.” It was a good move for Yale, adding $7 billion of value and earning a 12.9% annual return over the past 30 years. The success has made what has […]

Zweig’s Market Survival Guide

There’s a lot of talk among investors about beating the market, but in a recent Wall Street Journal article  Jason Zweig suggests that many overlook the challenge of merely surviving it. “Of all the qualities an investor needs to succeed,” he writes, “stamina may be the most underrated.” Zweig cites Morningstar data showing that of the 525 U.S. stock mutual funds that existed thirty years ago, 223 are still operating today (of those, only six are run by the same manager). In recent conversations with some of what he calls “investment marathoners,” he says a common theme in their approaches […]

Investing Principles: What Has Worked

For the next several weeks, our daily blogs will include information from a 1992 publication by the investment firm Tweedy, Browne Company LLC entitled What Has Worked in Investing: Studies of Investment Approaches and Characteristics Associated with Exceptional Returns. The booklet includes data from over fifty studies of share performance woven together with insights based on the firm’s five plus decades of industry experience as to which stock characteristics have provided the best returns over time. Our blogs will provide synopses of various sections of the booklet, which Tweedy says provides “empirical evidence that Benjamin Graham’s principles of investing, first […]

Debating with the Oracle of Omaha

It’s tough to argue with one of the most legendary investors of all time, but Paul Merriman (founder of Seattle-based Merriman Wealth Management) apparently takes exception with some of Warren Buffett’s principles, particularly as they relate to investors in retirement. In a recent MarketWatch article, Merriman outlines his interpretations and gripes with seven Buffett principles: Hold plenty of cash to withstand financial challenges and don’t be afraid to use it for “lucrative investment opportunities.” According to Merriman, this smacks of an encouragement toward market timing, and he questions how the gray-haired investor community would be able to identify bargains. The […]

Every Crisis is Different

It would be great if we could extract lessons from every financial crisis and then apply those lessons to avert future crises. Alas, writes Morningstar columnist John Rekenthaler, “The market’s turning points are never evident until after they have occurred.” That’s not to say, however, that some don’t read the writing on the wall and act accordingly. Rekenthaler writes, “Investors of various backgrounds figured out the housing bubble before it popped. Many more anticipated the 2000-2002 tech bust, as hundreds of hedge funds dodged that downturn altogether.” However, he argues, almost none of them were able to repeat their successes. […]

The Fool’s Housel on Brexit: Hurry Up and Wait

Thursday’s vote by the U.K. to leave the European Union has precipitated a host of commentary across countless channels. Last Friday, Morgan Housel of The Motley Fool offered frank advice about what investors should be doing. And that is…nothing. By voting to leave the EU, Housel says, the U.K. has ceded to France its title as the world’s fifth largest economy. But as far as The Motley Fool is concerned, the path is clear. “We’re not selling. We’re not making changes to our portfolios. We’re genuinely shaking our heads in surprise, but we’re not worried.” He reminds readers of the […]

Buy and Hold, Then Hold Some More

The old adage “if it ain’t broke, don’t fix it” can apply to many situations, and perhaps the world of investing is among them. A recent article in Investment News discussed the strong performance of the Voya Corporate Leaders Trust (LEXCX), a fund born during the Great Depression. In 1935, its founders bought the 30 largest companies (ruling out financials due to an understandable distrust of the sector). They believed that if a company could survive (even prosper) during the 20th Century’s worst economic downturn, it could probably last another 75 years or more. It has done just that, and […]

Primecap: A Growth-Oriented, Independent, Long-Term-Focused Shop

Barron’s profiles Primecap Management, which it describes as “one of the best fund shops you’ve never heard of.” All of its six mutual funds are beating at least 86% of their peers over the last decade. The firm began in 1983 when Howard Schow founded it with Theo Kolokorones and Mitchell Milas. A year later, legendary advocate of passive investing and founder of Vanguard Jack Bogle put up $100,000 in seed money to launch the actively managed Vanguard Primecap  fund, which now manages $64 billion in Vanguard funds, making it Vanguard’s second largest relationship. Primecap is a very private operation […]

Warren Buffett’s 5 Tips For Long-term Investing

“I know what markets are going to do over a long period of time,” says Warren Buffet in a recent clip presented by Asset TV, “they’re going to go up.” But over the short, Buffet says, “I never know what markets are going to do.” This leads to the first of what the video characterizes as his five tips for long term investing, which are: Don’t try to time the markets. Don’t be afraid of the dips. Buffett says: “we’re a more aggressive buyer [of stocks] when they’re going down.” Keep it simple. Buffett says: “I think every business should […]

How Taking a Break from Checking Your Portfolio Can Help with Returns

With smartphones and tablets and 24-hour financial news channels making stock market data instantaneously available, many investors spend a lot of time monitoring their portfolios’ every movement – too much time, says Validea CEO John P. Reese. Reese says many investors would be better served by looking at their investments less often and taking a long term perspective. “The truth is that short-term fluctuations in asset prices really aren’t that meaningful,” Reese writes in his latest Seeking Alpha column. “In fact, there is evidence that paying a lot of attention to those movements doesn’t make you a better, more conscientious […]

O’Shaughnessy Emphasizes the Value of "High-conviction" Buybacks Over the Long Term

Jim O’Shaughnessy, O’Shaughnessy Asset Management, says a long-term investor should be buying now, and compares “low-conviction buybacks” (defined as 5% or less) and “high-conviction buybacks” (over 5%) in identifying attractive stocks. From 1987 to 2014, he says, the return on low-conviction buybacks was 12.1% annually (about 1% over return on all large stocks), but the return on high-conviction buybacks was 15.9% annually. Further, he says that the buyers of these high-conviction buyback stocks “were buying their stocks when they were dirt cheap.” Of all buybacks, 70% are low-conviction, according to O’Shaughnessy. Going forward, O’Shaughnessy says investors should be taking a […]

O’Shaughnessy Emphasizes the Value of “High-conviction” Buybacks Over the Long Term

Jim O’Shaughnessy, O’Shaughnessy Asset Management, says a long-term investor should be buying now, and compares “low-conviction buybacks” (defined as 5% or less) and “high-conviction buybacks” (over 5%) in identifying attractive stocks. From 1987 to 2014, he says, the return on low-conviction buybacks was 12.1% annually (about 1% over return on all large stocks), but the return on high-conviction buybacks was 15.9% annually. Further, he says that the buyers of these high-conviction buyback stocks “were buying their stocks when they were dirt cheap.” Of all buybacks, 70% are low-conviction, according to O’Shaughnessy. Going forward, O’Shaughnessy says investors should be taking a […]