“Experts” obsess about irrelevancies, overlook what’s crucial – and are once again prodding the herd towards the risk of large losses. It’s “an article of faith among Wall Street research departments,” wrote David Dreman in Contrarian Investment Strategy (1979): “Nothing is as important in the practice of security analysis as estimating the earnings outlook.” Whether for … [Read more...] about Everything the mainstream says about earnings is wrong
Stock tips are for patsies – are you a patsy?
Overview “Mr Market is there to serve you, not to guide you,” wrote Warren Buffett in his letter to Berkshire Hathaway’s shareholders in 1987. “If he (is) ... in a particularly foolish mood, you are free to either ignore him or to take advantage of him, but it will be disastrous if you fall under his influence. Indeed, if you aren’t certain that you understand ... Mr Market, … [Read more...] about Stock tips are for patsies – are you a patsy?
Do earnings drive stocks’ returns?
Investors greatly overstate the short-term effect of earnings and ignore the long-term impact of dividends. The implications are momentous. Overview Mainstream financial media, as well as professional and retail investors, obsess about corporate earnings and their near-term prospects. The fixation is constant, but it’s most intense during “earnings season.” The media … [Read more...] about Do earnings drive stocks’ returns?
Why the S&P 500’s Five-Year Prospects Are Poor
Its valuation is unappealing and it’s extremely top-heavy. If these variables revert to historical means, investors will sustain losses. “At times,” reckons Richard Saintvilus (“Trusting the Magnificent Seven Stocks,” Nasdaq.com, 14 November 2023), “it can be a struggle to believe in the overall direction of the stock market, particularly as uncertainty remains with … [Read more...] about Why the S&P 500’s Five-Year Prospects Are Poor
Which are Riskier: stocks or bonds?
The answer has varied over the past 150 years; it also depends upon the CPI. Are investors now underrating both asset classes’ risks? It’s one of the most basic questions that investors face. Which are riskier: stocks or bonds? The answer is crucial because, as AQR put it (“A Changing Stock-Bond Correlation: Drivers and Implications,” Q1-2023), the “relationship between … [Read more...] about Which are Riskier: stocks or bonds?
Dividends aren’t a bane – they’re a boon
Payouts aren’t merely sensible, they’re desirable: by boosting subsequent earnings, they improve companies’ and thus investors’ returns. Should dividends be “the bane of your investment life”? Does Australia’s system of dividend imputation “force companies to behave irrationally” – that is, pay overly generous dividends, retain insufficient earnings, restrict capital … [Read more...] about Dividends aren’t a bane – they’re a boon
Index funds’ key flaws – and how we overcome them
For some investors, long-established and low-cost active funds are likely a better option than many index funds and most ETFs. Without resorting to Google, try to guess who said this: “if everybody indexed, the only word you could use is chaos, catastrophe. The markets would fail.” It’s none other than John Bogle! Long known and widely lauded as “the father of indexing,” he … [Read more...] about Index funds’ key flaws – and how we overcome them
A contrarian assessment of Macquarie Group
The crowd lauds its strengths but ignores its structural weaknesses and ethical shortcomings. I assess both and consider their implications. During the long stretches outside crises, bear markets, panics, recessions, etc., Leithner & Company constantly seeks suitable candidates for investment – and when we find them, we research them thoroughly. The minority of … [Read more...] about A contrarian assessment of Macquarie Group
Why value investors should doubt “climate science”
By nature they’re sceptics, and at key junctures become contrarians. I show why they should disbelieve the orthodoxy – and why it matters. The drumbeat has long been incessant, and lately it’s become deafening. For years, “the consensus” has decreed that “the science is settled.” And on 27 July, the UN’s Secretary General, António Guterres, proclaimed: “the era of global … [Read more...] about Why value investors should doubt “climate science”
How we prepare for – and profit from – recessions
We’ve outperformed over the long term by being conservatively contrarian during booms and aggressively contrarian during busts. Investors must never forget: the economic cycle includes contraction as well as expansion. Downturns usually don’t last nearly as long as upswings, and since the Second World War they’ve become even less frequent. Perhaps that’s why, as it seems to … [Read more...] about How we prepare for – and profit from – recessions