80-20 Investing – the Portfolio
I have decided to set up another real money portfolio to test out my ideas of 80-20 Investing, which I have previously discussed. For 20% of the effort I believe it is possible to get 80% of the investing result. The idea is fairly simple. Set up some investing criteria, and when a stock passes [...]
Lessons Learned from Mike Burry
Burry was the guru behind Scion Capital. He was a great stock picker and later made $100 million buying credit default swaps, investing against the housing bubble.
I am not going to recount the article. Read it if you are interested in what great investors do. It is a great read. I am just going to share with you the what I take away from the article.
Easy Concept, Potentially Profitable Investing Strategy
This is really another in the Value Investing Series, but also an 80/20 Investing idea. To reiterate 80/20 investing is my value investing concept that attempts to get 80% of a solid return with 20% of the work. Not sure if it is really viable, although I am thinking of starting a test portfolio. But it is also the result of finding the website I mentioned in yesterdays blog about Empirical Finance Research.
An aid to Empirical Finance Research
I am a fan of empirical evidence that supports investing strategies. This sounds like an obvious statement, but many people don’t care, or at least that is how seems if you view their actions. I have previously highlighted evidence that could potentially enhance returns like Low price to book, and help protect against loss like the Altman Z score.
The Problem with Back Testing Investing Strategies for Practical Investors
In surveying some of my favorite blogs recently, I have come upon something that hadn’t previously occurred to me, but could potentially alter how I invest. That is the problem with back testing Investing Strategies. Greenbackd posted an interesting starter piece on this subject called Walking the Walk, that led me back to the original blog from Aswath Damodaran called Transaction Costs and beating the Market. I have often thought there were practical problems with back testing, but I had not tried to articulate them until I read these posts. Both are excellent and worth reading. Damodaran, who is a Finance professor at NYU, and an author of Investment Fables (which I own), writes about the many ways to beat the market in general terms and then goes on to say, “Most of these beat-the-market approaches, and especially the well researched ones, are backed up by evidence from back testing, where the approach is tried on historical data and found to deliver “excess returns”.
Ben Graham’s Stock Selection Criteria – Value Investing Series
I found this idea in Tweedy Browne’s What Has Worked in Investing. And after a little more research I have included it in my Value Investing Series. In a “Test of Ben Graham’s Stock selection Criteria,” Henry Oppenheimer studied whether or not a set of Ben Graham’s investing criteria actually worked. Toward the end of Graham’s life he espoused a different, although related criteria to what he espoused in his master works Security Analysis and the Intelligent Investor.
What is Focus Investing?
The concept of Focus Investing is devilishly simple. Take the magnifying glass out and focus it on the very best investment ideas you have. Don’t pull the investment trigger unless you can say this is too good to pass up. It is the extreme opposite idea of diversifying your investments in the manner suggested by many financial advisors.
Does Market Timing Work?
The first evidence I discovered that some form of Market Timing may work was when I read Jeremy Seigel’s weighty tome, Stocks for the Long Run. He used what is called the 200 day moving average of a stock to determine a buy and sell point for equities, with investment going back and forth from cash to equities.
Investing in Low Price to Book Stocks- Value Investing Series
It may seem contrary to some investors to invest in Low Price to Book Value Stocks. After all, isn’t there a reason the stock price in relationship to assets is beaten down? Yes, probably. Is it enough that Ben Graham made money using a version of a low Price to Book investment strategy? For some investors, yes. Luckily we have someempirical evidence supporting this investment strategy. There are several studies that lay out the case for investing in these type of stocks.
What Next In Investing?
This is important because, many stocks are not cheap right now, and finding great or even really good investments has gotten tight. I have mostly been focusing on a couple of strategies, including NCAV stock investing.
keep looking »