Steven Romick – Avoiding The Worst Performing Stocks Can Lead To Outperformance – Here’s How

Johnny HopkinsSteven Romick Comments

Steven Romick at FPA has just put out a great paper called, Two Decades of Winning by Not Losing. It’s a great illustration of how you can outperform in the stock market by avoiding the worst performing stocks.

Here’s an excerpt from that paper:

Thanks to the accelerated increase of passive investing – now around 40% of the U.S. market – I’m confident that there will be a period when it will look really easy to beat a benchmark – followed by another time when, again, it won’t.

This academic argument against active investment is fundamentally flawed because it’s built on a false premise, which holds that only the best performing stocks will drive returns. The argument doesn’t consider the other side…. A maxim I’ve taken to heart….

If you avoid the worst performing stocks, you can still put up good numbers.

You can read the complete paper here.

Rob Arnott – Links Between U.S. Stock Returns And U.S. Presidents Are Bogus

Johnny HopkinsRob Arnott Comments

A new report released by Rob Arnott and the team at Research Affiliates shows that investors should exercise extreme caution when interpreting historical investment data as it relates to politics.

Here’s an except from that report:

Our results underscore the importance of exercising caution when interpreting historical investment data, including as it relates to politics.  As Harvey, Liu, and Zhu (2015) stress, the large number of ways in which the data can be analyzed in conjunction with the vast number of studies undertaken, opens the door to the discovery of spurious relations. The problem is compounded by the fact that political data are likely to be nonstationary. The claim that the left or right party has come to power can mean different things at different times or in different countries. In addition, the meaning of being “left” or “right” can depend on a number of factors such as the country in question, issues at stake, campaign positions of the opposing parties, and even the personalities of the candidates.

The international results we report here are consistent with the hypothesis that the correlation between US stock returns and US presidential elections, though dramatic, is spurious. Although US stock returns have been much higher when the left party was in power, this finding appears to be unique to the United States. The fact that the result is country specific, in combination with the observation that the US result is driven largely by two key observations associated with major market crashes, leads us to conclude that no persuasive relationship exists between the political party in power and stock returns.

You can read the full report here.

John Bogle – The 7 Rules For Successful Stock Market Investing

Johnny HopkinsJohn Bogle Comments

One of our favorite investors at The Acquirer’s Multiple is John Bogle, founder of the Vanguard Group. In a recent article written for the CFA Institute’s Financial Analysts Journal, Bogle provides his seven investing rules for successful stock market investing.

My favorite is Rule #7 which is:

Stay the course. Regardless of what happens in the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor. (Just ask investors who moved a significant portion of their portfolio to cash during the depths of the financial crisis, only to miss out on part or even all of the subsequent eight-year—and counting—bull market that we have enjoyed ever since.) “Stay the course” is the most important piece of advice I can give you.

Here’s an excerpt from that article:

Most of my books, essays, and speeches have focused on what I believe are the best interests of investors—the human beings whom we are all doing our best to serve. Perhaps this sampling of advice that I have offered over the years may be useful to other investment professionals.

1.Invest you must. The biggest risk facing investors is not short-term volatility but, rather, the risk of not earning a sufficient return on their capital as it accumulates.

2.Time is your friend. Investing is a virtuous habit best started as early as possible. Enjoy the magic of compounding returns. Even modest investments made in one’s early 20s are likely to grow to staggering amounts over the course of an investment lifetime.

3.Impulse is your enemy. Eliminate emotion from your investment program. Have rational expectations for future returns, and avoid changing those expectations in response to the ephemeral noise coming from Wall Street. Avoid acting on what may appear to be unique insights that are in fact shared by millions of others.

4.Basic arithmetic works. Net return is simply the gross return of your investment portfolio less the costs you incur. Keep your investment expenses low, for the tyranny of compounding costs can devastate the miracle of compounding returns.

5.Stick to simplicity. Basic investing is simple—a sensible allocation among stocks, bonds, and cash reserves; a diversified selection of middle-of-the-road, high-grade securities; a careful balancing of risk, return, and (once again) cost.

6.Never forget reversion to the mean. Strong performance by a mutual fund is highly likely to revert to the stock market norm—and often below it. Remember the Biblical injunction, “So the last shall be first, and the first last” (Matthew 20:16, King James Bible).

7.Stay the course. Regardless of what happens in the markets, stick to your investment program. Changing your strategy at the wrong time can be the single most devastating mistake you can make as an investor. (Just ask investors who moved a significant portion of their portfolio to cash during the depths of the financial crisis, only to miss out on part or even all of the subsequent eight-year—and counting—bull market that we have enjoyed ever since.) “Stay the course” is the most important piece of advice I can give you.

Over the long run, the growth trends in our economy and financial markets have been solidly upward, despite the gyrations and uncertainty we inevitably experience as the years roll by. It is reasonable to assume that this growth will continue. Do not let false hope, fear, and greed crowd out good investment judgment. If you focus on the long term and stick with your plan, success should be yours.

You can read the full article here.

Seth Klarman Warns Today’s High Stock Prices Are Masking Perceived Risks

Johnny HopkinsSeth Klarman Comments

According to a recent article by Business Insider, Seth Klarman has warned investors that today’s high stock prices are masking perceived risks.

Here’s an excerpt from that article:

“When share prices are low, as they were in the fall of 2008 into early 2009, actual risk is usually quite muted while perception of risk is very high,” Klarman wrote. “By contrast, when securities prices are high, as they are today, the perception of risk is muted, but the risks to investors are quite elevated.”

He flagged the following three forces that investors are regularly combatting:

  • greed and fear, which “pressure investors to do the wrong thing at every turn”
  • “aggressive brokers, investment bankers and traders who routinely promise more than they can deliver”
  • and investors focusing on the short-term and trend-following, and restrictions that are supposed to limit risk but actually prevent outperformance.

You can read the full article here.

Francois Rochon: 8 Rules For Successful Equity Investing

Johnny HopkinsFrancois Rochon Comments

One of our favorite investors at The Acquirer’s Multiple is Francois Rochon at Giverny Capital. According to the firm’s website, Rochon’s U.S. Portfolio has an annualized return of 14.8% since 1993 compared to the S&P 500 of 9.2%.

Rochon wrote a great paper for investors called the Keys to Successful investing, which provides eight rules to become a successful investor.

My personal favorite is rule #8 which is:

What differentiates successful investors from others is not related to intelligence, but rather related to attitude. Warren Buffett often uses the adjective RATIONAL to describe good investors. Rational investors do not let themselves be influenced by fads or crises. Aside from a rational attitude, another important quality (and one apparent in Warren Buffett) is the capacity to always want to learn and progress. The world is in a perpetual state of evolution and it is not easy to for someone to also constantly evolve. To be in a constant state of learning, one must not only be passionate for their art, but also humble. Without humility, there is no opening for something new. Therefore, paradoxically, successful investors must be able to combine both a high confidence in their judgment while also remaining constantly humble. A difficult and fragile equilibrium.

Here’s an excerpt from that paper:

If stocks represent the asset class that has generated the most wealth over the long term, why is it that so many investors fail to realize good returns with the stock market? Here are a few keys, according to Giverny Capital, that could help you in increasing your likelihood of success.

1- Consider stocks as fractional ownership in real businesses

2- Being present

3- Profit from market fluctuations rather than suffer from them

4- Leaving yourself a margin of safety

5- Stay within your circle of competence

6- Know when to sell

7- Learn from your mistakes

8- A constructive attitude

You can find the complete document here.

How to Invest in the U.S. Without Even Trying – Jason Zweig

Johnny HopkinsJason Zweig Comments

One of the best blogs in our Top 50 Blogs 2017 is Jason Zweig.

Zweig just wrote a great article called How to Invest in the U.S. Without Even Trying.

Here’s an excerpt from that article:

Imagine you wanted to own a mononational U.S. portfolio. S&P Dow Jones Indices estimates that among those companies in the S&P 500 reporting sufficient data, only 42 got less than 15% of revenues from outside the U.S. in 2015. A pure U.S.-only portfolio would have to exclude not just and Apple but even such firms as Costco Wholesale and Home Depot, all of which do significant business abroad.

So the mononational approach makes sense only as a small speculation, says Tadas Viskanta, who blogs about investing at and has written several research papers on global diversification.

Buying purely domestic companies is probably best-suited for trading on geopolitical events or the growth prospects of a specific country. But it’s not worth overhauling your whole portfolio for.

You can read the full article here.


500 Years Of Stock Panics, Bubbles, Manias, & Meltdowns (In 1 Simple Chart)

Johnny HopkinsValue Investing News Comments

One of the Top 50 Investing Blogs for 2017 is Zero Hedge, and one of the best articles at Zero Hedge is one called, 500 Years Of Stock Panics, Bubbles, Manias, & Meltdowns (In 1 Simple Chart). It’s a simple yet powerful illustration of just what has happened in the history of the stock market over the past 500 years.

Here’s an excerpt from that article:

From the “over-expansion of credit” leading to banking failures in 1255-62 in Italy to 2015’s “‘end’ of The Fed’s zero interest rate policy,” stock markets have risen and fallen and risen some more on the back of wars, manias, crises, and panics since The Middle Ages….

Click on the image below and it will take you to Zero Hedge where you can expand the image so that it becomes much more legible.

Value Investing Nuggets – Value Investor Insight Newsletter – April 2017

Johnny HopkinsValue Investor Insight Comments

One of the best resources for value investors are the Value Investor Insight Newsletters. The VII newsletter is a value investment publication full of value investing nuggets and interviews with some of the best value investing firms. The newsletter was created by money manager Whitney Tilson and media executive John Heins.

The April edition includes:

Thomas Putnam, Andrew Boord
Small-cap experts describe why they prefer the familiar, what out-of-favor sector interests them, the first thing they do when a position tanks, and why they think Sonic, ExlService and Hallmark Financial are mispriced.

Jiro Yasu
Japanese value hunter explains why capital allocation in Japan is poor but improving, lessons learned from an investing legend, why he has a perfect value-investor name, and why he sees value in Medikit, EM Systems and CRE.

Lawrence Speidell, Andrea Clark
Frontier-market pioneers describe how their research priorities may differ, why they’re in active-manager “paradise,” some exotic site visits, and why they see upside in Al-Eqbal, BRAC Bank and Centum Investment.

Wall Street treats Taro Pharmaceutical as if it is ill prepared for a difficult industry period. Is that true?

You can view a copy of the April newsletter here.

Howard Marks Investor Series with Bruce Karsh

Johnny HopkinsHoward Marks Comments

The Howard Marks Investor Series at The Wharton School brings high-profile investors to campus to share their real-world, practical investment perspectives. In this installment, Howard Marks speaks with Bruce Karsh. Both are co-founders of Oaktree Capital Management.

Here’s the interview:

This Week’s Best Investing Reads – Curated Links

Johnny HopkinsValue Investing News Comments

Here’s a list of this week’s best investing reads:


Free Reading: Dear Fellow Shareholders (Hurricane Capital)

The Unintended and Deleterious Societal Consequences of Quantitative Easing (The Felder Report)

Mohnish Pabrai On The Mistake Of Selling Ferrari (ValueWalk)

How Many Will Stay the Course During the Next Bear Market? (A Wealth of Common Sense)

Axel Merk: “Investing Is Not About Bragging Rights At Cocktail Parties” (Zero Hedge)

How Warren Buffett Used Insurance Float to Become the Second Richest Person in the World (Vintage Value Investing)

Notes from Howard Marks’ Lecture: 48 Most Important Things I Learned on Investing (Safal Niveshak)

This Map Shows the Most Valuable Brand for Each Country (The Investors Podcast)

What is Your Edge? (Base Hit Investing)

Explaining a Paradox: Why Good (Bad) Companies can be Bad (Good) Investments! (Musings on Markets)

Ten Years (Blog Investment Masterclass List)

Where Markets Fail: Markets Are Not Systemic (CFA Institute Enterprising Investor)

Profit Margins in a “Winner Take All” Economy (Philosophical Economics)

Confirmation Bias: Why You Should Seek Out Disconfirming Evidence (Farnam Street)

Jeff Bezos’ Criteria for a Great Business (Greg Speicher)

A Matter of Expectations (Jason Zweig)

World Population Density in 2015 (The Big Picture)

For those thinking of investing in ETFs: Are you sure? (The Globe and Mail)

Income Portfolios: The Good, The Bad, And The Ugly (Forbes)

With $2.9 Trillion In Market Cap – Here’s How The 5 Tech Giants Make Their Billions

Johnny HopkinsValue Investing News Comments

One of the top bloggers in our Top 50 Investing Blogs of 2017 is Visual Capitalist (VC). VC provides some of the best charts on the planet, covering a number of categories including investing.

Last month VC produced a chart called, Here’s How 5 Tech Giants Make Their Billions. It’s a stunning illustration of just how these five companies – Apple, Alphabet, Microsoft, Amazon, and Facebook now dominate the U.S. market, worth a collective $2.9 Trillion in market capitalization.

Here’s an excerpt from that article:


Each of these companies is pretty unique in how they generate revenue, though there is some overlap:

  • Facebook and Alphabet each make the vast majority of their revenues from advertising (97% and 88%, respectively)
  • Apple makes 63% of their revenue from the iPhone, and another 21% coming from the iPad and Mac lines
  • Amazon makes 90% from its “Product” and “Media” categories, and 9% from AWS
  • Microsoft is diverse: Office (28%), servers (22%), Xbox (11%), Windows (9%), ads (7%), Surface (5%), and other (18%)

You can read the full article at Visual Capitalist here.

James Montier: Markets Are Behaving Like The White Queen (Alice In Wonderland)

Johnny HopkinsJames Montier Comments

James Montier of GMO recently wrote a great paper called Six Impossible Things Before Breakfast, in which he discusses current market conditions and how we can make sense of today’s pricing. It’s a must read for all investors.

Here’s an excerpt from that paper:

I believe the markets are behaving like the White Queen. In order to make sense of today’s pricing, you need to believe in six impossible (okay, I’ll admit some of them are just very improbable as opposed to impossible) things.

1. Secular stagnation is permanent and rates will stay low forever. As we have argued at length elsewhere, secular stagnation is a policy choice and we could exit it reasonably quickly by implementing appropriate policies.

2. The discount rate for equities depends on cash rates. This is nothing more than a belief. It has no foundation in data and not a scrap of evidence exists that supports this hypothesis.

3. Growth rates and discount rates are independent. This is a very questionable assumption. If, as I believe, it is false, then it makes the “Hell” outcome Ben has discussed in previous Quarterly Letters less likely, unless the first two beliefs hold completely.

4. Corporates carry out buybacks ad nauseum, raising EPS growth despite low economic growth. This would imply rising leverage, which is already close to all-time highs. Remember Minsky: Stability begets instability.

5. Corporate cash piles make the world a safer place. Cash levels aren’t high by historic standards, and valuations are extreme even when cash is fully accounted for.

6. The “Hell” scenario is the most probable outcome. This requires “this time is different” to be true and, unlike Jeremy Grantham, I am not yet ready to assign this exceptionally useful rule of thumb to the waste bin of history. Put another way, Hell requires that stock prices have reached a “permanently high plateau,” and I’m not about to embrace that statement.

Conclusion: Is Hell the most probable outcome?

It appears that asset markets are priced as if secular stagnation were a certainty. Certainty is a particularly dangerous assumption when it comes to investing. As Voltaire stated, “Doubt is not a pleasant condition, but certainty is absurd.”

In order to believe that asset market pricing makes sense, I think you need to hold any number of “impossible” (by which I mean at best improbable, and at worst truly impossible) things to be true. This is certainly a different sort of experience from the bubble manias that Ben mentioned in the opening quotation, which are parsimoniously captured by Jeremy’s definition of bubbles – “excellent fundamentals, irrationally extrapolated.”

This isn’t a mania in that sense. We aren’t seeing the insane behaviour that we saw during episodes like the Japanese land and equity bubble of the late 1980s, or the TMT bubble of the late 90s, at least not at the micro level. However, investors shouldn’t forget that the S&P 500 currently stands at a Shiller P/E of just over 28x – the third highest in history.

The only two times that level was surpassed occurred in 1929 and in the run-up to the TMT bubble. Strangely enough, we aren’t hearing many exhortations to buy equities because it is just like 1929 or 1999. Today’s “believers” are more “sophisticated” than the “simple-minded maniacs” who drove some of the other well-known bubbles of history.

But it would be foolish to conflate sophistication with correctness. Current arguments as to why this time is different are cloaked in the economics of secular stagnation and standard finance work horses like the equity risk premium model. Whilst these may lend a veneer of respectability to those dangerous words, taking arguments at face value without considering the evidence seems to me, at least, to be a common link with previous bubbles.

You can read the full paper here at GMO.

Mohnish Pabrai: How To Build Wealth Copying 9 Other Value Investors

Johnny HopkinsMohnish Pabrai Comments

One of our favorite investors at The Acquirer’s Multiple is Mohnish Pabrai.

Earlier this year he wrote a great article called, Beyond Buffett: How To Build Wealth Copying 9 Other Value Investors. The article illustrates how you can build a successful portfolio by cloning other successful value investors.

Here’s an excerpt from that article:

I co-wrote this article in Forbes on an investment strategy called the “Shamelessly Cloned Portfolio.”

The shameless portfolio comprises of five of the highest conviction ideas of 9 value managers whom we shamelessly clone. Like the Small Dogs of the Dow and Uber Cannibals, we set it and forget it. I will publish the list of the top Shameless Cloned Ideas for a particular year on my blog on January 1 each year.

For 2017, even though it’ll be a partial year, one can buy the 2017 picks anytime. After that, rebalancing should occur right after January 1.

The Shameless Portfolio for 2017 contains:

  1. Oracle (ORCL)
  2. Berkshire Hathaway (BRK-B)
  3. Apple (AAPL)
  4. Microsoft (MSFT)
  5. Charter Communications (CHTR)

We’ve laid out all our algorithm rules below.

One can begin testing this strategy with a small portion of one’s networth and do it through a great broker like Interactive Brokers with commissions under $3/trade for small quantities. We hope you’ll join our merry band of shameless cloners.

You can view the article here:

I co-wrote the article with Fei Li, a talented quant at Dhandho Funds.


Note, anyone who invests in any strategy needs to do their own research/due diligence and are themselves fully responsible for the outcome.

Appendix: Shameless Cloning Portfolio Rules

Selection Criteria:

  1. No utilities, no REITs, no oil and gas exploration, no metals and mining and no multiline retailers.
  2. Positive trailing-12-month net income

Rebalance Methodology:

  • Rebalance on Dec 31st of each year.
  • The old companies that are not in the new portfolio are sold. The “sell money” is accumulated and distributed equally among all new entrants.
  • If the same company is present in our portfolio for another year, then we leave it unchanged i.e. no rebalancing trades.
  • Dividends are reinvested into the same company that paid it.
  • If there is an involuntary removal through acquisition/delisting/bankruptcy then the cash is distributed equally among the remaining cloners.
  • If there are any spin-offs, the shares are sold and reinvested in the parent.​

Tobias Carlisle: What To Do When The Market Punches You In The Mouth

Johnny HopkinsTobias Carlisle Comments

One of my favorite investors is Tobias Carlisle, who is of course our esteemed leader here at The Acquirer’s Multiple.

One of the best article ever written by him was one he wrote for Forbes called, What To Do When The Market Punches You In The Mouth. I thought today would be a good day to revisit this timeless piece.

“Everybody has a plan until they get punched in the mouth.” That’s Mike Tyson, the once-and-forever baddest man on the planet, and former boxing champion, explaining in his own words that the best laid plans of mice and men go often askew.

Well, you’ve just been hit in the mouth. The S&P 500 is down more than 8% this year and down more than 11% since it topped out on May 20 last year. That makes it officially a correction. What’s your plan?

Let’s get one thing straight: Nobody saw this coming. In the post mortem, it’ll be attributed to oil or China or North Korea but the real reason is that stock markets, like many things in the natural world, occasionally collapse. Take, for example, the 1987 stock market crash. The popular explanation for that decline is “program trading,” the computer-driven sale of futures to hedge declining stock portfolios, which was said to have created a self-reinforcing cascade of selling: The selling itself forced further selling. In the aftermath, John J. Phelan, then-chairman of the New York Stock Exchange, told The Wall Street Journal that “at least five factors” contributed to the collapse (via Above the Market):

[T]he fact that the market had gone five years without a large correction; inflation fears, whether justified or not; rising interest rates; the conflict with Iran; and the volatility caused by “derivative instruments” such as stock-index options and futures.”

The Wall Street Journal further noted that Phelan “declined to blame the decline on program trading alone.” Was Phelan wrong, or is the popular explanation wrong?

Here’s Robert Seawright, who writes about investors’ behavioral foibles on his Above the Market blog, explaining that Phelan’s explanation, while counterintuitive, “is wholly consistent with catastrophes of various sorts in the natural world and in society”:

Wildfires, fragile power grids, mismanaged telecommunication systems, global terrorist movements, migrating viruses, volatile markets and the weather are all self-organizing, complex systems that evolve to states of criticality. Upon reaching a critical state, these systems then become subject to cascades, rapid down-turns in complexity from which they may recover but which will be experienced again repeatedly.

Seawright likens such things to a sandpile:

Scientists began examining sandpiles and discovered that each tiny grain of sand added to the pile increased the overall risk of avalanche but which grain of sand would make the difference and when the big avalanches would occur remained unknown and unknowable.

The timing and causes of big avalanches in the stock market are similarly unknown and unknowable. If Phelan was right, it seems we can’t even predict stock market crashes after they occur.

There is research that shows the market becomes more likely to crash when it becomes overvalued. Nobel Laureate James Tobin’s ratio is one such measure of valuation. The ratio compares the market value and replacement value of the same assets in the stock market. Logically, there should be a relationship between the market and replacement values of the same assets and they should trade at approximately the same ratio (for reasons beyond the scope of this post, the relationship isn’t 1:1 but it should be roughly constant). Investor Mark Spitznagel says that when the q ratio gets too high–the market is expensive and overvalued–and large losses become much more likely:

[W]hen Q is high, large stock market losses are no longer a tail event but become an expected event.

In other words, the higher the sandpile, the more likely a crash. How high is the sandpile now? According to the most recent update published January 4 on Doug Short, who tracks the ratio, it currently stands 55% above its long-term average and close to its historic highs:

Here’s the problem with using valuation to predict big declines: The market has rallied about 45% since Spitznagel published his paper in May 2012. In fact, the market has been overvalued for most of the last 25 years, only dropping under fair value for a brief period in late 2008 and early 2009. While there were two huge crashes over those 25 years–the “dot com” bust from 2000 to 2002 and the 2007 to 2009 “credit crisis”–and a couple of smaller ones in 1998 and 2011, the market is up over 400% since first crossing into overvalued territory. The sandpile might grow increasingly shaky and an avalanche become increasingly likely but it can get a lot higher before that last tiny grain of sand finally makes a difference.

It is for precisely this reason that Warren Buffett advises value investors to ignore the level of the overall stock market and focus instead on individual stocks:

At Berkshire we focus almost exclusively on the valuations of individual companies, looking only to a very limited extent at the valuation of the overall market. Even then, valuing the market has nothing to do with where it’s going to go next week or next month or next year, a line of thought we never get into. The fact is that markets behave in ways, sometimes for a very long stretch, that are not linked to value. Sooner or later, though, value counts.

Value investors take an ad hoc approach to portfolio management, only holding cash to the extent that they can’t find undervalued stocks. If you’re value investor, it doesn’t make sense to sell undervalued stocks in anticipation of a stock market sell-off. That’s usually the best time to buy stocks. Buffett counsels that you should not be in the stock market unless you can “watch your stock holding decline by 50% without becoming panic-stricken.” If you are unwilling to endure a 50% crash and you still want to own stocks, there is another way.

You can read the original article at Forbes here.

John Rogers: In Investing, Brains Are More Reliable Than Machines. Here’s Why

Johnny HopkinsJohn Rogers Comments

Just read a great article by John Rogers from Ariel Appreciation, who illustrates why brains are more reliable that machines in the world of investing. It reminded me of an article by Scientific American which says, “Computers are good at storage and speed, but brains maintain the efficiency lead”. The article went on to say:

For decades computer scientists have strived to build machines that can calculate faster than the human brain and store more information. The contraptions have won. The world’s most powerful supercomputer, the K from Fujitsu, computes four times faster and holds 10 times as much data. And of course, many more bits are coursing through the Internet at any moment. Yet the Internet’s servers worldwide would fill a small city, and the K sucks up enough electricity to power 10,000 homes.

The incredibly efficient brain consumes less juice than a dim lightbulb and fits nicely inside our head. Biology does a lot with a little: the human genome, which grows our body and directs us through years of complex life, requires less data than a laptop operating system. Even a cat’s brain smokes the newest iPad—1,000 times more data storage and a million times quicker to act on it.

Here’s an excerpt from the article by John Rogers:

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Warren Buffett: Berkshire Hathaway Has An Unprecedented $100 Billion In Cash, Here’s Why

Johnny HopkinsWarren Buffett Comments

Great article by Jeff Nielson at that highlights Buffett’s equity portfolio is valued at $135 billion. With $100 billion in cash, that means more than a 40% cash component, an unprecedented mountain of cash in the history of Berkshire Hathaway. The question is why?

Here’s an excerpt from that article:

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Howard Marks: 7 Principles For Identifying Investment Opportunites

Johnny HopkinsHoward Marks Comments

Howard Marks is a modern day Superinvestor like Seth Klarman and Mohnish Pabrai. His memos provide investors with a great deal of insight on investing strategy.

One of our favorites memos was an Addendum he added to his third quarter client letter in 1994 in which he provides seven principles for identifying investment opportunities. It’s a must read for all investors.

Here’s an excerpt from that addendum:

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(Month 8) TAM Deep Value Stock Portfolio Up 13.77% – Global Sources Ltd up 158%

Johnny HopkinsTAM Deep Value Stock Portfolio Comments

Today is the end of Month Eight of The Acquirer’s Multiple – Deep Value Stock Portfolio, and the portfolio is up 13.77%, leading the comparative Russell 3000 Index by 2.44%, since inception.

The plan is to build my portfolio over the next twelve months and ongoing. After twelve months I’ll have thirty stocks equally weighted in the portfolio, then I’ll re-balance each position after one year and one day to minimize tax.

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