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Archive for the ‘Contrarian investment’ Category

Why Does an Equal-Weighted Portfolio Outperform Market Capitalization- and Price-Weighted Portfolios?

Posted in About, Behavioral economics, Contrarian investment, Stocks, tagged , on May 17, 2012 | 1 Comment »

Yesterday I took a look at the different ways of structuring an index suggested by Joel Greenblatt. Greenblatt finds that an equal-weight portfolio far outperforms a market capitalization weight portfolio. And for good reason. Greenblatt says that market cap weighted indexes suffer from a systematic flaw – they increase the amount they own of a particular [...]

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Value investing works, so why do value investors underperform? The evidence for contrarian value investors

Posted in Contrarian investment, Stocks, Strategy, tagged , , on April 25, 2012 | 8 Comments »

Yesterday, I examined Aswath Damodaran’s paper ”Value Investing: Investing for Grown Ups?” in which Damodaran asked, “If value investing works, why do value investors underperform?” Damodaran divides the value world into three groups: “The Passive Screeners,” – “The Graham approach to value investing is a screening approach, where investors adhere to strict screens… and pick stocks that pass those [...]

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Michael Mauboussin on WealthTrack

Posted in About, Behavioral economics, Contrarian investment, Value Investment, tagged , , on June 28, 2011 | 3 Comments »

Michael Mauboussin appeared Friday on Consuelo Mack’s WealthTrack to discuss several of the ideas in his excellent book, Think Twice. Particularly compelling is his story about Triple Crown prospect Big Brown and the advantage of the “outside view” – the statistical one – over the “inside view” – the specific, anecdotal one (excerpted from the book): June 7, 2008 was a [...]

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Abnormal Returns on the equity risk premium

Posted in About, Contrarian investment, Stocks, Value Investment, tagged on August 11, 2010 | 1 Comment »

Abnormal Returns has a great post, Blind Men And The Equity Risk Premium, with links to various estimates of the equity risk premium. Tadas says the equity risk premium is sensitive to recent performance, and mean reverting: A recent post at Systematic Relative Strength shows just how different the equity market can look given recent history.  They [...]

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Wilbur Ross on Charlie Rose

Posted in About, Activist Investors, Contrarian investment, Liquidation, Liquidation Value, Net Current Asset Value, Stocks, tagged on August 4, 2010 | 5 Comments »

Charlie Rose has a fantastic interview with Wilbur Ross, who played Willy Tanner (the dad) on Alf before becoming an investor in distressed businesses, most notably in the coal, steel and auto parts industries. This profile describes Ross’s start thus: In 2001, when LTV, a bankrupt steel company based in Cleveland, decided to liquidate, Ross [...]

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Niederhoffering the system

Posted in About, Contrarian investment, Stocks, tagged on June 23, 2010 | Leave a Comment »

Slate has a superb interview with Victor Niederhoffer, who I think is one of the most interesting people in finance (or elsewhere, for that matter). A friend gave me his book The Education of a Speculator when I was about 19. It’s a wonderful window into an eclectic, humble intellect, and a great read. Slate introduces [...]

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ROIC and reversion to the mean: Part 3

Posted in About, Behavioral economics, Contrarian investment, Net Current Asset Value, Net Quick Stocks, Net Quick Value, Stocks, Value Investment, tagged , on April 27, 2010 | Leave a Comment »

Recently I’ve been discussing Michael Mauboussin’s December 2007 Mauboussin on Strategy, “Death, Taxes, and Reversion to the Mean; ROIC Patterns: Luck, Persistence, and What to Do About It,” (.pdf) about Mauboussin’s research on the tendency of return on invested capital (ROIC) to revert to the mean (See Part 1 and Part 2). Mauboussin’s report has significant [...]

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AAPL: Trade of the decade?

Posted in About, Contrarian investment, Stocks, Value Investment, tagged on April 20, 2010 | 1 Comment »

On October 25, 2001, Apple Inc. (Public, NASDAQ:AAPL) traded at a (split-adjusted) $9.15 per share. Fast-forward to yesterday’s close, and AAPL is a $247.01 stock. For those keeping score at home, that’s a lazy 2,600% in 8 1/2 years, or around 47% p.a. compound. And with a starting market capitalization of $5B, anyone could have [...]

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Uncommon lessons from Phil Fisher

Posted in About, Behavioral economics, Contrarian investment, Stocks, Value Investment, tagged , , on March 18, 2010 | 10 Comments »

In the Introduction to my 2003 copy of Philip A. Fisher’s Common Stocks and Uncommon Profits and Other Writings, his son, Kenneth L. Fisher, recounts a story about his father that has stuck with me since I first read it. For me, it speaks to Phil Fisher’s eclectic genius, and quirky sense of humor: But one [...]

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5 contrarian candidates for mean reversion

Posted in About, Contrarian investment, Stocks, Value Investment, tagged , on March 9, 2010 | Leave a Comment »

Mean reversion is a favorite investment topic here on Greenbackd (see, for example, my posts on Mean reversion in earnings, Contrarian value investment and Lakonishok, Shleifer, and Vishny’s Contrarian Investment, Extrapolation, and Risk). The premise of contrarianism is mean reversion, which is the idea that stocks that have performed poorly in the past will perform better [...]

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