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The Case for Health Care Stocks

by: Lawrence Hamtil  on Monday, October 16, 2017

Tadas Viskanta over at Abnormal Returns has an interesting symposium today on the topic of what investments might be better investments over the next decade than the S&P 500.  The suggestions made by his featured guests are varied and creative, and they are worth checking out.  However, I would like to add a suggestion or two of my own. Read More

Testing the Small Company Premium at the Sector Level

by: Lawrence Hamtil  on Monday, October 09, 2017

In a previous articled titled, "Learning the Wrong Lessons," I discussed how the small company premium is a real enough phenomenon, but that for it to be realized by investors, portfolios must be sufficiently diversified in order to reduce the extreme risk inherent in small companies.  However, most studies on this subject have examined portfolios of large and small companies only on the basis of random selection, which does not tell us much other than that individual large companies tend to mirror the capitalization-weighted market more closely and with substantially less risk than individual small companies. Read More

A Few Myths Regarding the Dollar and Domestic Stocks

by: Lawrence Hamtil  on Thursday, October 05, 2017

Whenever there is a major move in the value of the dollar, you will likely hear talking heads recommend one adjustment or another to your portfolio, whether it is to compensate for, or take advantage of, the opportunity presented.  For example, because a far greater percentage of revenues are earned overseas by large cap companies, you will likely hear that a tilt toward large caps is warranted when the dollar weakens.  Conversely, when the dollar is strengthening, you will probably hear a recommendation to tilt toward more domestically-oriented small cap stocks.  However, when performing a thorough analysis of past dollar cycles, it is not clear that moves in the dollar really warrant major repositioning within the domestic portion of a portfolio. Read More

Does Equal-Weighting Lead to More Consistent Returns?

by: Lawrence Hamtil  on Tuesday, October 03, 2017

In a previous post, I discussed how equal-weighting the positions in an equity portfolio historically has yielded greater returns than portfolios composed by market capitalization.  Among the reasons for this, I noted, were the benefits of implicit rebalancing, a tilt toward value, and a greater exposure to what is called the "small company premium," which, simply put, is exposure to the excess returns historically generated by smaller firms.   Read More

Learning the Wrong Lessons

by: Lawrence Hamtil  on Tuesday, September 26, 2017

A recent study by Professor Hendrik Bessembinder found that over very long periods of time, most individual stocks underperform the benchmark, while a minority of stocks are responsible for the bulk of equity market gains.  While the results of this study have been lauded as revelatory in the financial media, they really should not be; after all, most new enterprises fail, so it should not be all too surprising that most small companies (which constitute by far the majority of underperforming stocks) should fail, too. Read More

Lessons From the March

by: Lawrence Hamtil  on Monday, September 18, 2017

This past weekend, I was privileged to be able to participate with other Alpha Architect team members in the Pennsylvania National Guard's annual March for the Fallen event.  The course was 28 miles of steep inclines, treacherous footing on broken rocks, and one very precipitous descent, which, strangely enough, was the most challenging portion of my experience.  I elected to "enhance" my experience by strapping an extra 35 pounds of gear to my back, which served to strain my endurance, tax my muscles, and generally test my willingness to see the event through.  Upon completion of the event (which for me took nine hours and nineteen minutes), my feelings were of satisfaction and relief in having completed the event, combined, strangely enough, with not just a little regret that it was all over.  Here are a few of my takeaways from the weekend and from the event itself. Read More

The Case For and Against Gold

by: Lawrence Hamtil  on Wednesday, September 13, 2017

After having fallen precipitously from its all-time high set in 2011, the price of gold has surged about 15% so far this year, a performance that has even surpassed the S&P 500's year-to-date gain.  Not surprisingly, along with the renewed strength in gold, there is renewed interest in owning it.  Yet despite all the blog posts and articles written on the subject of gold over the past decade and a half, it seems that few people understand exactly why gold behaves as it does.  In this post, I hope to shed some light on the matter in order for investors to have a better understanding of the risk and rewards involved with allocating significant capital to the precious metal. Read More

Long-Term Bonds & The Duration Risk in Your Portfolio

by: Lawrence Hamtil  on Wednesday, September 06, 2017

After a brief surge after last fall's election, long-term Treasury yields are again approaching all-time lows [the gap in the data is explained by a temporary halting of issuance in the mid 2000s]: Read More