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Relative Valuation Update - US vs EM, Europe, and Foreign Developed

by: Lawrence Hamtil  on Wednesday, June 13, 2018

Last fall, I detailed the correct way to frame relative valuations when comparing aggregated stock indices such as the MSCI USA Index and the MSCI ACWI ex-USA Index.  That post is very detailed, covering even the crucial currency aspect of relative performance between two foreign equity markets, and so it is worth reading in its entirety if you have not done so previously.   Read More

Not Even Buffett Can Escape Reversion to the Mean

by: Lawrence Hamtil  on Thursday, June 07, 2018

Warren Buffett's performance as an investor has been extraordinary, and there is no doubt his savvy and skill are unmatched.  One need only look at the wealth he has created for his shareholders to see this; from 1965 through May of this year, $1 invested in Warren Buffett's Berkshire Hathaway would be worth an astounding $14,975, while investors in the S&P 500 over the same period would have seen their $1 grow "only" to $144: Read More

Your Focus Should Be On Risk, Not Reward

by: Lawrence Hamtil  on Monday, May 28, 2018

A common theme of this blog has been that the assumption of more risk does not go hand-in-hand with the reaping of greater rewards.  In fact, if anything, the opposite has been true historically, both in equity markets and in fixed income.  Experience has shown again and again that, for example, higher returns have emanated from lower-volatility stocks, and higher quality bonds have tended to outperform those of lower credit quality.  In both instances, - whether risk is defined by volatility (yes, volatility can be a risk), drawdowns, or total loss, - the more conservative option has generally performed better. Read More

Price Is What You Pay; Value Is What You Get - Nifty Fifty Edition

by: Lawrence Hamtil  on Thursday, May 24, 2018

Every investor is aware of Warren Buffet's famous dictum that, "Price is what you pay; value is what you get."  That of course applies to the valuation an investor is willing to pay for a given company's stock, and the subsequent returns he receives for doing so.  In today's environment, in which commentary focuses on the lofty multiples that characterize much of the U.S. stock market, particularly on some very popular names like Facebook, Amazon, and Netflix, I thought it would be interesting to revisit the "Nifty Fifty" era of the early 1970s, when the Amazons and Facebooks of the day were what became today's boring blue chips:  McDonald's, Merck, Procter & Gamble, and so forth. Read More

2018: A Tale of Two Sectors and the Opportunity for Contrarians

by: Lawrence Hamtil  on Tuesday, May 22, 2018

The S&P 500 has so far registered a positive total return in 2018, though it is a slight one.  A good deal of the market's anemic return can be explained by what has become a somewhat bifurcated market, with technology shares being the best performing sector year-to-date, and consumer staples being the worst performing sector.  In fact, the total return spread, - as measured by their sector ETFs - XLK for tech, and XLP for consumer staples, - has surpassed 2,000 basis points, with XLK returning almost 9% through May 21st, versus a decline approaching 13% for XLP. Read More

Uranium, Lottery Stocks, and the Transience of Wealth

by: Lawrence Hamtil  on Tuesday, May 15, 2018

The commodity boom that took place at the turn of the century was spectacular by any measure.  As prices soared for every raw material from coal and oil, to fertilizer and gold, the industries that produced them became the hottest areas of the global stock market.  For shareholders of these resource companies, fortunes were made in short periods of time, and theories abounded as to why these stellar returns were merely a precursor of what was to come in a world where the forces of seemingly scarce supply and insatiable demand would work themselves out in favor of ever higher commodity prices. Read More

Revisiting the Case For An Equal-Weighted EM Strategy

by: Lawrence Hamtil  on Wednesday, May 09, 2018

Several years ago, I discussed the benefits of crafting an emerging markets investment portfolio predicated on weighting equally each of the constituent countries.  Among the benefits of such a strategy, I argued, would not just be superior returns, but also lower volatility, and shorter, if not shallower, drawdowns.   Read More

Why You Should go Heavy at the March for the Fallen

by: Lawrence Hamtil  on Friday, May 04, 2018

Last September, I was privileged to participate in the March for the Fallen, which is an annual event put on by the Pennsylvania National Guard.  My good friend, Wes Gray, of Alpha Architect has taken on the task of annually organizing a large group of finance professionals to participate in the event, which is a grueling 28-mile trek over rugged terrain.  You can read more about Wes's team and the event over on Wes's site, found hereRead More

The Enduring Appeal of Tobacco Stocks

by: Lawrence Hamtil  on Tuesday, April 24, 2018

Tobacco stocks currently find themselves in a steep drawdown, with industry titans Altria Group and Philip Morris International currently down about 30% and 34%, respectively, from their all-time highs.  A rise in bond yields, - which lessens the appeal of tobacco stocks' hefty dividend yields, - increased regulatory concerns, and disappointing financial performance have combined to push the stocks to their worst performance in more than a decade: Read More