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The Big Secret?
Morgan Korn at Yahoo's Breakout reports, Superstar Managers Don’t Mean Superstar Returns: Renowned Investor:
Renowned investor Joel Greenblatt can't keep a secret.
The
founder of Gotham Capital, the hedge fund he started in 1985 that
produced 40 percent annualized returns under his 20-year tutelage,
wants you to be rich. Very rich. And it doesn't mean pouring your
hard-earned money into five-star rated funds or hiring talking head
money managers (they are plenty of them on cable business channels). In
Mr. Greenblatt's latest book, The Big Secret for the Small Investor, he decodes the secrets of Wall Street for the average investor and debunks the most common myths of investing.
What's
the biggest secret revealed? "Investing comes down to valuing
something and paying a big discount to that value," Greenblatt recently
told Breakout. In his book, Greenblatt gives plenty of examples
of how to determine a company's valuation with simplified numbers and
mathematical equations. He strips away the grandeur and lays bare the
basics of investing. Greenblatt says
investors should look for a basket of companies that appear
undervalued, because winning big in the stock market means "figuring
out what something is worth and paying a lot less." Of course,
determining a company's value and future earnings can be very
difficult, even for the most sophisticated and experienced money
managers, Greenblatt admits.
Another
secret Greenblatt divulges is that market-cap weighed indexes beat
most active managers —- and all successful managers go through periods
of underperformance. Therefore, investors should avoid chasing
managers based on prior performance stats -- as we know, past
performance does not guarantee future success. Historically
speaking, Greenblatt said 70 percent of active managers have
underperformed the market over the past 10 years and "odds are
investors are not going to find that superstar manager." Believe
it or not, retail investors and money managers really do compete on an
equal playing field, he adds. The market is "very emotional," and to
separate the emotion from the reward, Greenblatt recommends buying ETFs
—- specifically Value Index ETFs.
Follow Greenblatt's advice
and your portfolio could soon be well ahead of the markets and
outperforming even the most eminent managers. Warren Buffett and Ben
Graham made fortunes looking for value, and so can you.
You
can watch the interview below. Let me comment on Mr. Greenblatt's
advice. Fist, I agree with him but with a qualifier (see below). The
overwhelming majority of active managers underperform the market,
especially after fees, so small investors are better off buying Value
Index ETFs. In fact, some argue that large investors, like pension
funds, are better off investing in a Fundamental Index instead of the traditional cap weighted index.
Go back to read my conversations with AIMCo's Leo de Bever on when the music stops and with OTPP's Neil Petroff on active management.
Mr. de Bever discusses how he cut external manager fees considerably
and moved assets internally to control costs and Mr. Petroff discusses
the advantage that pension funds have over mutual funds which typically
churn their entire portfolio every 12 to 18 months. Importantly, pension
funds' longer time horizon allows them to be patient enough to ride out
any short-term volatility and realize huge gains if they invest at the
right time.
Now, let me share with you another secret, one that
Mr. Greenblatt doesn't discuss. There are elite asset managers who have
stellar long-term track records. I'm not just talking about some elite
hedge funds, like Citadel, but other top long-only managers like Dodge & Cox Funds.
I track the quarterly filings of roughly 50 top funds very closely,
paying close attention to which positions they're increasing
considerably, which positions they're cutting, and what are their new
holdings. For me, this is all information that I use when analyzing
markets.
I'm very careful not to read too much into quarterly
filings because some hedge funds churn their entire portfolio every
quarter, but that's why I also look at more long-term funds that look at
holding positions for a longer period. I like seeing a bunch of elite
funds buying the same stock at the same time, and then I put it on my
watch list, paying close attention to technical and fundamental trends.
In
my personal portfolio, I prefer taking concentrated bets on a few
stocks than investing in any ETF, but if I were to give advice to the
majority of small investors, I'd say stick with what Mr. Greenblatt is
recommending and invest in Value Index ETFs. Most Long/Short hedge
funds are long small cap value stocks and short large cap stocks. Most
of these hedge funds underperform the small cap value index over a long
period. So why pay 2 & 20 for mediocre results?
If you want
to know where the elite hedge funds and asset managers are investing in,
I am willing to share this information, but it's not going to be free.
And just knowing where they're investing isn't enough. You have to also
know whether they're manipulating certain stocks/sectors and how to beat
the high-frequency trading platforms which are wreaking havoc in these
markets. Knowing when to buy is crucial, especially for long-term
investors.
Finally, I wish you all a Happy Easter.
»
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few days ago you were insisting small investors haven't a clue and are "a disaster" ...now you're giving them advise?!!
What a crone you are Kockupalot, shedding your slippery skin when it suits you without an ethical investing second thought eh?
Credibility and integrity just ozzes from your every pore ...you can't remember what you wrote one day to the next with your cut (crib) and paste articles without tripping over your own banana skins and falling flat on your fat face ...take a hint Kock: fuk off
Zero Brains, stop being so jealous of me! It's time you focus on yourself. Hopefully, it's not too late!
Kock, you're a shambles, and a sham ...try some of your green investments you recommend ..i'm long CO2, stick that up your Canadian crony arse
"What's the big secret that renowned investor Joel Greenblatt wants to share with all small investors?"
How to seperate small investors from their money?
"What's the big secret that renowned investor Joel Greenblatt wants to share with all small investors?"
That the maximum truth of the market makers on Ponzi Street is just as true today as it was in 1933 or 2008 or today - the best way to make a small fortune speculating against the shysters of equity markets is to start with a very large fortune.
"What's the big secret that renowned investor Joel Greenblatt wants to share with all small investors?"
We will have to ask ourselves: "Do we really want to know?" . . .
. . .after reading the Greenblatt quote from the breakout link: "Recent Berkshire scandal has not tarnished my view of Buffet"
Greenblatt/Buffet. . . no Big Secret I guess.
LMAO
somewhat arrogant - bury the "sheople" with but a portion of his infinite wisdom while subscribing with our money for his brilliance.
He's so much smarter than the masses. Like us.
Pitiful.
dupe
The big secret: buy tulips.
Or be one of the first into the next ponzi
Past performance is no indication of future results. This also - even particularly - applies to the hedge fund manager "elite".
Leo K, peddling his worthless bullshit yet again.
As Leo claims he's involved in pension fund management (a giant Ponzi; just look at CALPERS), and as every problem looks like a nail to a carpenter, every problem looks like a hole that can be patched up with government printed fiat, to Leo.
Opa!
## 1985 that produced 40 percent annualized returns under his 20-year
I NEVER UNDERSTOOD WHY GUY MADE 40% ANNUALLY FOR 20 YEARS NEED TO WRITE BOOKS/ BE ON TV /ETC.. why ???????? he must be freakingly rich..
here's simple math
lets say he starts w/ 5 mln capital... 40% annually is roughly doubling money each 2 years.. so he made for him(and investors):
10, 20, 40, 80, 160, 320, 640, 1280, 2650, 3300 mln
so in the end he made overall 3.3 bln $$$, so lets assume he took personaly only 10% , so he's worth at least 330 mln.. if he's long term investor and not much turnover, so taxes are pretty small .. so he's worth at least quarter of billion..
so whats point of writing books & being on TV ? what if started w. 50 mln, and took 15% personally.. ???
SO SUMMING UP: JUNK JUNK JUNK.. HE DIDNT make 40% per annum, he's not rich,
he's just bullshitting you...
alx
yes, a hypster right underneath our noses.
"It's not going to be free" he wrote at the end. Classic pitch.
Nice try. No sucker here. Ha ha,
The cherry was the Happy Easter plug, to show he has a heart and is a real person, not so much an evil charlatan. Life is fun.
Skeptical - cynical - you bet I am, after reading that piece of artwork.
dupe
+CalPERSs shortfall
http://www.dailynews.com/news/ci_14825623
So pension funds should ditch all their portfolio managers and analysts, and simply move to being systems engineers' with respect to ETF portfolios?
Sounds good. Would cut a lot of the bribery, and the outlandish compensation that some pension funds seem to be plagued with. No reason for the OTPP heads to be earning more than $150k/year -- anything more is just ripping off the beneficiaries who are locked into such schemes for the usual lack of outperformance.
That's not what I said, read my OTPP comment carefully!!
But is there *any* evidence that the gold plated management of the OTPP adds any value, on a risk-adjusted basis, over a 25-year-old dude with a spreadsheet who diligently rebalances an broad based index ETF portfolio?
Why pay the managers of the OTPP (or the CDP) millions when there is no evidence that active management even works?
In a wide-ranging interview with Petroff, the CIO of Canada’s third-biggest retirement-fund manager claims: "If we were a passive fund, we'd be C$23.2 billion lower in value, with liabilities at the same level. That really speaks to the value of active management - you add value when you pay for active management."
Is he going to do anything but talk his book? You expect the CIO of a fund management firm to come out and admit that there's no value added? Why can these pension funds add value, while your typical mutual fund cannot? Are mutual fund managers, by definition, less intelligent or less skilled investors than men cut from the same cloth at pension funds?
Maybe Petroff's retirement fund got lucky by riding certain asset classes that have done better over the past decade, not because of skill or any intrinsically 'better' approach to investing, but rather, by luck.
Especially in Canada; a sure fire way to outperform the Canadian market over the past few decades has been to invest in the US and overseas (the S&P500 has beaten the TSX significantly in total return over the past 30 years!). But that has the effect of, for instance, putting Canadian pension funds significantly underweight in the mining and gold sectors compared to the TSX index composition, guaranteeing future underperformance if that sector starts to perform.