buffett hesitated for a second, then snorted dismissively: “none of them!”
I quickly lost interest in buffett. I don’t care how much money you’ve made. Mark Hulbert’s work since the 1980s clearly shows that there are inefficiencies in financial markets. and some investment cards systematically benefit from them.
ironically, this is in fact more or less what buffett himself has always argued. In fact, there are even several cards that focus on the technique itself, fundamental analysis (assets, earnings, leverage), which Buffett has taken from, for example, Charles Allmon’s growth stock perspective. (see column of April 30, 2009).
moral: not only financial markets, but also intellectual markets are inefficient.
I don’t know what buffett and charles mizrahi, editor of a relatively new letter, hidden values alert, are doing with each other. but mizrahi is explicitly, even slavishly devoted to the buffett, to the point of heading each monthly issue with an apercu from the sage of omaha (and laguna beach, i learn from his wikipedia profile. hmmm.)
It’s quite interesting, actually. and it seems to be working.
Over the past 12 months, hidden values have risen 80.38% according to Hulbert’s Financial Summary count, compared to a 34.93% gain for the Wilshire 5000 Total Stock Index reinvested in dividends.
over the last three years, all the data that I have data from, the print lost some ground, negative 1.7% annualized. But that’s far less than the negative 6.93% annualized total return for the Wilshire 5000. And surprising for a service that avoids market timing, remaining fully invested at all times.
In the most recent issue of Hidden Values Alert, for example, Mizrahi writes, with his usual commendable clarity, about “the three attributes warren buffett always looks for” in business management.
are (1) “Are managers rational?” (2) “Are they honest with shareholders?” (3) “Do they resist the ‘institutional imperative’? managers lemmings or leaders?” (does that mean they recently bought mortgage-backed securities before the 2008 crash?)
which may sound subjective. But in Mizrahi’s narrative it seems to come down to numbers, above all, return of equity.
For example, in analyzing the buffet concept of a company’s economic “moat” provided by technical competitive advantage, Mizrahi wrote: “In addition to following industry trends and corporate developments, I have found that Looking at a company’s return on equity (ROE) and net profit margins (NPM) several times a year will tell you the size of the moat. Is it increasing or decreasing?”
“Wall Street doesn’t spend a lot of time looking at the competitive landscape or discussing a company’s economic prospects in a given industry. Instead, it seems to focus on quarterly numbers, which to me is just noise. “Every business will hit a bump and fall into a ditch from time to time. Knowing that the companies you buy have the upper hand, over time, will make a difference in the world in terms of returns on your investment,” mizrahi wrote.
“Investing in businesses with a lasting competitive advantage is one of the cornerstones of successful value investing.”
on the most recent number of hidden value alerts. Mizrahi suggested two stocks for new investors: National Instruments Corp. nati, +3.37% (under $32.00) and iconix brand group inc. icon, (under $12.25).