Posts Categorized: Finance

Tiny Margins for Tiny Companies

The U.S. market’s profit margin remains very high, but smaller stocks are suffering. While margins for the largest companies have remained well above their long-term averages, margins for the 40% of stocks in the market with smaller market caps have current margins well below their long-term average. This divergence highlights a broader key point: small caps provide…

Is Being Different Better? Dispersion and Active Management

Beating the market very obviously requires performance that is different than the market, which in turn requires portfolio holdings that are themselves different from the market. “Active Share”–or the percent of your portfolio which does not overlap with your relevant market benchmark (say, the S&P 500 or the Russell 2000)–has become a buzz word in…

Backwards Biking and Thinking Differently

We know that our brains create heuristics—rules of thumb—which act as energy savers. Heuristics are our brains’ attempt to automate certain processes so that they can happen beneath our conscious awareness. Heuristics are a collection of behavioral algorithms in our brain. They are, for the most part, great. They help us efficiently navigate the world. But…

Seeing the Future from the Past

Imagine an investor equipped with a crystal ball in 1963—we will call her Cassandra. She would have looked forward five decades and seen some bizarre outcomes. She’d have seen that the best performing stocks would be mundane, boring food & beverage companies, cigarette makers, and insurers. The worst performing (and most volatile) would be stocks…

Welcome to The Investor’s Field Guide

The stock market is a jungle. It is an ecosystem that is unpredictable, dangerous, fascinating, rewarding (to some), and full of life. To navigate it successfully, you need a guide. To write this guide, we are going to take a one year journey through the stock market jungle. If you are interesting in beating the…

Lessons for Investors and Entrepreneurs: The Nature of Value

It is always fun to read a book that is useful for investors and entrepreneurs/businesspeople. Nick Gogerty’s The Nature of Value covers a lot of ground—below I quote and highlight some of the most useful lessons and idea from the book. I also met Nick last week, and it helps that he is a very…

How Expensive Are Expensive Tech Stocks?

The answer: not much more expensive than OTHER expensive stocks in the market. Granted, this is all based on publicly traded companies, not privately funded start-ups. If I had a thorough history against which to compare current fintech or other start-up valuations this might look quite different.  But here is the story. This chart shows the…

Art And Fear And Investing

“I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will…

Does Value Still Work?

Everyone knows about value investing now, and everyone is tilting towards value, so its going to stop working. Everyone is saying this to me lately–sometimes as a question, sometimes as a statement of fact.  Yogi Berra famously said, “no one goes to that restaurant anymore, its too popular.” Is the same thing happening to value? The…

What Millennials Want (Or, How You Can Win Their Business)

Millennials are still in the very early stages of market participation: those under 35 own just 4% of mutual fund assets, but the 80-90 million millennials will soar in importance to everyone in the wealth/asset management business before too long. Through inheritance alone, millennials stand to receive $30 trillion in the next few decades. Where…