Posts Categorized: Finance

“Do What You Love”

My wife and I had a scare with our four month old son yesterday. Following a routine checkup, we had to see an especially dreaded kind of “specialist” about something.  Everything turned out fine and normal, but it was our first experience as parents feeling abject terror—a feeling of deep, gut-wrenching love and emotion. It’s…

For Great Returns, Follow the Cash

Earnings get all the attention on Wall Street. While earnings are of course important (and measures like P/E are very useful in stock selection), they aren’t everything.  Less discussed, but equally important, is the cash that is flowing into and out of a company. Hidden in the statement of cash flows is an extremely useful…

Two Ways To Improve The Momentum Strategy

Momentum investing worked very well in 2013, but it’s been awful in 2014. The momentum reversal has been one of the major headlines in an otherwise flat and quiet market year because the high-flying stocks from 2013, especially popular tech names like Tesla, have been crushed in recent months. Momentum investing works great over the…

Clash of the Financial Pundits Reviewed

Punditry is all about concise sound bites, so before diving into a full review, my one sentence review of Josh Brown and Jeff Macke’s new book Clash of the Financial Pundits is “a spoonful of sugar helps the medicine go down.” This is a book that sneaks great investing advice and wisdom into your brain…

Talk Is Cheap: Why CEOs’ Actions Speak Louder Than Their Words

When you think of any famous CEO, you probably think of the great products or services that they’ve championed. CEOs that build great businesses become very famous, and justifiably so. But building a business that generates tons of cash flow is just step one. The less interesting—but equally crucial—job of any CEO is allocating their…

Portfolio Patriotism, and Why You Should Avoid It

The U.S. equity market is expensive.  The median stock is about as pricey as it’s been in 50 years, and valuations are all clustered: there are far fewer bargains than in years past. I am not an index investor, so I generally pay less attention to market-level valuation measures like the Shiller P/E or Tobin’s…

Reading List – May 2014

I’ve started a monthly reading list to share the best books that I’ve ever read. For the first few months I will also post the lists here to give you a sense for what they look like. If you’d like to receive these monthly recommendations, sign up for the reading list here. Also, if you have any…

Beware Experts Bearing Predictions

You should ignore experts making predictions, you should avoid making predictions of your own, and you should definitely avoid any investment decision that is predicated on a subjective prediction. Predictions are everywhere in investing (price targets, GDP forecasts, S&P 500 earnings, EPS estimates, and so on), but they are usually worthless.   Our brains evolved…

The Death of Money Portfolio

I finished James Rickards’s latest book Death of Money this weekend, which I found provocative, informative, and scary, but ultimately lacking in terms of investment advice.  Rickards knows his stuff, and I recommend the book for all the great information it contains and because it will get you thinking. I plead ignorance on most of…

Popular Stocks Stink

Why does value investing work?  One of the reasons is that value factors like price-to-cash flow or price-to-earnings identify companies with very low market expectations. They tend to be boring companies, have negative news, poor outlooks, and so on. Value works because the market leaves these stocks too cheap, and when perception is ultimately adjusted…