Posts Categorized: Finance

Consumer Staples, Part II

 “We see change as the enemy of investments…so we look for the absence of change. We don’t like to lose money. Capitalism is pretty brutal. We look for mundane products that everybody needs.” Warren Buffett In Consumer Staples, Part I, I explored the unique nature of consumer staples stocks and their impressive historical returns. In…

What Drives the Market’s Return on Equity?

Earning a high return on equity is one of the primary reasons to do business. Managers of (and investors in) companies want to earn the highest return on their equity as possible, and sustain this high rate of return over as long a period as possible. Some sectors of the market, like consumer staples, have…

Investor Behavior: The Final Frontier

Jack Bogle and Vanguard have been incredibly good for the investing business. They’ve made equity markets more accessible to investors and have minimized the cost of investing to the point that it is almost free. As a result, the market share of index funds has risen from the low single digits in 1990 to nearly…

We Are All Factor Investors

Smart beta, indexing, Fama/French, margin of safety, Graham (deep) value, growth, momentum, GARP. Each of these terms represent very different styles of investing, but they all have one thing in common: they are all predicated on the fact that certain factors have, and will continue to, drive stock returns. ·         Smart Beta: fundamental-weighting, low volatility…

The Power of Share Repurchases

One of the most effective stock selection strategies in the U.S. over the past several decades has been to buy stocks that are in the midst of repurchasing significant quantities of their shares—but just blindly following buybacks isn’t always the best strategy. While many companies that are repurchasing large quantities of their shares make for…

The Best Performing Sector (Consumer Staples, Part 1)

When Jeremy Siegel and Jeremy Schwartz were doing research for the book The Future for Investors, they wanted to find the best performing stock from the original 1957 version of the S&P 500[i]. What they found wasn’t an exciting technology stock, or a behemoth oil company, but rather a simple consumer stock: cigarette maker Philip…

Overdiversification

Who doesn’t like to be diversified? It’s one of the easiest words to throw around when pitching an investment product or process because the word has an almost perfectly positive connotation. I am guilty of overusing the term because it’s just so easy to throw around. But diversification isn’t all peaches and cream. There is…

My Five Favorite Investing Books

I recently asked a number of my favorite writers to list their five favorite investing books. You can read the fantastic list that resulted here. For this month’s reading list, here are my five all-time favorites. 1.       What Works on Wall Street by James O’Shaughnessy—I am, of course, massively biased in this first selection but…

A (Very) Short History of Shareholder YIeld

I’m working on a longer piece on share repurchases (and shareholder yield) and found the two charts below very interesting.  Buybacks are an important part of the corporate toolkit here in the U.S.–since the late 1990’s, cash spent on gross buybacks has exceeded cash spent on dividend payments. This first chart shows the total dollar…