An Improved MFO Portfolio Analysis Tool

By Charles Boccadoro

We introduced our Portfolio Analysis tool to MFO Premium subscribers in September last year, which sadly seems like decades ago. The intro piece, appropriately titled “Introducing MFO’s Portfolio Analysis Tool,” was in response to David’s May 2017 article “Time to put on your big-boy pants and check your investments.” In it he demonstrated a simple method to answer the “how bad could it get?” question. Based on the current funds held in your portfolio, how much pain (aka drawdown, aka Ulcer Index) might you experience in the next downturn?

The Portfolio Analysis tool does this Continue reading →

Preparing for a new world

By David Snowball

The scariest line of the election season appeared on the front page of The Wall Street Journal:

The U.S. stock boom has its roots in tactics that fund managers, small savers and Robinhood traders alike have applied over the past decade:  Don’t hide from markets by hoarding cash.

The Dow Jones Industrial Average closed above 30000 on Tuesday for the first time, extending an eight-month rebound that has taken many analysts by surprise … The run has put the Dow up 62% from its March low, when the U.S. Federal Reserve ended a panic that wiped out trillions of dollars in investments by outlining a plan to counter the pandemic’s economic stress.

The market appears to be in a self-perpetuating upward spiral, defying the pandemic and accompanying economic woes. (“Behind Dow 30000: A Self-Perpetuating Upward Spiral,” Wall Street Journal, 11/25/2020, pg 1).

That sounds only Continue reading →

Holiday Reading List

By Edward A. Studzinski

“Imagine the Creator as a low comedian, and at once the world becomes explicable.”

        H.L. Mencken

We have come into December with November having been one of the best performing stock market months ever. S&P 500 Index products have generated a total return of approximately 14%. Active-managed funds have had returns all over the lot, with value-oriented funds having crept into the positive return range, generally single digit, as a result of strong monthly performance. Growth funds, depending on Continue reading →

Enough…in the Coming Lost Decade

By Charles Lynn Bolin

How much is “enough” to retire when there are likely to be multiple decades of low returns due to high starting valuations with low yields and dividends?

  • Section 1 of this article summarizes the investment philosophies of John Bogle, Warren Buffett, Ed Easterling, Charles Ellis, Benjamin Graham, and Howard Marks.
  • Section 2 looks at the benefits of combining actively and passively managed funds to reduce risk.
  • Section 3 shows the impact of high valuations and inflation for over 120 years.
  • Section 4 covers stock and bond performance during secular bear markets with rising inflation and interest rates.
  • Section 5 looks at nearly two dozen lower risk funds for investors seeking “all-weather” funds or safer yield.
  • Section 6 provides estimates of “enough” for retirement in the coming decades.

Readers can skip to Continue reading →

Rondure Overseas Fund (ROSOX/ROSIX), December 2020

By David Snowball

Objective and strategy

Rondure Overseas invests, primarily, in the stocks of corporations located in developed markets outside of the US. The managers pursue a benchmark-agnostic, active style that allows them to invest in stocks of any size. In general, they aspire to invest in great companies at good prices. They have the freedom to invest in good companies at great prices, but the wisdom to play that game rarely.

The quantitative markers of being a great company include strong balance sheets, stable free cash flows, and high returns on capital. The qualitative markers are “compelling competitive advantages,” which might include elements of the business niche and strong, responsible leadership.

The portfolio currently holds Continue reading →

Funds in Registration

By David Snowball

The Securities and Exchange Commission, by law, gets between 60 and 75 days to review proposed new funds before they can be offered for sale to the public. Fund companies anxious to have a new fund up and running by December 31st need to have it in the hopper by the third week in October at the latest. And, my goodness, a lot of folks did find time to file with 50 new funds and active ETFs listed in our November issue.

This month brings a far more sedate pace of launches with 19 new products in the pipeline. They continue the trends we identified last month: socially-responsible funds, funds with options strategies, and dumb ideas.

The most notable change is the shift from a passive approach in ESG investing toward an active or “impact” approach. Historically, most socially-responsible funds had a “first, do no harm” mandate: avoid tobacco, weapons, alcohol, porn, or whatever. Impact investors seek out the opportunity to actively advance good: allocate capital to firms seeking to address the global climate crisis, to advance social equity, or Continue reading →

Manager Changes

By Chip

Fund managers matter, sometimes more than others. As more teams adopt the mantra, “we’re a team,” if only as window-dressing, more than more manager changes are reduced to “one cog out, one cog in.” Nonetheless, we know that losing funds with new managers tend to outperform losing funds that hold onto their teams, while the opposite is true for winning funds. Strong funds with stable teams and stable assets outperform strong funds facing instability (Bessler, et al, 2010). Because of the great volatility of their asset class, equity managers matter rather more than fixed-income investors.

November was a relatively quiet month with 48 funds seeing partial or complete manager changes. By far, the highest visibility changes come to Parnassus Endeavor (PFPWX), where Jerome Dodson, the firm’s founder, has decided that full of years and honors, it’s time to step aside. The fund’s long-term returns pretty much crush Continue reading →

Briefly Noted

By David Snowball

Updates

Guinness Atkinson’s groundbreaking OEF-to-ETF conversion is surging ahead. In early summer, GA filed a plan to convert two of their current funds – the four-star Dividend Builder GAINX and Alternative Energy GAAEX – directly into ETFs. Other firms have launched ETF clones of their funds, and a bunch of strategies that would normally have been launched as funds have instead followed the non-transparent, active ETF route. Guinness was the only firm bold enough to try a switchover mid-flight.

The conversions were slowed by “a thousand thoughtful questions and comments” from the SEC, according to president Jim Atkinson. In the latest round of comments, the agency has asked GA to begin incorporating concrete Continue reading →

November 1, 2020

By David Snowball

And now we wait.

I’m writing this less than 48 hours before the end of the most divisive and likely most consequential presidential election in a hundred or a hundred and fifty years. (It depends on your view of the sea change enacted in 1932 or the tumult of 1860.) I am exceptionally distracted by the unfolding events.

In general, I have faith that things will work out okay. People are, on the whole, sensible when not terrified. And, while many of our fellow citizens are terrified – in part because conditions in many parts of the country are unremittingly hard and, in part, because political parties have learned that it’s in their best interests to enflame our worst fears – we have an okay track record of tempering our fears with Continue reading →

The End of Many Eras

By Edward A. Studzinski

“A genius is the man who can do the average thing when everyone else around him is losing his mind.”

            Napoleon Bonaparte

For those who missed my comments last month, there were not any. I felt I had nothing new to say. And while the same may be true this month, I thought I would give it a shot.

The other day I was joking with Continue reading →