The Long (and Short) of It: Top-Tier Long-Short Options

By David Snowball

Writing in The Wall Street Journal, Simon Cable declared “‘Long-Short’ Funds Missed Their Moment” (8/9/2020, paywall). His argument: “The stock-market volatility in the first half of 2020 should have been a near-perfect period for ‘long-short’ mutual funds and exchange-traded funds to make a killing. Unfortunately, less than one in three such funds made money for investors during this tumultuous period.” His analysis was that the market’s moves were too quick for most investors to capitalize on them (even if they recognized the opportunity).

He notes that Neuberger Berman Long-Short (NLSIX) raked in the most cash and that the ProShares Long Online/Short Stores ETF had the top YTD performance.

“Most funds are mediocre” is not a terribly Continue reading →

Feet of Clay

By Edward A. Studzinski

“Advertising is the rattling of a stick inside a swill bucket.”

                    George Orwell, ch. 3, Keep the Aspidistra Flying (1936)

I recently had occasion to speak with a long-term value manager who was lamenting how badly value was out of favor and how much it was hurting his and his firm’s performance and investor returns. The genesis of that sub-par performance, which one finds repeated across many value-oriented firms, is a departure from being attuned to the intrinsic business value of the firms invested in, replaced by a laser-like focus by his firm’s analysts and portfolio managers on what stocks are going up because the market Continue reading →

A Thirty Year Proposition

By Charles Boccadoro

New Bull Emerges in a Market Riskier Than It Appears

The S&P 500 is once again at all-time highs.

Month ending July 2020 total return data indicated the S&P 500 index had recovered all of its March drawdown, officially marking the end of the CV-19 bear and declaring a new bull market, which began last April. Unlike bears, which are announced as soon as the market swoons 20% from previous peak, bulls are known only in retrospect … although granted definitions vary. Commonly, a bull needs to climb 20% off its last maximum drawndown and subsequently go on to achieve its next all-time high; basically, it needs to get back above water before becoming official. That happened in July.

The following table summarizes the US bear and bull markets dating back to the Great Depression, which updates the version Continue reading →

Matthews Asia: High Profile Shuffle, Limited Downside

By David Snowball

On August 24, 2020, Matthews Asia announced a long set of manager changes and one fund liquidation. While they appear in a single document, there are at least two distinct triggering events behind them.

Event One: The departure of managers Tiffany Hsiao and YuanYuan Ji. Ms. Hsiao managed Matthews China Small Companies (MCSMX, since 2015) and, with long-time lead manager Michael Oh, Matthews Asia Innovators (MATFX, since 2018). Ms. Ji was the second manager of China Small Companies. Their departure was, so far as I can tell, a surprise to all. There is no word on their reason for leaving or their Continue reading →

Alternative and Global Funds during a Global Recession

By Charles Lynn Bolin

I am selective in the analysts that I receive market commentary from. They are overwhelmingly cautious. The buzz word “FOMO or Fear Of Missing Out” is used to describe retail investors piling into markets. The quote that sums up my feelings best comes from Liz Ann Sonders of Charles Schwab in “High Hopes: S&P 500 Hits All Time High Amid Pandemic/Recession”, published on Advisor Perspectives.

I worry about the signs of froth in the market and among some behavioral measures of investor sentiment: not to mention traditional valuation metrics that are historically stretched. This is not an environment in which greed should dominate investment decisions; but instead one for discipline around diversification and periodic rebalancing…

This article looks at a brief Continue reading →

Portfolio update #1: added Palm Valley Capital

By David Snowball

On August 26, I added Palm Valley Capital Fund (PVCMX) to my non-retirement portfolio.

Why does this make sense?

My portfolio has a simple, static asset allocation: 50% stocks, 50% not. Within stocks, the default is 50% here, 50% there plus 50% larger, 50% smaller. When we calculated the likely downside of my portfolio in a 2008-like event, the loss was in the range of 25%. That’s not catastrophic.

Currently, my portfolio is Continue reading →

Portfolio update #2: added T. Rowe Price Multi-Strategy Total Return

By David Snowball

On August 31, I added T. Rowe Price Multi-Strategy Total Return (TMSRX) to my non-retirement portfolio. I funded that position by transferring about half of my stake in T. Rowe Price Spectrum Income (RPSIX).

Why does this make sense?

I traditionally have minimal savings, in the sense of money in a savings account at the bank. That decision makes sense for me because my income is incredibly predictable (a perk of being a tenured senior member of the faculty at a strong college), though it grows minimally. Because savings accounts have for so long offered near-zero to negative real returns, I chose to keep the money otherwise destined for savings in exceedingly low volatility funds that offered the prospect of low- to mid-single-digit returns. RiverPark Short Term High Yield (RPHYX, 3% annual returns, 0.8% standard deviation, 1% maximum Continue reading →

Launch Alert: T. Rowe Price active ETFs

By David Snowball

On August 5, 2020, T. Rowe Price launched ETF versions of four of its largest actively-managed domestic equity funds.

Those are:

T. Rowe Price Blue Chip Growth ETF (TCHP)

  • The strategy targets mid- to large-cap, blue-chip companies that have the potential for above-average earnings growth and are well established. About 90% US stocks.
  • The strategy is managed by Larry Puglia, who has run it for 26 years.
  • The mutual fund version of the same name (TRBCX) is a five-star fund with a Silver analyst rating from Morningstar. It has $92 billion in assets.
  • The net expense ratio for the ETF is 0.57%, lower than the 0.69% charged by the fund.

Continue reading →

Launch Alert: Towpath Focus Fund

By David Snowball

On December 31, 2019, Oelschlager Investments launched the Towpath Focus Fund (TOWFX). The fund invests in 25-40 domestic stocks regardless of market capitalization. The fund is managed by Mark Oelschlager.

In general, we intend Launch Alerts to occur within six weeks of a fund’s launch. We entirely goofed up the Launch Alert for Towpath because we were looking for it under its preliminary name, Oelschlager Equity. As a result, we entirely missed the launch and the fund’s first eight months of existence. Regrets for the slip!

What do they do?

Towpath is a concentrated, all-cap equity fund. The portfolio currently holds 38 securities. About 11% of the portfolio is invested in non-US stocks. Portfolio construction begins with macro-level Continue reading →

Osterweis Emerging Opportunity (OSTGX), September 2020

By David Snowball

Objective and strategy

OSTGX pursues long-term capital appreciation. Their target universe is high quality, small- to mid-cap companies with the ability to generate rapid, sustainable revenue growth. The markers of quality include: (1) a distinct proprietary advantage; (2) a leading position in the industry; (3) potential for margin expansion; and (4) the presence of a strong management team. “Rapid revenue growth” translates to organic growth that averages 30% annually. It invests primarily in domestic companies; as of June 30, 2020, 11% of the portfolio is invested internationally though the prospectus permits up to 30%. As of June 30, 2020, just over 50% of the Fund’s assets were invested in securities within the health care and information technology sectors, slightly lower exposure than the Continue reading →