I have written a ton of posts on why hedge funds attract the best talent in the investing field (namely, compensation). Let’s look at a real time example to see if this theory holds up.
Morningstar has been tracking a portfolio they call the “Ultimate Stock Picker’s Portfolio” for a couple years. It is nearly impossible to track since there have been at least three authors over that period (Fuller, Owens, and Warren), and they don’t track the performance as far as I can tell (maybe there is a reason for that?). I took a post from the end of 2008 with the recommended list of 15 Ultimate Stock Picks. They were:
MSFT, WFC, COP, GE, EBAY, CMCSK, HD, PFE, WLP, MMM, DIS, UNH, SNY, COST, and LOW
If you bought that portfolio you would be up about 23% YTD, roughly in-line with the S&P 500.
However, what if you looked to the hedge funds instead for your stock ideas? At the end of 2008 I posted 5 Ideas for 2009 (which I will update in January). The last idea was to track the top stock picks of the Tiger Cubs. The list was:
QCOM, V, MA, AMX, PCLN, TDG, SD, SBAC, AMT, XTO
If you bought that portfolio you would be up about 60%, beating the S&P 500 by about 40%.
If you want to check out the current Tiger Cubs holdings, you can view them here.
Looks like you're cherry-picking again. Was the Tiger Cubs call the highest-performing of your five ideas?
Here we go – I updated it because morningatar just came out with their
article. And did I not say I would update them all in Jan?
And to be clear, what do you mean by “again”?
Yes, but you never indicated why you selected that one of the five in particular (“indicative”?, “at least as good as”?), and the BOLDFACE suggests cheesy cherry picking.
I'll have more to say about “again” when I finish your book.
If you were a long time blog reader you would know I don't engage in cheesy cherry picking, and I am transparent and honest about both my good and terrible ideas. I have never deleted a blog post of the >600 posts.
Looking forward to your criticisms when you finish the book.
What is the issue with some people
I don't think people realize that all this data is free. All this hedge fund, endowments, etc. is public domain. Goto SEC and search for Appaloosa and find their quarterly filing. Takes 1.5 minutes. Or there's several sites who aggregate these filings for free….yes, I said free. This timing strategy, nor the data, is proprietary in any way. Faber's just giving you a means (and thoughtful organization) to the information – which he charges for. It's kinda like paying for a butler cuz you're too lazy to walk to the fridge. Also, you have to realize that this data is 'old'. Funds are required to file their holdings/activity 45 days after quarters end. So do the math…one quarter..plus 30 days = ~ 120 days. Yep, thats 1/3 of a year late. Market volatility is pretty high these days; so keep your eye on the ball.
One of the biggest mistakes a casual investor has is getting lured into these large, advertised % gains. Ever hear or read: “past performance is not indicative of future results”? Unfortunately, this post is a little suspect and selective in nature. Any sentence that starts with 'If you bought __' is merely a “claim” based upon past performance. I'd advise the author to be careful with such wording.
Since most of the followers are casual investors; they need to know all the details.
Thanks for the response – check out my new post for a follow up…
[...] times there are comments left on old posts that would probably be of interest to the community. Below is a thoughtful comment from DP that I wanted to respond to. My comments in [...]
What are the picks for 2010?
What are the picks for 2010?