Every headline I see mentions Apple initiating a dividend. So, why don’t you see any headlines mentioning that they plan on returning as much if not more on buybacks than dividends over the next three years?
Investors generally don’t care how you return cash flows, just that you do and the total amount. With government proposals aimed at raising tax rates for cash dividends, it is more important that ever to have a holistic method to analyze cash distributions.
Source: McKinsey
Lots of other stockpickers off to a strong start with some hedge fund long picks up well over 20% YTD (Appaloosa, Pabrai, ESL all up over 20% and a few like DAFNA and QVT up well over 40%). Source: AlphaClone.
It is a fixture of investing that investors chase returns. They follow a manager with the hot hand, and once that manager (or strategy, or asset class) underperforms, they often sell at the worst time (and over and over again thus the DALBAR numbers). Anyways, lots of calls for Fairholme’s death after a terrible 2011, but they are certainly off to a strong 2012, up around 30% or so. I don’t have a position or any interest, just noting the rebound.
I have not read this white paper (from Oz) but a few readers have emailed it in so I thought I would pass along.
Market Timing with Moving Averages by Paskalis Glabadanidis, University of Adelaide Business School
Abstract:
I present evidence that a moving average trading strategy dominates buying and holding the underlying asset in a mean-variance sense using monthly returns of value-weighted decile portfolios sorted by market size, book-to-market cash-flow-to-price, earnings-to-price, dividend-price, short-term reversal, medium-term momentum, long-term reversal and industry. The abnormal returns are largely insensitive to the four Carhart (1997) factors and produce economically and statistically significant alphas of between 10% and 15% per year after transaction costs. This performance is robust to different lags of the moving average and in subperiods while investor sentiment, liquidity risks, business cycles, up and down markets, and the default spread cannot fully account for its performance. The substantial market timing ability of the moving average strategy does not appear to be the main driver of the abnormal returns.
There are very few asset classes that are truly non-correlated to a traditional portfolio. (There are active strategies but that is a bit different.)
I think Lending Club is an interesting example for an asset class that is hard to commoditized as a public fund – consumer credit. I allocated $50 worth of notes a few years ago, and then promptly forgot about it. Low and behold I am sitting on a fat 12.5% gain, ha. Anyways, they started a RIA with private funds and separate accounts. I think a public fund would be difficult with the exception of a closed end fund. Anything else that would be similar?
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Interview with Kahneman, HT RR:
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Great piece “Stocks, Bonds, and the Efficacy of Global Dividends” (PDF and PPT) from OSAM. Highly recommend both…having a hard time pasting the graphics but worth a read.
I will be traveling to a few places in the coming months, drop me a line if you are around.
Texas (Austin area) 3/9 – 3/14
New Orleans 3/29 – 4/2
Bermuda 4/15 – 4/18
There are a few other trips penciled in (St. Louis, North Carolina, and NYC) but have not confirmed dates yet.
This is a great piece from Brad Jones at Deutsche Bank.
Serious must read.
Summary here.
PDF link below:
Rethinking Portfolio Construction and Risk Management – A Third Generation in Asset Allocation
Excited to see the news that the SEC has hired a new ETF Czar, Barry Pershkow. There has been quite a logjam/blockade at the SEC with funds filing with anything even mentioning the word derivatives so hopefully this helps them with the workload.
I still think there is a huge opportunity for some public managed futures, both targeting bond like volatility as well as more aggressive stock like vol and 20%+ targets. Since 80% or so of the CTA world all do the same thing, here is a fun paper I forgot to link to this past fall – Quest Research Notes – Black Box Trend Following – Lifting the Veil. Conquest also had a paper titled the Beta of Managed Futures.
The top 5 managed futures mutual funds have $7billion in AUM while the the average expense ratio is 2.71%. The average sales charge for the A class is 5.75%. Talk about SuperFees!
The only two managed futures ETFs trading are WDTI ( 0.95%) and LSC (0.75% but also an ETN), both based on the Sperandeo/S&P Indexes. The problem with these, like most indexes, is front running. In my Australia talk I mentioned the benefits of not following an index (and avoiding front running costs, up to 1.8% for small caps see Chen (2005) and Petajusto (2010) and up to 3% for the GSCI) which makes the active ETF structure perfect for active managers. (Also see ‘Indexing’s Dirty Little Secret.)
I think if someone launched a series of managed futures ETFs at low cost it would raise $1bln in the first year, easy. Once these trendfollowing funds start outperforming again, I see no reason a managed futures ETF couldn’t raise $5 bln in short order.
The title of this post is meant to be a bit playful, but below is our first attempt at what should be a regular series of videos and webinars. I found that it is much, much easier for me to chat about ideas and research than it is to type (at about 5 words per minute, need to try the Dragon software perhaps).
In any case, I feel a lot of context is lost in the printed word as well, so, in coming months look forward to lots of videos that will parallel 1) published research papers, 2) speeches, since most are never recorded, and 3) our new upcoming books. Once I figure out the technology we will try to add a live Q&A element as well if that interests people.
Below is a video where I try and answer five of the most often asked questions about our 2006 and 2010 papers, A Quantitative Approach To Tactical Asset Allocation and Relative Strength Strategies for Investing. Actually, a few are not questions I get but they are questions I should get.
We take a look at increasing the number of assets in the portfolio as well as increasing the granularity within the major asset classes. We examine whether rebalancing frequency such as daily, weekly, or monthly rebalancing impacts returns, and the effects of different parameter lengths. We also examine various cash management strategies that could improve returns over Treasury Bills. We finish the presentation with a few more possible extensions that investors may consider as a complement to a trendfollowing system.
Note: You should be familiar with both papers and or at least read The Ivy Portfolio….(and if you would rather watch on Screencast here is the link.)
And, now that I’ve bored you to death, a second video to begin your week….beautiful Iceland and Bon Iver.
HT:DW
I poach most of my links from Abnormal Returns for investing and Kottke for weird and diversions. Some fund ones below:
Best of LIFE magazine covers - I didn’t see our family’s cover (true story, will post if I can find)…
I like this one in particular:
Then here is some film footage of Tebow, errr, I mean Harvard and Yale in 1903:
…and all the World Press Winners….
And skateboarding in NYC in the 1960′s:
