Finished the following books: Great book on investing! Very easy to read and short too! Joel Greenblatt describes a "magic formula" to rank stocks (based on two criteria: Return on Assets and Earnings yield (reverse of P/E!), rank stocks with higher numbers for both. Add the two ranks and rerank based on sum of the two ranks). Then buy a basket of 20-30 stocks who are top ranked and hold them for 1 year. Sell them all after 1 year, re-apply the formula and buy new stocks with highest rankings. Rinse and Repeat. Based on backtesting with different ways, this portfolio has handily beaten the market averages. I wonder why backtesting was only done for past 13 years when comprehensive US market data is available for 75+ years.
The strategy seems sound and is well supported by theory. (High ROA companies means, good earnings on slim assets. High Earnings yield means they are currently cheap. Using the book's website you can very easily find the rankings and stocks that you need. The only problem I see with this strategy is implementation. Buying and selling 30 stocks every year (60 transactions) is not cheap (okay, I am an index fund person - 0.19% fund expenses). I could possibly use buyandhold.com or foliofn.com, but they are not cheap. Also the author might turn the website into a paysite (so you have to use something like moneycentral.com to screen your stocks. I will make a couple of mock portfolios to keep watching the strategy for sure.
I guess I am not a Malcom Gladwell person! This book was on my to-read list for a long time and though I liked the basic premise of the book, somehow I was disappointed by the presentation. I had the exact same reaction after I finished Blink. Anyway...
Today's speaker was Morgan Dene Oliver who is a CEO of OliverMcMillan, a real estate development and management firm. While his projector was getting fixed, he started by doing some show-of-hands about who in the audience:
1. believes "Art and Design" are essential for their future success ? (Many hands went up)
2. believes they are left brained ? (some - much less that I anticipated)
3. believes that people can use both left and right side of their brain ? (Huh ? almost all hands)
Then he offered some introduction about the left and right brain functions and recommended a book by Daniel Pink: A Whole New Mind which talks about how your right brain is going to help you achieve differentiation. Morgan also mentioned that Creativity, Tenacity as very important values for entrepreneurs. "You can always find someone who is more brilliant than you, but not someone who is more creative than you". With this theme, the presentation started. On the showcase were several of the stunningly beautiful and familiar buildings in La Jolla, UTC, Downtown area. He touched upon how they started to introduce complete community-in-a-building feeling to all their development, the importance of location for real-estate (I have yet to see any real-estate guy not utter location-location-location phrase in any talk), strategically buying properties in downturn and also some of the mistakes that they made and some of the unfortunate bad timings. Someone asked about Green Buildings (eco friendly) in San Diego downtown and his answer was that this was no longer a fad, but a requirement. Also mentioned about supporting the art tax bill from all commercial development. Had an interesting advice for real estate locations - buy properties near art galleries, gay communities!
This was the first professional seminar. Leo Spiegel is a managing partner with Mission Ventures, a hi-tech venture capital firm. Leo has been a president of Digital Island, CEO of Sandpiper Networks. He is also a member of Dean's advisory Council of Rady School of Management, UCSD.
This was an interesting and engaging presentation about Leadership Lessons (the subtitle was funny but I cannot remember it). One interesting thing was that all the slides were a single point followed by a cartoon describing that. Presentation Zen!
The actual message in the presentation was same-old. Good values, Vision, Choose Great People. Common sense (so uncommon in practice!). The anecdotes after each point were very interesting. The following question-answer session was also great - He talked about the startups in San Diego and Orange County area, the profiles of the companies they are currently "incubating" (Entropic, Slacker - which he was very enthusiastic about), his greatest investments so far...
All in all, a great kickoff to the seminar series.
John Mutch has been a CEO of HNC software and was appointed the CEO of Peregrine Systems by Federal Bankruptcy court. He took Peregrine Systems from bankruptcy condition to the price tag of $425 millions (HP was the buyer). Since then he started a MV Advisors, an "Activist hedge fund".
What is an Activist Hedge Fund ? The strategy is to find technology companies which are undervalued compared to peers because of corporate governance issues and organize shareholder activism to improve them and in the process create market value. They do this by establishing big stock positions (starting from 4.9 percent which keeps you under SEC radar!), bargaining for board seats and then improving matters by possibly restructuring products, reviewing executive compensation, spin-off, merge as necessary and kick away non-performing executives!
An interesting business model and a good conversation...