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Diversification: What Is It Good For?

Diversification: What Is It Good For?

The investing world can be a complicated place. There are two main approaches to portfolio management when it comes to concentration. The first approach is broad diversification, favoured by value investors such as Benjamin Graham (Graham’s advice of having a well-diversified portfolio of 30 or more deep value stocks) and more recently Noble Prize winning economist Harry Markowitz in his Modern Portfolio Theory, and Dr John Lintner, both of whom strongly advocated diversification. On the other hand, there’s the highly concentrated…

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Societe Generale Developed And Emerging Market Deep Value Screen

Societe Generale Developed And Emerging Market Deep Value Screen

Société Générale publishes a monthly update on the performance of several value orientated fundamental trading strategies across both developed and emerging markets. For deep value investors, one of the most interesting screens is the Graham & Rea deep value screen. The screen is a strategy developed by Benjamin Graham and James Rea. It uses a set of ten basic investment criteria used to identify deep-value opportunities. These criteria are also known as Graham’s last will, and the Benjamin Graham deep…

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Finding Value With The Piotroski F-Score

Finding Value With The Piotroski F-Score

The following is part of a series originally published at the end of November on SeekingAlpha. The series was designed to test the effectiveness of the Piotroski F-Score in today’s market. The F-Score was designed to help investors outperform the market, but if it was really that good, surely everyone would be using it? The stocks below were selected using computer screens, no human interaction was involved, the stocks that qualified for the F-Score screen, entered the test portfolio. I’ve always believed…

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Market Sentiment

Market Sentiment

“…The line separating investment and speculation, which is never bright and clear, becomes blurred still further when most market participants have recently enjoyed triumphs. Nothing sedates rationality like large doses of effortless money. After a heady experience of that kind, normally sensible people drift into behavior akin to that of Cinderella at the ball. They know that overstaying the festivities — that is, continuing to speculate in companies that have gigantic valuations relative to the cash they are likely to…

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Actively Managed Funds Consistently Outperform Trackers

Actively Managed Funds Consistently Outperform Trackers

According to research conducted by FE Trustnet, the average active UK growth fund has beaten an average, standard tracer fund over a period of one, three five and ten years. To say that this is astonishing is an understatement. Many market commenters have been reiterating the benefits of passive of active for some time now, and even market oracle, Warren Buffett has bet against actively managed hedge funds, making a $1 million bet with hedge-fund manager Protégé Partners that a…

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Earnings Growth Compared To Market Returns

Earnings Growth Compared To Market Returns

In theory, the S&P 500 should rise in line with earnings. In practice  this does not happen. While this comes as no surprise, the scale of the difference is astounding. Period Earnings Growth S&P 500 Returns 2003-2013 148% 68% 1993-2003 16% 137% 1983-1993 5% 179% Across three decades the date shows that the S&P 500 has almost no correlation to earnings growth. The current period, 2003 to 2013 has seen the fastest earnings growth but the slowest S&P 500 growth….

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Derivatives Market Reaches New High

Derivatives Market Reaches New High

A combination of fractional reserve banking, bank leverage, money printing, derivative manufacturing and government borrowing has been the reason behind much of the global GDP growth over the past 40 years. This market is now worth a staggering $1 + quadrillion,  that’s $1,000,000,000,000,000 of essentially worthless derivatives where buyers only need to put up a fraction of the purchase price. Add in $250 trillion of government debt around the world and things start to look pretty shaky. During 2012, the…

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Margin Debt Hits an All-time High

Margin Debt Hits an All-time High

Margin debt, or the amount that has been borrowed by investors from banks or brokers in order to pay for US securities, reached a grand total of $379.5 billion in March – the second highest in history. The highest level was $381.4 billion back in July 2007 . The problem is that large amounts of borrowing, on average about 50% of the equity position can exacerbate losses as the market starts to fall as investors rapidly sell down positions. In…

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