George Morgan's Blog, page 12

Extreme Buy And Hold Approach

While the simple buy and hold approach I described yesterday may sound overly simplistic in our high speed Internet world, I have seen it work dozens of times in real portfolios. Usually these portfolios belonged to people in their sixties and seventies who during their empty nest years bought stocks at random never made any adjustments. In most cases the motive driving the lack of activity was that many of the positions had significant capital gains and they would chew off an arm before givi...

An Efficient Market Approach

If markets are efficient and stock picking and market timing does not result in market beating performance, what’s the alternative? Academia has long advocated a passive investment approach which does not utilize trading activities which attempt to outperform the market. A passive strategy focusses on minimizing transaction costs and time spent positioning the portfolio because the expected benefits from active trading are likely to be less than the costs. Investors who practice the passive a...

An Efficient Market Concept

The concept of an efficient market has been with us for more than three decades and you cannot be a serious student of the market unless you are at least aware of its implications. A great deal of evidence exists to support an efficient market and the fact that some well-known market observers and participants reject the idea does not reduce its validity. The concept of market efficiency is based upon the rapid dissemination of all publicly available financial information. The concept does no...

Make A List And Check It Twice

As we end the year with the S&P 500 up 26%, Jason Zweig’s weekend column has some good advice; make a list and check it twice. Loose translation, now is not the time to adopt a new investment philosophy in response to what you think the market may do next. Nobody knows where the market goes from here, but you will be bombarded with predictions of disaster and be told that the xyz approach is the only way to avoid joining the ranks of the homeless. Make a list of the things that you did to...

Passive vs. Active

One move that put Blackrock over the top in terms of its assets under management was his purchase of Barclays IShares division. IShares years is a major player in the ETF market, not only in the United States, but also Europe. Currently, the IShares division has over $2.6 trillion under management. ETF’s claim to fame is that they are a passive investment which generates lower fees than actively managed mutual funds which need to cover expensive research and trading teams. But, let it be know...

Worlds Largest Investor

In 1988, Larry Fink, along with a group of Wall Street types, formed an investment company called Blackrock. Currently, Blackrock is the world’s biggest investor with $4.1 trillion in directly controlled assets. This amount is almost as much as all private equity and hedge funds put together. It is the single largest shareholder of Citigroup, Bank of America, JP Morgan Chase, Exxon Mobil, Shell, Apple and McDonald’s. It owns a stake in almost every listed company, not just in the United State...

The More Things Stay The Same, The More They Change

Many of the country’s largest mutual funds and brokerage firms are starting to avoid the conventional exchanges when trading for their account and have developed a strategy known as upstairs trading. When large institutions place orders to buy or sell millions of shares of a stock, they run the risk of having the size of the trade move the price of the stock. Institutions are also complaining that the proliferation of high speed training is hurting their ability to get their trades executed i...

Modern Day Ben Graham

Following my post yesterday, I received numerous emails asking me if there is a modern-day Ben Graham and if so, who?  My almost immediate response was yes; John Bogle the founder of Vanguard funds and considered to be the father a passive investing just as Graham was the father of value investing. Index investing is an investment methodology that uses mutual funds and ETFs to replicate market indexes such as the S&P 500 and the Dow. Bogle has written extensively on the use of index...

Who Was Ben Graham?

Ben Graham is the father of value investing, an approach which he began teaching at the Columbia School of Business in 1928. His most famous follower is Warren Buffett, who studied under Graham in the early 1950’s. Mr. Graham is best known for “The Intelligent Investor,” which was first publish in 1949 and has been revised many times since, the latest being in 2004 by Jason Zweig. In his epic work, Graham goes to great lengths to make a distinction between speculation and investing. He also t...

Interesting Point???

This week’s Intelligent Investor is about stock splits. Mr. Zweig is informing investors that a stock split does not make a stock more valuable. To make his point, he uses the analogy that two nickels are not more valuable than a dime. During his discussion Jason points out that there is the tendency for stocks that split to become the target of high frequency traders because lower priced stocks are more profitable in their trading formula. We know that the Dow Jones Industrial Average is a p...