My second quarter reading is short on books but long on pages. It was dominated by another textbook with a couple of lengthy books thrown in.
Here’s what I’ve been reading the past three months: Continue Reading…
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The Rise and Fall and Rise of Ben Graham
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Sometimes beating the market isn’t all it’s cracked up to be. Just ask Ben Graham.
Graham set up his second fund, the Graham Joint Account, in 1926 after closing down the first fund he set up with Louis Harris, Grahar Corp., run from 1923 to 1925. Over the first three years, 1926 to 1928, Graham’s new fund would earn 25.7% annually against the Dow’s 20.2%. He handily beat the market on the way up.
And he beat it on the way down…
From 1929 to 1932, Graham’s fund lost 70% compared to the Dow’s 80% loss (a beating alright). If he was chasing relative returns, he succeeded.
But Graham knew he failed. He barely survived the worst four year period ever in the stock market.
Not surprisingly, it would leave a lasting impression on him. James Grant explained exactly what went wrong during a 2008 Graham and Dodd event: Continue Reading…
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2020: First Half Returns
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Had you fallen asleep in January and woke up today, you’d probably have a few questions about the virus and think nothing big happened in the stock market. Yet, everything happened.
The first half of 2020 can be summarized by one of the fastest market crashes ever and a quick and confusing recovery. In fact, all but one country saw it’s stock market fall month-to-month from January to February, then again from February to March. The one exception: China. It’s market rose slightly from January to February then fell from February to March. The global decline resulted from the reaction to a worsening situation with the virus.
Then magically, every country’s stock market reversed course and rose in April. Things deviated a little from there. Continue Reading…
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S&P 500 Stock Returns at the Half-Way Point
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It may not feel like it but we’re finally six months into 2020. And the first half was a roller coaster…
The S&P 500 offers a snapshot of how wild that ride was so far. It reached a high of 3,386.15 on February 19th up 4.8% in less than two months. Then the next month, it fell to 2,237.40 on March 23rd down 30.7%. And finally, it rose to 3,100.29, down just 4.0% year-to-date (not including dividends).
Roughly a quarter or 136 of the S&P 500 stocks are positive year-to-date, not including dividends. That puts the median return at -12.6% — the average S&P 500 stock has performed worse than the index.
I’ll hold off on further commentary until the next post and after I update all the asset class tables with YTD returns throughout the day.
Below, you’ll find price returns for each stock in the S&P 500 broken down by sector. Continue Reading…
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Peter Bernstein’s Checklist for “Growth Companies”
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There is a big difference between a growth stock and a company that grows.
…the term “growth stock” is meaningless; a growth stock can be identified only in hindsight — it is simply a stock which went way up. But the concept of “growth company” can be used to identify the most creative, most imaginative management groups; and if, in addition, their stocks are valued at a reasonable ratio…over a period of time, the odds are favorable for appreciation in the future. — Peter Bernstein
Bernstein believed that investors needed to separate “growth stocks” from “growth companies.” Because one was a label slapped on anything with a high price relative to earnings or assets. The other had a few characteristics that made it a rare exception in the business world. Continue Reading…
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Protection from Ourselves
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Ben Graham spoke to a group of bankers in 1951. It was unique in that he addressed their increasing role as investment advisors. He offered some timeless advice for advisors and investors alike.
He began with a brief history of portfolio construction — stocks and bonds. For years, bonds were the smart safe investment of choice for bankers and individuals, while stocks were speculative. That all changed in the early 1920s.
People learned stocks held a few advantages over bonds — better inflation protection, capital appreciation, and, in general, a better overall return. And eventually, stocks gained a more prominent foothold in portfolios.
But it wasn’t all good news. Stocks had a few downsides too. Three, in particular, stood out to Graham. Continue Reading…