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The Importance of Portfolio Management I’ve had a successful run as a retail investor, with an eight-year CAGR of 44%. I attribute my success to two things: my ability to find stocks that will outperform and my portfolio management techniques, which may be of equal importance to my returns. Without…

Note: The M Score is used to identify companies that are engaged in manipulating their financials. I am using pseudonyms in this article and changing certain details to mask the identity of the companies in question. I. Getting Defrauded Not too long ago, an investment research firm exposed a company…

I recently performed a study of over fifty different value factors to see which performed the best. (Admittedly, a lot of them are similar.) The results surprised me. Method I conducted the study using a web-based stock research company called Portfolio123. Here’s my methodology. (This gets a bit technical; feel…

The Netflix Prize The Netflix Prize was a competition begun in 2006 to predict user ratings for films. Competitors were given ratings scrubbed of information about the users, and were challenged to find, using machine-learning methods, an algorithm based only on the raw data. Netflix provided each team with about…

If you were given a crystal ball that would accurately predict a company’s growth over the next year, you would logically invest in those companies with the highest growth and short those with the lowest. Portfolio123 recently allowed this kind of crystal-ball prediction in its backtesting by allowing negative numbers…

This article is the third in a series about screens designed by famous investors. The first, on Benjamin Graham, can be found here; the second, on William O’Neil, can be found here; and for an overview of the subject, see my article “Can Screening for Stocks Still Generate Alpha?“ In…

(Originally posted as Why Low-Variability Investing Works) There are two kinds of volatility. One is beta; the other is variability, or fluctuation. Beta is measured by taking the correlation of a portfolio’s or stock’s returns to the market’s, multiplying it by the standard deviation of the portfolio or stock returns,…

Just after New Year, an amazing paper was posted on SSRN called “Selling Fast and Buying Slow: Heuristics and Trading Performance of Institutional Investors.” A few days later, Matt Levine, who writes daily for Bloomberg and whom I read almost religiously, published a terrific column about it called “Investors Have…

It is commonly believed that you cannot have more reward without taking on more risk. I take a different view. You certainly can have more reward by taking on less risk, simply by switching from highly risky investments to more dependable ones. By evaluating every investment from as many angles…

Last May, Kit Chellel wrote a very interesting article for Bloomberg News about Bill Benter, who won $900 million betting on horse races. The races he bet on were run on a parimutuel system, where odds are updated in proportion to how bettors bet, with the house simply skimming a…