Articles

Articles Written by Validea Founder John Reese

9/19/2017

John Reese NASDAQ Articles
NASDAQ.com

Rebalancing Is Key to Avoiding Increased Risk Exposure

If it ain't broke, don't fix it can be a useful mantra in many walks of life, but investors should be wary when applying this idea to asset allocations. Movements in the market can shift allocations and result in concentrations that might not necessarily fit your risk profile and/or investment goals.

9/13/2017

John Reese Globe and Mail Articles
The Globe and Mail

Three Beaten-Down Stocks That Fit Warren Buffett's Patient Investor Style

If there's one thing that's hard to persuade investors to be, it's patient. The urge to chase the hot idea or the manager with the dazzling recent track record is incredibly powerful. The resolve to resist crowd mentality can falter when it seems as if everyone else is winning and you've been left behind. Imagine hiring a manager in 1997 and for the three year period to 2000, he clocks a gain of 65 per cent. That sounds pretty good, but remember: It was the roaring 1990s, and the technology-fuelled boom was all anyone could talk about. Dot-com after dot-com soared. During the same three year period, the Standard & Poor's 500 rose 107.6 per cent. That means your manager with the decent track record got beaten pretty handily and trailed the market by more than 40 per cent during this period.

9/12/2017

John Reese TheStreet.com Articles
TheStreet.com

3 'Orphan Stocks' to Consider Adopting

While it seems like the whole world is investing in stocks that trade in the major market indexes, sometimes winners can be found on the path less traveled. It's easy to see why investors are flocking to index-traded stocks. When a stock joins a major market index like the S&P 500, there is often celebration. It almost certainly means an immediate boost to the price and adds to the perception that the company has a promising outlook. Index stocks also benefit from a boost in liquidity. They immediately get bought up by all funds tracking the index and anyone who is trying to mimic it.

9/11/2017

John Reese Forbes Articles
Forbes

A Contrarian Investment Strategy Built For The Long Run

Newton's Laws of Motion describe the relationship between a body, the forces acting upon it, and its motion in response to those forces. The third of these laws states: For every action, there is an equal and opposite reaction. Granted, the laws of physics don't apply to investor behavior. But if they did, we'd have a universal mess on our hands. Investor behavior is firmly rooted in psychology, a notion that's evident in all the guru-inspired stock screening models I created for Validea. One of these gurus, however, dug into this field of study more than most others--David Dreman, author of both Psychology and the Stock Market (1977) and Contrarian Investment Strategies (1980). In fact, Dreman (who founded his own investment company) is on the board of directors of the Institute of Behavioral Finance, publisher of the esteemed Journal of Behavioral Finance.

9/7/2017

John Reese NASDAQ Articles
NASDAQ.com

Strong Offense and Defense Necessary to Prepare for Market Downturns

As the September 7th kick-off of this year's National Football League season approaches, we're reminded of the importance of both strong offensive and defensive lines of players. The same argument holds true in terms of a winning investment portfolio. Building a resilient, well-performing "team" involves incorporating both "offensive" and "defensive" holdings to ensure the best probability of success.

9/6/2017

John Reese CNBC Articles
CNBC

Oncor acquisition battle isn't Buffett's first - or last - rodeo

Berkshire Hathaway recently made investment headlines with its agreement to purchase the power-transmission company Oncor for $9 billion in cash, a would-be coup for the legendary billionaire, as it would have chipped away at Berkshire's bloated cash balance (of nearly $100 billion). Disappointment, however, came in the form of Sempra Energy, which swooped in with an offer of $9.45 billion. This made headlines, some of which characterized the chain of events as a "stumble" by Buffett, even insinuating that the Oracle of Omaha might be losing his deal-making chops.

8/30/2017

John Reese Forbes Articles
Forbes

Go 'Back to Old School' On Your Investment Portfolio

It's the time of year when notebooks and pencils (okay, iPads and styluses) are replacing flip-flops and swimsuits. Go into any store and you'll see all the trappings; every food item imaginable in snack-size packaging, backpacks, dorm room accoutrements, and a sea of organizational shelves, bags and boxes. Maybe it's also a good time to evaluate how organized you are with respect to your investment portfolio. Do you have a solid, go-to approach that is aligned with your risk profile and future goals? Are you sticking to that approach no matter what you hear on television or from friends and family? If not, these are questions that deserve your attention.

8/24/2017

John Reese Globe and Mail Articles
The Globe and Mail

Three Stocks to Hedge Against a Stock Market Downturn

The waning days of August leave many parents looking forward to the start of school and many investors bracing for September, the month that is historically the worst of the calendar year for stocks. Add the increasing uncertainty coming out of Washington and stock valuations that look increasingly overheated, and it's enough for a few prominent investors to warn that a pullback is probably on its way.

8/23/2017

John Reese TheStreet.com Articles
TheStreet.com

Quant Models Begin to Find Value in Energy Names

Energy is a sector that has burned even the savviest of investors over the years. It's easy to see the allure: the U.S. administration's promised major infrastructure spending should boost related industries, and alternative energy generation has shown promise. But the energy sector is still struggling with oil prices at (or recently below) $50 a barrel, and many investors appear reluctant to hunt for bargains among the beaten-down shares of major energy companies. The Energy Select Sector SPDR (XLE) is down more than 16% percent this year, while the Standard & Poor's 500 is up more than 10%. That makes energy one of the worst performing sectors in the index, which would suggest there might be some bargains to be found

8/22/2017

John Reese Forbes Articles
Forbes

Investors: Keep Calm And Carry On With These 5 Investing Commandments

Keep Calm and Carry On was a motivational poster produced by the British government in 1939 in preparation for World War II. The poster was intended to raise the morale of the British public as they faced the threat of mass air attacks. Today, the motto can be found on a seemingly endless array of merchandise ranging from coffee mugs to car seat covers. If only the notion was as widely embraced by investors as it is by slogan-loving shoppers.

8/22/2017

John Reese NASDAQ Articles
NASDAQ.com

Investors, the Trigger is Not Your Friend

It seems that financial advisers, like individual investors, can fall prey to impulsive investment decision-making. And it can hurt their clients' pocketbooks. After Morningstar conducted a study in which they analyzed the returns of actively managed stock and bond funds from 2003 through 2016, the firm published the following conclusion: In short, we find, on average, there is no change in future performance following a fund-management change. Yet, investors overreact and subsequently pull money from these funds. Our findings suggest that the fund industry handles succession planning far better than investors react to such changes.

8/16/2017

John Reese Globe and Mail Articles
The Globe and Mail

Why Apple is a Perfect Fit For Warren Buffett's Value Investment Strategy

Berkshire Hathaway's recent purchase of Apple shares has revived debate about whether the world's biggest tech company has become a value stock. After all, Berkshire's Warren Buffett made his fortune seeking out undervalued companies with strong fundamentals and dominant industry positions, and it's not hard to argue that Apple meets those criteria. Now, the iPhone maker is well on its way to becoming the world's first $1-trillion (U.S.) company. Its shares are up 45 per cent in the past year. Berkshire has about 130 million shares, a $20.2-billion stake. The Street recently figured Berkshire has made almost $3-billion from this investment.

8/14/2017

John Reese Forbes Articles
Forbes

Build An Investment Checklist Using Buffett's Investment Criteria

In this year's letter to Berkshire Hathaway shareholders, Warren Buffett refers to the conglomerate's "gradual shift from a company obtaining most of its gains from investment activities to one that grows in value by owning businesses." An article in the Wall Street Journal last month titled, "Warren Buffett's Berkshire Moves Away from Stock Picking," underscores the shift in the context of the conglomerate's offer to purchase power-transmission firm Energy Future Holdings for $9 billion in cash.

8/4/2017

John Reese NASDAQ Articles
NASDAQ.com

Where Have the Low P/E Stocks Gone? Here are Five to Consider

When Warren Buffett purchased his first shares of GEICO back in 1951, there were no funny commercials or talking lizard mascots to entice him. It was Buffett's limitless curiosity about the company's then-chairman Benjamin Graham-one of Buffett's professors at Columbia University as well as his mentor and "hero"--that led Buffett to visit Washington DC on a cold Saturday morning to visit what was then the General Employees Insurance Company.

8/2/2017

John Reese Globe and Mail Articles
The Globe and Mail

Three Stock Picks From a Warren Buffett-Inspired Portfolio

The mathematician Ed Thorp figured out how to beat Las Vegas casinos at blackjack and baccarat and they didn't like it. But the MIT and University of California Irvine professor didn't get discouraged. He applied those same mathematical principles to the markets, and also won. Mr. Thorp knows that good ideas have limited runs. As more investors pile into a winning trade, the returns start to diminish and the idea can no longer outperform the market.

8/1/2017

John Reese Forbes Articles
Forbes

Market Indicators Can Be Helpful, But These Five Stocks Stand Tall On Fundamentals

Among the myriad guidelines that the wise investor follows, diversification sits front and center: Don't put all your eggs in one basket, either with respect to equities or asset classes. But the notion of diversification extends beyond the process of deciding what to buy. It also applies to the assessment of the market as a whole and the factors affecting it at any given time. The universe of indicators available to investors is vast to say the very least, and there is no shortage of opinion or controversy around them and their relevance at any given time. It's important to evaluate a range of factors, as no single indicator is sufficient to draw broad-based conclusions about the market.

7/30/2017

John Reese Globe and Mail Articles
The Globe and Mail

Three Underperforming Stocks That Show Solid Potential

While analysts are predicting gains for the markets in the second half, it's hard for investors to avoid being skeptical, especially as major benchmarks continue their seemingly unstoppable march upward. It has the feeling of semi-euphoria that preceded some big declines. Investors who got burned in the 2000 dot-com bubble and the 2008 financial crisis probably haven't forgotten that.

7/25/2017

John Reese Forbes Articles
Forbes

10 Ben Graham-Inspired Stocks For Value's Eventual Turn

"You either believe in it or you don't," Peter Lynch PBS. Those words, from investing great Peter Lynch, are never more true then when the markets are in a free fall. But they should also ring true when the indexes are hitting record high after record high. Value investors must be feeling pretty lonely this year when all the attention has been on growth stocks, and four in particular: Facebook, Amazon.com, Netflix and Google parent Alphabet.

7/25/2017

John Reese Globe and Mail Articles
The Globe and Mail

Three Stocks the Great Value Investors Would Likely Adore

So far in 2017, there is a huge divergence between the performance of growth and value stocks. The growth stock camp has been largely led by a handful of megacap technology names - Facebook, Apple, Amazon and Google parent Alphabet. According to a recent Wall Street Journal story, the S&P 500 has added $1.7-trillion (U.S.) to its overall market capitalization in 2017, and those four technology behemoths have contributed $500-billion, or 30 per cent of the total gain based on their stocks' price appreciation. If you weren't invested in those names, you were probably left in the dust.

7/25/2017

John Reese TheStreet.com Articles
TheStreet.com

4 Stocks Warren Buffett Would Love

Warren Buffett doesn't go for the next big thing. Indeed, to do so would run counter to his core investment philosophy. You won't see this market legend jumping on a hot stock because there's buzz around it, nor will you see him cut and run when negative hype abounds. Buffett goes for stable companies with strong fundamentals, capable management and a durable competitive advantage of providing goods or services that are easy to understand and that people need and want -- a lot.

7/20/2017

John Reese NASDAQ Articles
NASDAQ.com

Buffett's Friendly Skies and Picks that Could Lift Off

Amazon's much anticipated 30-hour long "Prime Day" kicked off on July 10th, with the company offering countless bargains for Prime customers-those that pay $100 a year to receive free or reduced-rate shipping on certain items. The shopping extravaganza-the third for Amazon-is considered a mid-year Black Friday of sorts. Last year, analysts estimated that Amazon pulled in $500 million to $600 million on the blow-out sales day, (although some claimed the figure was closer to $1.8 billion worldwide) and predictions for this year hover around $2.2 billion.

7/18/2017

John Reese Forbes Articles
Forbes

Four Buffett-Inspired Picks That Could Outrun The Bulls

The annual "Running of the Bulls" is part of a nine-day festival held in Pamplona, Spain in which thousands of people attempt to outrun a small herd of bulls that are allowed to gallop frenetically through a series of small streets leading to a bullring, where the event ends. Some say the event originated in northeastern Spain during the early 14th century, when men would try to speed up the process of transporting cattle to market by spooking them into running.

7/10/2017

John Reese Forbes Articles
Forbes

Buffett's Bank Of America Windfall And Five Attractive Financials To Consider

Before the July 4 weekend began, Warren Buffett made some fireworks of his own. Last week, the CEO of Berkshire Hathaway decided to exercise the company's warrants to buy 700 million shares of Bank of America (BAC) common stock, a transaction that will result in an $11 billion windfall for Berkshire and represent Buffett's most profitable investment in this sector since the financial crisis. The deal with also make Berkshire Hathaway Bank of America's biggest shareholder (7%), surpassing Vanguard, which currently holds a 6% stake.

7/10/2017

John Reese TheStreet.com Articles
TheStreet.com

5 Small-Caps That Could Be Big Performers

The universe of publicly traded companies in the U.S. stock market is about half what it was 20 years ago -- despite the fact that gross domestic product (GDP) is triple what it was then -- and much of the shrinkage is attributable to the smallest companies, according to data from Credit Suisse. In May, a Bloomberg article reported that investors had pulled back from small-caps in a big way, more than they had in the 10 years prior and in stark contrast to their post-election surge.

7/5/2017

John Reese NASDAQ Articles
NASDAQ.com

A Review Of The Piotroski Book/Market Model

Quantitative investment strategies have drawn a lot of headlines and attention in the finance world, and represent an arm of passive investing which continues to rule the market roost. Since 2009, the flow of funds into the "quant" sector has more than doubled, and a number of high-profile money managers are bulking up their quant teams and relying more heavily on computer algorithms for stock-picking. The concept, however, isn't new.