Articles

Articles Written by Validea Founder John Reese

11/19/2018

John Reese Forbes Articles
Forbes

The Deeper Lesson From Berkshire Hathaway's Share Buyback

Berkshire Hathaway (BRK.A), the global conglomerate headed by legendary investment guru Warren Buffett announced last week that it went into the open market earlier this summer and bought $928 million of its own stock. The market viewed it as big news, and Berkshire's stock was up 5% on the day of the announcement. The buyback was the tangible result of the company's recent change in its repurchase policy that allows Buffett and Berkshire Vice Chairman, Charlie Munger more flexibility in stock repurchases. It also shed further light on how differently Berkshire Hathaway views its cash--and its stock--than other public companies do.

11/14/2018

John Reese Globe and Mail Articles
The Globe and Mail

Three Solid Stocks That Are Well Situated To Thrive

When it comes to elections or economic issues, there's always a group of experts everyone turns to for predictions and forecasts. They aren't always right. Forecasting is difficult even with the best available data. Few people predicted the election of Donald Trump in 2016, and yet, here we are halfway through his presidential term. Last week's midterm elections, throwing the U.S. House of Representatives back to the control of the Democrats, was in keeping with the expected outcome, but few could have foreseen the turbulence in the markets leading up to polling day.

11/4/2018

John Reese Forbes Articles
Forbes

Federal Reserve: Friend Or Foe?

The Federal Open Market Committee, the monetary policymaking arm of the Federal Reserve, is scheduled to meet next on November 7. Those who watch the Fed closely don't expect to see any increase in the Fed Funds rate at that meeting. Nevertheless, the consensus view is that interest rates will continue to rise into 2020. The risks or benefits of higher interest rates are in the eye of the beholder. For borrowers, higher interest rates are a net negative. For savers, the reverse is the case. For banks, they are an absolute positive.

10/30/2018

John Reese Forbes Articles
Forbes

Panic Or Profit? October Market Swoon Leads To Opportunities In These 5 Beaten Down Stocks

To paraphrase Rudyard Kipling, the world belongs to those who remain calm when others around them are losing their heads. That may be how we remember what transpired in the month of October. Most major indices corrected or came close to correction territory, and underneath the surface there was a lot of pain in many individual stocks. In general, bull markets climb a wall of worry and bear markets slide down a slope of hope. If all you looked at is the performance of stocks in October, there would seem there's much to worry about.

10/29/2018

John Reese Globe and Mail Articles
The Globe and Mail

Focusing On Process Over Outcome: Three Stocks the Investment Legends Would Approve Of

In South Carolina last week, someone or a group of people won the US$1.5-billion lottery jackpot, the largest in U.S. history. And believe it or not, two winners will share another jackpot of almost US$700-million. Imagine winning both. For nearly everyone, those odds are impossible to beat. But of course, there is eventually always a winner. If you pick your own numbers, you might be tempted to attribute your lottery success to skill, but there certainly is a lot of luck involved. The same holds true for investing, at least in the short term.

9/18/2018

John Reese Globe and Mail Articles
The Globe and Mail

These 3 Stocks Would Appeal to the All-Time Great Investors

If there's one lesson to be learned from observing the habits of some of the most successful investors over the years, it's discipline. This sounds a lot easier than it is in practice. Human nature is emotional, and its instinct is to flee danger. Despite good intentions, it's easy for investors to chase hot stocks, react impulsively to market swings and make rash decisions that end up being costly mistakes. Along the way, long-term goals get kicked to the side and the most carefully constructed plan can get derailed. Investing for the long-term means resisting short-term reactions.

8/17/2018

John Reese Globe and Mail Articles
The Globe and Mail

These Eight Stocks Are Buying Back Shares and Score Highly With Top Investing Strategies

The race to become the first US$1-trillion company ended this month when Apple Inc. crossed the finish line, but there are a few other tech companies also on the brink. Amazon Inc., Google parent Alphabet Inc. and Microsoft Corp. are within striking distance and Facebook Inc. isn't too far behind. If that group rings any bells for you, it's because most of them make up the much discussed FANG group of tech stocks that have driven the indexes higher for the better part of the last year. Some names briefly cooled off in the past month or so, but the group is still pushing technology as the S&P 500's leading sector.

8/14/2018

John Reese Forbes Articles
Forbes

Six Buffett-Inspired Stock Buys

When Mohnish Pabrai immigrated to the U.S. from India in the 1980s, he probably never imagined that some 20 years later he would be sitting down to lunch with Warren Buffett. Pabrai was introduced to Buffett nearly 25 years ago when he read Roger Lowenstein's book, Buffett: The Making of an American Capitalist. The book led him to Buffett's letters to Berkshire Hathaway (BRK.A) shareholders which, Pabrai said in a recent interview with online research platform Sumzero, "radically changed my life for the good-for the better, which was wonderful."

8/13/2018

John Reese Forbes Articles
Forbes

The Strong Case For Small-Cap Investing In Today's Market

For investors, staying small and close to home could pay off. A tumultuous global landscape is fueling the appeal of domestic, small-cap stocks that tend to be insulated from the threat of trade war and a strong dollar. These companies are made more attractive by the juxtaposition of increased U.S. retail sales and consumer spending alongside dampened optimism for synchronized global growth-all pointing to an American economy that may have more room to run.

7/30/2018

John Reese NASDAQ Articles
NASDAQ.com

Contrarian Investing David Dreman-Style

In a recent interview with the Columbia University investment newsletter Graham & Doddsville , adjunct finance professor Michael Mauboussin said, "If you distinguish the great investors from the average investors, it's not because their cost of capital calculation is more accurate. It almost always has to do with the fact that they're able to make good decisions and be correctly contrarian in adversity." He later quips, "Being contrarian for the sake of being a contrarian is a bad idea."

7/26/2018

John Reese Forbes Articles
Forbes

Don't Sit Out The Market, Here's Why

When considering the odds of winning, the old Arizona state lottery slogan "You can't win if you don't play" seems pretty misleading. But if you're a level-headed investor who sticks to fundamentals, the same slogan could apply to the stock market. No matter how often we hear that stock market timing is an ill-fated pursuit, there are still those among us who fall victim to headlines, emotions, elections or other outcomes that are very difficult to predict. More often than not, this can lead to the unfortunate scenario of buying high, selling low and missing out on returns that stocks produce over time. The concept, which applies regardless of the age of the economic cycle, may be particularly relevant today, as the current bull market continues closing in on its ten-year anniversary.

7/16/2018

John Reese Forbes Articles
Forbes

Six Guru-Approved Oil And Tech Stock Buys

The oil and tech sectors are both performing well and presenting opportunities for investors, but in different ways. According to a recent Wall Street Journal article, since the oil-price bottom of January 2016, both the global oil and tech sectors have returned more than 80% (including dividends), widely outperforming the broader market, which gained 53%. But the article explains that the underlying factors differ: the oil sector is following a trajectory of post-crash rebound, while the tech sector has been led to "heady heights by giddy enthusiasm for a bright future." And these divergent factors set decidedly different stages with respect to sustainability.

7/8/2018

John Reese Globe and Mail Articles
The Globe and Mail

Who Says Growth Stocks Can't Be Value Investments?

Stocks of high-growth companies can help investors beat the market but there are some downsides. Often the fast-growth trajectory is already reflected in the price of the stock, making it difficult to distinguish between the real opportunities and the overpriced. And then there are the growth stocks that have morphed into value plays. People tend to look at value and growth strategies as opposites. But they are not as mutually exclusive as that. In some ways, they are phases on the same spectrum."

6/19/2018

John Reese NASDAQ Articles
NASDAQ.com

Four Picks for the Get-Up-Off-the-Mat Value Investor

Where has all the value investing gone? If you go by the traditional definition championed by the late Benjamin Graham and his disciple Warren Buffett-that value investing involves assessing a company's intrinsic value and comparing it to such metrics as price-earnings and price-book ratios--you can see why the strategy has seen years of rough sledding. A recent article in The Wall Street Journal put it this way: "Hunting for cheap stocks has been out of favor for so long that some self-proclaimed 'value' investors are embracing a broader mandate, a potentially costly move in the later stages of an economic cycle."

6/12/2018

John Reese Forbes Articles
Forbes

Prolific Quant Investor Tweets Up A Storm, Plus Five Stocks For The Wise Investor

As an investor, knowing what you don't know could be just as important-if not more so-than knowing what you do. At least that's the gist of a recent tweetstorm by famed investor James O'Shaughnessy, CEO of O'Shaughnessy Asset Management and author of the classic investing tome "What Works on Wall Street" (1996). Bloomberg columnist Barry Ritholtz described the post as "intriguing," and one that addressed, "our own lack of understanding of our own lack of understanding." In an interview with Bloomberg last year, O'Shaughnessy argued: "I have come to the conclusion--after 30 years of doing this and seeing clients' behavior just continue to repeat itself," he says, "the majority of investors lack the emotional characteristics and the personality traits that allow them to go on to become successful investors."

6/10/2018

John Reese Globe and Mail Articles
The Globe and Mail

Why Value Investors Shouldn't Give Up Just Yet

While growth stocks continue to clobber value stocks, causing many investors to question their priorities, it's not time to declare the death of value investing. Sure, the technology-heavy Nasdaq is at yet another record high in the ninth year of a broad bull market, led by tech giants Facebook, Amazon.com, Netflix and Google parent Alphabet, not to mention Apple. The rotation back to value stocks that many people started to anticipate two years ago has yet to materialize in the face of this relentless growth-stock rally. Instead, it seems some well-known value investors have shifted their thinking after five years of losing out.

5/29/2018

John Reese Forbes Articles
Forbes

Berkshire, Apple And Other Buffett-Like Picks

In an article I wrote last year titled, "Why Doesn't Berkshire Just Buy More Apple?" I argued that CEO Warren Buffett might consider putting his bloated cash balances to work by taking a bigger bite of the tech behemoth that he already knew and loved. Turns out, he did just that. Despite weak demand for the iPhone X and growing saturation in the smartphone market, the Oracle of Omaha upped his Apple ante last quarter by a staggering 75 million shares (45%), bringing Berkshire's total stake in Apple to approximately 5%.

5/27/2018

John Reese Globe and Mail Articles
The Globe and Mail

Adopting a Factor-Investing Strategy For a Little Extra Return

Investors are always warned not to put all their eggs in one basket. It's less risky and more rewarding to spread money around. Traditionally, this approach involved investing a certain percentage of money in bonds and another chunk in stocks of various types. This has gotten a lot easier with the explosion of passive investments such as exchange-traded funds, especially those tracking the stock-market indexes. All an investor has to do is pick an index to track, invest the money in the corresponding ETF and then sit back and watch. But fund companies didn't just stop there. In addition to funds tracking the indexes as they are, a whole industry of funds tracking the indexes in different ways also sprouted up.

5/16/2018

John Reese NASDAQ Articles
NASDAQ.com

No Fooling Around With This Top Performing Small Cap Growth Stock Model

When you buy shares of big, well-known companies, you're swimming with the sharks. At least that's the opinion of David and Tom Gardner, brothers and co-founders of the multi-media financial services company The Motley Fool. They argue that Wall Street (and analysts) devote a lot of time and attention to these companies and that individual investors are therefore unlikely to uncover something everyone else has missed. Small-cap stocks, on the other hand, are described on their site as "a deserted lagoon" many of which are "pearls of potential profit, waiting for the right catalyst to value them into the limelight." Although they tend to suffer deeper dips than their larger counterparts, the Gardners argue that small-caps can offer huge upside.

5/6/2018

John Reese Globe and Mail Articles
The Globe and Mail

Megadeals Are Back Amid Increasing M&A Activity

Markets have returned to volatility after an unusually calm 2017, but that hasn't stopped companies from striking deals to combine. So far this year, a record US$1.7-trillion in deals have been announced, nearly US$120-billion of that in just a few days last week, including T-Mobile US Inc.'s US$59-billion bid for Sprint Corp. More notable is the size of the transactions. Thomson Reuters points out that while the number of deals is down from this time last year, their size is way up. Megadeals - in the billions of dollars - are more than half of current activity.

5/3/2018

John Reese NASDAQ Articles
NASDAQ.com

A List For The Tenacious Value Investor

Value investors haven't had it too easy in recent years. But it's never really easy to be a value investor, an approach that involves buying out-of-favor stocks based on the future potential of the underlying business-described by legendary investor Warren Buffett as buying "a wonderful business at a fair price" rather than a "fair business at a wonderful price." Recent years have seen value stocks languish as growth stocks, particularly the tech giants, have pushed ahead.

4/25/2018

John Reese Forbes Articles
Forbes

Four Fundamentally Sound Stocks For A Focused, Institutional-Like Portfolio

Passive investing has spread like wildfire in recent years, but that doesn't mean an active approach can no longer reap rewards. Passive investing is a rules-based, disciplined strategy that strives to obtain the same return as the broader market by buying a cross-section of it and weighting holdings based on market capitalization. Conversely, active investing (also referred to as "stock picking") involves the individual selection of securities by an investor or portfolio manager.The shift away from active and into passive has been dramatic, driven by both the lower cost and historically better performance of passive funds.

4/18/2018

John Reese NASDAQ Articles
NASDAQ.com

Jelly Beans, Group Think and Greenblatt's Magic Formula

Even investing legends sometimes need props. When Gotham Asset Management co-founder Joel Greenblatt was asked to teach stock market concepts to ninth-graders in Harlem, he brought a large jar of jelly beans to the class and asked them to guess how many were in the jar. He allowed the students to hold and scrutinize the jar to arrive at their estimates and then, after each had written a guess, allowed them to make a second guess if they so desired.

4/16/2018

John Reese Globe and Mail Articles
The Globe and Mail

Five Debt-Laden Stocks That Could Be Attractive Buys

Debt isn't always the dirty word stock investors think it is. Some of the most successful investors over time have used debt to buy cheap companies, nurse them to health and reap the gains. Private-equity firms try to capitalize on debt to reap profit. They snap up struggling publicly traded companies, with the help of some debt financing, spend a few years turning them around by restructuring or shedding businesses and then they sell them back to public stockholders, ideally at a gain.

4/3/2018

John Reese Globe and Mail Articles
The Globe and Mail

These Three Stocks Score Highly in a Model Inspired by Warren Buffett's Bridge Philosophy

During a bridge game in 1968, investing legend Warren Buffett told mathematician Edward Thorp, "Investing in a market where people believe in efficiency is like playing bridge with someone who has been told it doesn't do any good to look at the cards." He was preaching to the choir. A few years earlier, the MIT professor figured out how to beat casinos in blackjack by identifying the sequencing of cards (he went on to invent a wearable computer to help him win at roulette). Mr. Buffett was an early admirer (casino operators were not).