Articles

Articles Written by Validea Founder John Reese

5/15/2019

John Reese Globe and Mail Articles
The Globe and Mail

By Buying into Amazon, Warren Buffett Rethinks What it Means to be a Value Investor

Earlier this month, Warren Buffett revealed to the world that Berkshire Hathaway Inc. had taken on its first stake in the e-commerce juggernaut Amazon.com Inc. A regulatory filing on Wednesday confirmed how much: 483,300 shares, or US$860.6-million worth of stock, as of March 31. For years, the billionaire value investor famously avoided high-flying tech stocks such as Amazon, which have dominated index returns for the past year-and-a-half. But he seems to have come around to a new way of thinking about what it means to be a value investor.

4/17/2019

John Reese Globe and Mail Articles
The Globe and Mail

Dividends and Buybacks: A Stock Picking Strategy That Takes Both Into Account for Producing Superior Returns

Dividend investors may be leaving some money on the table. Picking stocks based on their dividend payouts is a time-tested strategy, boosting returns for investors compared with the broad market and providing steady income. Bank and utility stocks come to mind. The companies generate a steady-enough amount of cash that management feels comfortable paying it back to shareholders in a predictable way. But company managements are increasingly using the share buyback as a way to return capital to shareholders, and strict dividend investing doesn't capture that activity.

3/12/2019

John Reese Globe and Mail Articles
The Globe and Mail

Six Stocks Uncovered by Using the Magic Formula

Avoid overpaying for stocks. That's the consistent message from the world's most successful investors. This rule applies under any market condition, including the current long-running bull market. December's rout cleared out some room for bargain hunters until the rebound so far this year reclaimed the lost ground, but there still are ways to spot the good opportunities while eliminating some of the guesswork. Warren Buffett's technique is to buy well-priced stocks of quality companies. It is a slight twist on the view of Benjamin Graham, the father of value investing, who looked for stocks that were trading cheaply relative to others and the value of the underlying businesses.

1/29/2019

John Reese Forbes Articles
Forbes

Contrarian Investors Consider Wading Into Emerging Markets But Risks Remain

Investors in emerging markets had their heads handed to them in 2018, losing roughly 18% of their value on the year. If that wasn't bad enough, just days before the World Economic Forum was slated to begin in Davos, Switzerland, the International Monetary Fund released its World Economic Report for 2019 and 2020. And, the forecast wasn't great.

1/16/2019

John Reese Globe and Mail Articles
The Globe and Mail

How to Find Undervalued Stocks in the Wake of Last Year's Big Selloff

After letting off steam late last year, stocks have bounced back in a post-holiday rally that gives some rays of hope for investors. While companies are resetting earnings growth expectations lower this year, last year's stock sell-off means there are likely some real bargains out there. One of the most widely used yardsticks used by investors to judge whether a stock is overpriced or undervalued is the price-to-earnings ratio, or earnings multiple. It is supposed to reflect how much investors are willing to pay for $1 of a company's earnings.

12/19/2018

John Reese Forbes Articles
Forbes

Getting Contrarian With Commodities

Commodities prices for basic materials (gold, silver and copper) and agriculture and livestock products (wheat, hogs, and cattle) have been in the doldrums for more than a year now. And, energy (oil and gas) has been in contango since June 2008. Contango is futures trader's jargon for the equivalent of an inverted yield curve, where the further out into the future you look, the lower price gets. The pain in the commodity trade may be about to change though.

12/12/2018

John Reese Globe and Mail Articles
The Globe and Mail

These 3 Companies Are Buying Back Shares And Score Highly With Top Investing Strategies

Companies started this year with plenty of cash, thanks to a big tax cut, and they've put that money to work in the market. Specifically, they've been buying their own stock. Even Warren Buffett's Berkshire Hathaway joined the crowd, announcing recently it had acquired nearly US$1-billion of its own shares in the last few months. Through November, U.S. companies bought a record US$957-billion of their own stock and were on pace to top the US$1-trillion mark for the year, according to San Francisco-based TrimTabs Investment Research, though the activity does tend to slow in the last weeks of December.

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.