Articles

Articles Written by Validea Founder John Reese

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).

3/28/2018

John Reese Forbes Articles
Forbes

Make Your Own Luck In Investing With These Four Stocks

Four leaf clovers and pennies-on-the-sidewalk aside, it's pretty tough to count on getting lucky. As an investor, this is a good thing to keep in mind. Although we'd like to find causality between actions and outcomes, the sobering truth is that sometimes there's none to be had. The universe is rife with randomness, and the world of investing is no exception. In his book Thinking, Fast and Slow, Nobel Laureate Daniel Kahneman uses the example of basketball to describes what he argues are "misperceptions of randomness".

3/21/2018

John Reese NASDAQ Articles
NASDAQ.com

Investing Lessons From The Duchess Of Poker, Annie Duke, Plus Five Names To Hold

Is investing in the stock market the same as gambling? Are we betting the odds when we purchase a piece of a company, playing a version of capitalist casino, rolling the proverbial dice? It really all depends on your mindset about investing and your approach to making decisions. In his famous book The Intelligent Investor, the late Benjamin Graham wrote, "An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return. Operations not meeting these requirements are speculative."

3/14/2018

John Reese Globe and Mail Articles
The Globe and Mail

Three Stocks That Pass the Momentum Model Test

The trick to value investing is finding cheap stocks of well-run companies that are about to rise but haven't yet caught the attention of investors. It is in some ways the opposite of investing based on price movements, or momentum, a strategy that involves picking stocks that are already on an upswing with the expectation they have further to run. Value investors are supposed to focus on a company's numbers and not be swayed by technical analysis, however. Momentum investing is, after all, partly a self-fulfilling prophecy.

3/12/2018

John Reese Forbes Articles
Forbes

Apple And 4 Other Stocks That Fit Buffett's Investing Style

The much-anticipated release of Warren Buffett's annual letter to Berkshire Hathaway (BRK.A) shareholders at the end of February ignited the internet with a flurry of market and investment commentary. Some focused on the Berkshire's hefty cash balances against the dearth of acquisition opportunities, while others expanded on the famous ten-year, million-dollar bet Buffett waged-and won-that the S&P 500 would outperform a bundle of hedge funds (selected by investor Ted Seides). Still others, like the Wall Street Journal's Jason Zweig, zeroed in on what Buffett chose not to mention in the letter-that over the same ten-year period, Berkshire Hathaway also failed to outperform the S&P 500 (returning only 7.7% annually versus the index's 8.5% return).

3/5/2018

John Reese Forbes Articles
Forbes

12 Stocks That Fit The Investment Strategies Of Buffett, Lynch, Dreman And O'Shaughnessy

In this year's letter to Berkshire Hathaway shareholders, legendary CEO Warren Buffett lists the characteristics he looks for when considering a company for purchase, which include durable competitive strengths, strong management, and "a sensible purchase price." For this stock market guru, "sensible" is gauged by evaluating the following quantitative criteria (as outlined in the book Buffettology)

2/27/2018

John Reese NASDAQ Articles
NASDAQ.com

Screening For Super Stocks

The market blip that occurred earlier this month, sending shock waves through the much of the investment community, didn't faze legendary investor Ken Fisher. In a recent USA Today article, the market guru advises, "If you're fully invested, sit on your hands. Hard! For cash holders this action prescribes buying. Always stay cool. Fight any urge to sell. It's all signaling more new highs ahead." Fisher, who leads the money management firm Fisher Investments (approximately $70 billion in managed assets), goes on to say, "During corrections, media and market mavens invariably search for justifying causes. What made it happen? Why? By the time they agree, it's all over."

2/20/2018

John Reese Globe and Mail Articles
The Globe and Mail

When It Comes to Investing, There's Safety in Simplicity

It's easy to make investing overly complicated. Every day, nearly 10,000 U.S. mutual funds and exchange-traded funds compete for investor dollars with thousands of listed stocks, not to mention a dizzying array of options, futures and derivatives and trillions of dollars of bonds. Every day, fund managers are trying to lure investors with new strategies to make money.