Factor winners, Richard Oldfield, DIY investors and bad data - the best investing blogs and podcasts from the past week
What did you need to be doing to get the best returns out of the stock market so far this year? Well, in punishing conditions it was exposure to high dividends and low volatility that delivered the best results in the first half, which makes sense when you think about it…
Against a backdrop of surging inflation, interest rates hikes and the prospect of recession, dividend-paying stocks and conservative, low beta shares have undoubted appeal. These are the factors that text books tell you generally hold up in bearish phases, and so it has proved.
Traditional big divi payers in natural resources, healthcare and financials have fared much better than most in the market sell-off this year. Dividends have also been rebounding fast from the mass-cutting that went on during the Covid shock in 2020 and 2021. Meanwhile, low-vol stocks, which can sometimes find themselves overlooked in the good times, can and have resisted some of the heaviest selling. It’s been a somewhat triumphant period for safe, sensible, diversified investing.
But that’s where the good news largely ends. Half-year analysis by ETF provider WisdomTree, shows the resurgence of value over the past couple of years stalled between April and June 2022. With the prospect of recession on the cards, low quality value stocks seem to have lost their appeal for now, which perhaps isn’t surprising.
Momentum and size (the small-cap effect that ‘small beats big’ over time) both remain in the doldrums, and quality has been a mixed bag. Here’s a chart from the WisdomTree research (and you can read the details here).
Year to date outperformance of equity factors in developed markets
Sticking with the factor theme, this post from Nicolas Rabener at Factor Research is an indulgence for anyone with an affection for diving into the detail on this stuff: Outperformance Ain’t Alpha. In there, he pulls apart what really contributes to performance and how analysing factor exposures shows that ‘outperformance’ and investment ‘alpha’ really aren’t the same thing. And guess what? It turns out Cathie Wood’s Ark fund really is creating alpha!
If you want to dig further into the relationship between high and rising inflation and both sectors and factor performances, this blog from MSCI this week has a more technical take on it all: Inflation Sensitivity and Equity Returns.
Top posts from the past week
Behind the Balance Sheet - Episode 13 - The Contrarian
In this episode of the Behind the Balance Sheet podcast, Stephen Clapham talks to Richard Oldfield, the founder of investment firm Oldfield Partners and the author of the 2007 book, Simple But Not Easy. Richard is a deep value investor the likes of which have seen their numbers dwindle over the past decade as growth became the dominant market factor. What’s striking throughout this interview is his stoicism. The man was schooled in value through the pages of Ben Graham and hasn’t deviated from those principles whatsoever. His brand of investing is all about buying sound businesses at low valuations and in his words value investors “are born, not made”. He says it takes a particular type of person to become more interested in a company when its share price is falling. The conversation takes in his distaste for indexing and how the coming decade could be a good one for active money management. Plus the importance of psychology and having a long time horizon. There are some real gems in here for any investor - particularly those with an eye for value.
Occam Investing - Do DIY investors underperform?
You don’t have to look hard to find academic research showing that individual investors have a habit of underperforming the stock market. A potent combination of multiple bad decisions and trading fees are more than capable of ruining returns. But then there’s research that DIY investors can have an edge in the market and make profits that would be hard to imagine elsewhere. So where’s the truth? This is a great post from Occam Investing that explores some of the best research (some current and some dating back years) on both sides. As a disciple of index investing, Occam’s views are clear, but for the humble DIY’er there’s a lot of food for thought here.
Of Dollars And Data - When Data Fails
Nick Maggiulli’s blog, Of Dollars and Data, has been around since early 2017, and he went on to join Ritholtz Wealth Management in mid-2018 (where he’s now COO). He does a great job of weaving data science and storytelling in his investment articles (and I’d say there are echoes of Morgan Housel, who does it brilliantly). This article picks up on the theme of badly deployed data, or rather drawing the wrong conclusions from the data in front of you. Whether it’s missing something, badly collated or plain wrong, bad data is a perennial risk to investors and this blog makes sense of how it can happen.
UK Dividend Stocks - Portfolio 2022 half-year update
John Kingham has been interviewed on a couple of podcasts recently (profiled in the July 15 2022 issue of Fully Invested). This week he published his half-year portfolio update on his UK Dividend Stocks blog. I’m a big fan of private investors who blog the thinking behind their portfolios and update the good and bad on a periodic basis. John is a master at this and his blog this week takes a seriously deep dive into some of the ideas behind his approach, how he’s refined it over time into a series of rules-of-thumb.
Among other PI portfolio updates recently, you could try this from value and opportunity: Half Year Portfolio Review 2022 - Part 1 or this from DivHut: Dividend Income Update July 2022
Stratechery - Instagram, TikTok, and the Three Trends
The future of social media platforms like Facebook, Instagram, Twitter and TikTok are not only important to those firms and their shareholders, but also millions of others who are in various ways reliant on them. Ben Thompson, who writes the Stratechery blog, is a technology and media analyst who knows this stuff better than most. Much of his work isn’t free, but this article is, and offers some interesting ideas about how these platforms are evolving and what the future might hold for them.
Have a great weekend - and don’t forget to check out the best of the rest investment blogs and podcasts below…
Ben
Thinking & Strategy (Blogs)
Reality bites for private company funding
Investing Archives - Monevator
What is Defi? What Everyone Needs to Know about Decentralized Finance
Investment U
Alpha from Short-Term Signals
Alpha Architect
Value and momentum yes, size and CAPM no
Klement on Investing
The Self-Organizing Economy — Paul Krugman on Emergence and Instability
Athenarium
Learning the Wrong Lessons
Novel Investor
The Real Estate Market Is Turning A Corner
Mindfully Investing
Ben’s 4 Common Sense Rules of Investing
A Wealth of Common Sense
Family Business
Neckar's Minds of the Market
9-Chart Monday (8/15/22)
Compound Advisors
Thinking & Strategy (Podcasts)
TIP470: How to Leverage Information to Serve You Best w/ Ross Dawson
We Study Billionaires - The Investor’s Podcast Network
Episode #437: Edward Chancellor – Interest, Capitalism, & The Curse of Easy Money
Meb Faber Research – Stock Market and Investing Blog
Animal Spirits: The Animal Spirits Indicator
A Wealth of Common Sense
Ehren Stanhope, O’Shaughnessy Asset Management – The Great Inflation, Factors, and Stock Returns (The Best Investment Writing Volume 6)
Meb Faber Research – Stock Market and Investing Blog
Reciprocity: Getting What You Give
Farnam Street
MI209: The Art of Value Investing w/ Drew Weitz & Barton Hooper
The Investor's Podcast Network
David Perell—Write to Find Yourself (EP.119)
Infinite Loops
Day trader Michael Taylor: "Losers average losers"
Investors' Chronicle
Putting the Customer First for 90 Years with Scott King, CEO, and Jeff Gorman, Executive Chairman of The Gorman-Rupp Company (NYSE: GRC)
Compounders: The Anatomy of a Multibagger
Katherine Boyle - Investing for America - [Invest Like the Best, EP.290]
Invest Like the Best with Patrick O'Shaughnessy
Inside Long-Short Equity Investing
Podcasts Archive - Capital Allocators with Ted Seides
Securities & Markets (Blogs)
2022 Warren Buffett Portfolio Stocks List | Highest Conviction Picks Now
Sure Dividend
Top 5 Diamond Stocks To Buy
Investment U
Why we bought more Uber shares as the stock fell
Vitaliy Katsenelson Contrarian Edge
Invesco’s Anness: Four ‘surprising’ companies that can protect against inflation
Fund research from Trustnet
Deep dive #4: Natural Gas (part 1: overview) (part 2: $CNX and $DEC bull cases)
Yet Another Value Blog
Securities & Markets (Podcasts)
Funds Fan: investment trust bargains, and top US investor interview
interactive investor
ChargePoint: Leading the EV Charge - [Business Breakdowns, EP. 70]
Business Breakdowns
How to Beat the S&P 500 by 30 Percentage Points
What Goes Up
840: Intelligent Ultrasound CEO Stuart Gall on the company's best ever start to a year
The Vox Markets Podcast
Tribal Group (TRB) 2022 half year results presentation – August 2022
PI World
Small Caps Podcast with Paul Scott – Episode 7
Quality Small Caps
Show Us Your Portfolio: Rick Ferri
Excess Returns
Chris DeMuth's State of the Markets August 2022 (Podcast #121)
Yet Another Value Blog
Hi Ben, thanks for including me in your excellent roundup again. This is one seriously comprehensive list of content!