i’m going to grab greenblatts book again…i read it a few years back but i think I need to retool and get more knowledge…
Skepticism warranted. There are 2/20 funds that do stupid things like buy gold and ETFs – why does that kind of fund even exist? Who are these people and who is giving them money?
There are funds with a real process for investing that create significant value over time in a repeatable methodology. It is hard to argue that Icahn’s returns are random, for example. A large piece of his business is corporate takeovers. It doesn’t get much less random than that.
Greenblatt’s returns are not random. He wrote a couple of books outlining how he did it. A major and repeatable competitive advantage is that his fund invests for a long time period. It is not about quarterly performance. Since most funds face arbitrary restrictions, including short-termism, based on structurally embedded factors such as basic human psychology (“I want the stock to go up 10 minutes after I buy it”), Greenblatt’s strategy is almost certainly repetable indefinitely as long as his capital base does not get too large.
Experience is also a major factor. Many people on the list have been doing this for a long, long time.
Greenblatt himself may have outperformed substantially, but his magic formula investing has had mixed reviews. The book he wrote outlines the stratgey only in a back-test. The most generous interpretation I’ve seen on the Net, from InsiderMonkey, is that the strategy has 4.5% alpha. Which is huge, if true.
^ That’s a different book. We’re talking about “You can be a stock market genius”.
I was talking about this book (both books actually).
The firm I work at uses a variation of the magic formula. I say variation because the firm has been around well before Greenblatt wrote his book, and because the strategy incorporates some other very important pieces that the magic formula does not.
What it’s interesting about the magic formula is that it assumes no skill. If you just buy low multiple stocks with good returns on capital, you will win based on this formula. In reality, a skilled analyst or fund manager would be able to avoid many pitfalls (this multiple is low because the business is dying and the ROC does not show that yet). In other words, the premise of the formula is great on a stand alone basis, but you can significantly improve it through skilled execution.
First of, the returns for these hedge funds are not made public. So unless you are an investor of each or the administrator, you would not be able to get an accurate return. It’s still possible that itleaked over the internet ( happens all the time in website such as dealbreaker or else), but it would not be official. Second, those are the management companies, they sure don’t publish their returns, the funds they manage do (feeders mostly and rarely master). So there is a slight possibility that these fund have a sub-serie as leveraged or Yen currency or whatever, with 4mio AUM that has remained at 0 or below for the periods mentioned. But since it would be a stretch, I am assuming, like the others that it’s BS. Soros for one became a family office, so good luck finding navs.
You and every other investor is wondering the same thing. I kind of understand the “buy it for the asset value” since apparently Sears owned a lot of the land their stores were on, but that argument lost a lot of weight after 2007. I wouldn’t go anywhere near SHLD, or a Sears store for that matter. I’ve been in a Sears ONCE in the past 7-8 years and it was to buy a $5 screwdriver that I couldn’t find anywhere else.
I think I’ve only seen one Sears in the last 7-8 years, and that’s while I was looking for something else. It’s tough to see why Sears still exists between big box and the internet.
i guess greats make mistakes too…but i figure given buffet’s experience with second rate retailers he would have been aware of the potential pitfalls…however, i have noticed a lot of value managers also hold sears (francis chou to name one)…
I remember when Berkowitz dissed Lampert as saying, he’s a “smart” guy, but not the genius everybody thought he was. LOL
Sears Canada is apparently doing much better. Competition is much less fierce.
Definitely true. Simply between fewer retailers operating in Canada and the fact that online purchases from the US are subject to 5-12% sales tax (depending on the destination province) at the border, it really discourages US purchases. Target is currently setting up shop in Canada though, they bought out a lot of locations from Zellers, a shitty chain that was owned by the Hudson’s Bay Company. The Bay is similar to Macy’s/JCPenney, while Zellers was kind of like Kmart.
Interestingly enough, at the beginning of summer, the Canadian government raised the duty free exemption for goods that people are allowed to bring back from the US for short trips (<72 hrs). You can only imagine how that pissed off Canadian retailers, since prices for most consumer goods are higher in Canada vs. US.
Sears is still weak in Canada…