US Stocks, 2023

[JimGant]

Been a good year for US stocks, particularly compared to last year. Now, I've never been smart enough to invest in individual stocks -- figured the insiders have already queered the package. But, years ago, in researching where to put my IRA tax deferred inputs, the reports on an actively managed fund, Contrafund, caught my attention. Hence, that's where I went. Nice choice, as it turned out; haven't quite made the million mark, per the link, below, due to RMDs, but close. And, of course, 'past is not prologue,' so maybe Contrafund's magic is burned up. Nevertheless, if you're stuck with an under performing mutual fund, maybe a look at this article is warranted:

https://pictureperfectportfolios.com/fidelity-contrafund-fcntx-review-actively-managed-mutual-fund/

[Mike Lister]

https://www.morningstar.com/stocks/why-weve-downgraded-fidelity-contrafund

 

This is why other successful managed funds such as Royal London Global Select have closed the fund to new purchase in order to limit its size.

Edited December 30, 2023 by Mike Lister

[JimGant]

https://www.morningstar.com/stocks/why-weve-downgraded-fidelity-contrafund

 

Good find. Something to consider in your overall evaluation of whether or not to invest in Contrafund.

[Mike Lister]

I've held several different managed funds that have performed well over the years, Lindsell Train Global Royal London Select, Fundsmith, JPM EM etc. I finally realised that every fund has a shelf life at the top, the trick is to buy into it before it begins that life. Buying in once it's up there, rarely works well for me. As they say in all the blurb in the UK, past performance is no guide to future returns. 

[Thailand J]

I used to have money in Fidelity Magellan under the management of legendary Peter Lynch. Did very well for a few years. That was where I learnt most managed funds don't beat the broadmarket in the long run and moved my money into index funds.

Last decade  Contrafund was good but not outstanding compared to the broadmarket. You must have got in before that.

Contrafund vs VOO, 10 yr, 5 yr and 3 yr:

 

Edited December 30, 2023 by Thailand J

[Mike Lister]

1 hour ago, Thailand J said:

I used to have money in Fidelity Magellan under the management of legendary Peter Lynch. Did very well for a few years. That was where I learnt most managed funds don't beat the broadmarket in the long run and moved my money into index funds.

Last decade  Contrafund was good but not outstanding compared to the broadmarket. You must have got in before that.

Contrafund vs VOO, 10 yr, 5 yr and 3 yr:

 

Unfortunately that's true, every do has its day in the sun and then it starts to rain. I also learned that lesson about index funds and trackers beating the market/benchmark consistently. Index Funds and Trackers are great, except in a down market, when they fall, you have nowhere to go and you have to take the ride down. At least with a managed fund there's a Fund Manager who can take the fund into different things or at least mitigate the effect of the fall, with trackers you don't have that. That's not a problem if you're young enough to have the time for loss recovery but if you're a pensioner you may not hence there is a real risk of permanent loss.

[Thailand J]

1 hour ago, Mike Lister said:

take the fund into different things or at least mitigate the effect of the fall

I believe fund managers do everything to help, not just that, but no thanks.

The only non index fund i have is BRK/B where I moved all my cash reserve in my portfolio into, thinking that it is a stable investment.

 

 

Edited December 31, 2023 by Thailand J

[Thailand J]

I recall it was Magellan manager Jeff Vinik who sold tech stocks in the fund in 1995/1996. He predicted a tech stocks correction 4 or 5 years too early and missed the rally.

Edited December 31, 2023 by Thailand J

[noobexpat]

5 hours ago, Mike Lister said:

At least with a managed fund there's a Fund Manager who can take the fund into different things or at least mitigate the effect of the fall

 

I'm not wholly convinced by that principle. Suggesting that a fund manager will time the market ...and get it correct twice!

On the way out and back in again.

I have mainly trackers but about 7 active funds.

Here is my emerging markets one (dark green) with the global EM benchmark in orange. Screenshot from financial times.

This fund hit about £100k for me and then sank quickly. And then it just mirrored the benchmark - but it will probably be in the top quartile performers for a good few years, due to that short timeframe of outperformance - making it look artificiallybetter than it is? Wonder why they didn't take more profit at the time. I think they are mostly reactionary. 

Not complaining ...but a bit frustrating on this particular fund.

 

 

[Mike Lister]

2 hours ago, noobexpat said:

 

I'm not wholly convinced by that principle. Suggesting that a fund manager will time the market ...and get it correct twice!

On the way out and back in again.

I have mainly trackers but about 7 active funds.

Here is my emerging markets one (dark green) with the global EM benchmark in orange. Screenshot from financial times.

This fund hit about £100k for me and then sank quickly. And then it just mirrored the benchmark - but it will probably be in the top quartile performers for a good few years, due to that short timeframe of outperformance - making it look artificiallybetter than it is? Wonder why they didn't take more profit at the time. I think they are mostly reactionary. 

Not complaining ...but a bit frustrating on this particular fund.

If an active fund is invested across a number of different markets, the FM has the ability to switch out of one market and into another or go into cash, if things start to go South. The FM doesn’t have time his re-entry, he just has to exit and avoid the loss that a falling market will cause to a tracker in order to be ahead of the game.

 

Significant market crashes since 1950 are as high as 60%. The time to recovery can be as long as 15 years (in the case of the 1929 crash).

 

August 1957 (21%)

April 1960 (14%)

December 1969 (36%)

November 1973 (48%)

January 1980 (17%)

July 1981 (27%)

July 1990 (20%)

March 2001 (37%)

December 2007 (57%)

February 2020 (34%)

Average (31%)

 

https://www.morningstar.com/portfolios/how-long-will-it-take-market-recover

 

 

Again, if you’re 25 or 30 years old, a 15 year recovery is manageable, if you’re 70 or 75, it probably isn’t.

[noobexpat]

3 hours ago, Mike Lister said:

If an active fund is invested across a number of different markets, the FM has the ability to switch out of one market and into another or go into cash, if things start to go South. The FM doesn’t have time his re-entry, he just has to exit and avoid the loss that a falling market will cause to a tracker in order to be ahead of the game.

 

Significant market crashes since 1950 are as high as 60%. The time to recovery can be as long as 15 years (in the case of the 1929 crash).

 

August 1957 (21%)

April 1960 (14%)

December 1969 (36%)

November 1973 (48%)

January 1980 (17%)

July 1981 (27%)

July 1990 (20%)

March 2001 (37%)

December 2007 (57%)

February 2020 (34%)

Average (31%)

 

https://www.morningstar.com/portfolios/how-long-will-it-take-market-recover

 

 

Again, if you’re 25 or 30 years old, a 15 year recovery is manageable, if you’re 70 or 75, it probably isn’t.

 

The principal sounds good and i guess you only know whether the fund will make a big change, after it happens.

 

Restrictions like a low turnover mandate can scupper good intentions. I think mutual funds pride themselves on a low turnover percentage ...5%pa ?? 

 

Then they can have similar rules for cash, geography, small/large cap etc. Mixed asset funds have to have a minimum equity concentration to maintain their fund type for tax purposes as well (some rule that i can't remember).

 

Can be tricky to pick a fund, have expectations and they may not happen. Yes i would love to not have recovery times!!

 

 

Low turnover mandate:This mandate puts a cap on the amount of a portfolio that is sold every year to reduce the turnover. This might also restrict how much of the total fund value managers can trade in a given quarter or year for that matter.

[Mike Lister]

12 minutes ago, noobexpat said:

 

The principal sounds good and i guess you only know whether the fund will make a big change, after it happens.

 

Restrictions like a low turnover mandate can scupper good intentions. I think mutual funds pride themselves on a low turnover percentage ...5%pa ?? 

 

Then they can have similar rules for cash, geography, small/large cap etc. Mixed asset funds have to have a minimum equity concentration to maintain their fund type for tax purposes as well (some rule that i can't remember).

 

Can be tricky to pick a fund, have expectations and they may not happen. Yes i would love to not have recovery times!!

 

 

Low turnover mandate:This mandate puts a cap on the amount of a portfolio that is sold every year to reduce the turnover. This might also restrict how much of the total fund value managers can trade in a given quarter or year for that matter.

I have held JPM Global Equity for some time, it was interesting to watch earlier this year in July as the fund went into cash by over 25%. Ordinarily you'd squeal if a FM held that much cash but the reason why became clear in July as the S&P fell by 10% and the fund maintained value. I've watched a number of similar events and at 10% it's not a big deal. But what if it were 30% of more! Food for thought.

[Walker88]

4 hours ago, Mike Lister said:

If an active fund is invested across a number of different markets, the FM has the ability to switch out of one market and into another or go into cash, if things start to go South. The FM doesn’t have time his re-entry, he just has to exit and avoid the loss that a falling market will cause to a tracker in order to be ahead of the game.

 

Significant market crashes since 1950 are as high as 60%. The time to recovery can be as long as 15 years (in the case of the 1929 crash).

 

August 1957 (21%)

April 1960 (14%)

December 1969 (36%)

November 1973 (48%)

January 1980 (17%)

July 1981 (27%)

July 1990 (20%)

March 2001 (37%)

December 2007 (57%)

February 2020 (34%)

Average (31%)

 

https://www.morningstar.com/portfolios/how-long-will-it-take-market-recover

 

 

Again, if you’re 25 or 30 years old, a 15 year recovery is manageable, if you’re 70 or 75, it probably isn’t.

After 1929 the Dow did not reach a new high until 1954---and only because the index replaced the bankrupt companies.

 

Japan peaked in Dec 1989 at 38.915.87 on the Nikkei, and 34 years later has yet to fully recover.

 

Of course both of those instances involved wildly overpriced markets. That is not quite the case today.

 

Let us not forget Oct 19, 1987, when the Dow fell 23% in one day.

[noobexpat]

1 hour ago, Walker88 said:

After 1929 the Dow did not reach a new high until 1954---and only because the index replaced the bankrupt companies.

 

 

Looking at past dow charts (i assume) won't show dividends, which i think is about 4.4% pa long term average. Really hard to actually find a dow total return graph, from the old days.

 

It should shorten that timeframe a bit.

[save the frogs]

15 hours ago, Thailand J said:

I used to have money in Fidelity Magellan under the management of legendary Peter Lynch. Did very well for a few years. That was where I learnt most managed funds don't beat the broadmarket in the long run and moved my money into index funds.

 

Yeah, so if a "legendary fund manager" can't beat the index, I can only imagine how many hordes and hordes of crappy fund managers there are out there screwing people out of their hard-earned income. 

 

[FruitPudding]

They can't beat the index because they can't just sit on their hands and do nothing for years -- they'd lose their jobs.

 

So, they play around with the portfolio - to keep their jobs - which ironically causes them to perform worse than the market.

[Mike Lister]

Fund Managers beat the benchmark and the Index on a regular basis, it happens all the time. The problem is, they can't do it consistently over many years.

[Yellowtail]

The problem with managed funds, it that there are not enough great fund managers to go around.

 

You look at a fund with great ten-year performance, and when you check, the manager has only been managing the fund for a year. I look at the people coming out with advanced degrees today and I do not see this improving. 

 

I've only bought three individual stocks and they all did well. 

I bought Boeing after watching a video of the development of the 777 during a plant tour. 

I bought Apple after buying an ipod and being so impressed at how perfectly well thought out everything was just opening the box. Never really even used the ipod but I loved it. 

I bought Brunswick after meeting one of their product managers on a fishing trip. We talked shop for a week and I was sold. 

 

I pick funds using Fidelity's sort function to look at performance. All but one have been good, and a couple have been great.  

Edited December 31, 2023 by Yellowtail

[Mike Lister]

1 hour ago, Yellowtail said:

The problem with managed funds, it that there are not enough great fund managers to go around.

 

You look at a fund with great ten-year performance, and when you check, the manager has only been managing the fund for a year. I look at the people coming out with advanced degrees today and I do not see this improving. 

 

I've only bought three individual stocks and they all did well. 

I bought Boeing after watching a video of the development of the 777 during a plant tour. 

I bought Apple after buying an ipod and being so impressed at how perfectly well thought out everything was just opening the box. Never really even used the ipod but I loved it. 

I bought Brunswick after meeting one of their product managers on a fishing trip. We talked shop for a week and I was sold. 

 

I pick funds using Fidelity's sort function to look at performance. All but one have been good, and a couple have been great.  

You appear to pick individual stocks based on emotion and funds based on past performance, is that really smart? I confess I also used to use past performance as a major guide until I started to pay attention to the metrics and other factors.

 

Today, I have several gates that any fund must pass through before I considering buying. Volatility must be below 16 fund P/E must be below 16 also, I look for Beta's less than 1.0, 1.5 at absolute max and Alpha's of 3.0 or more. Every fund must operate in more than one geographic region with no more than 60% in the US. Fund Size is also an indicator I look at closely, funds can be too small and at risk of closure but also too big which means they are not capable of being nimble. A P/B with a max of 3.0 and a P/S of with a max of 2.0. Giant and large caps around 75%, medium caps of 16% and small caps of 8% is about right in these uncertain times. As far as style is concerned, I try to stick with blends rather than trying to time growth and value, I reckon that's the FM's job, another good reason to go with a managed fund.  Lastly, I try not to hold more than 10% in any one fund or fund house, unless its short term money market fund and even then it's usually giants like Fidelity of Vanguard. Once I've done all those things, I check my entire portfolio for the extent of overlap. Some duplication across funds is inevitable and even desirable to some degree but too much defeats the purpose of holding multiple funds. My best fund currently is Royal London Global Select which I bought into early, the fund is now closed to new buyers. It's returned over 27% this year and has an alpha of 14.5! Happy days.

[Yellowtail]

41 minutes ago, Mike Lister said:

You appear to pick individual stocks based on emotion and funds based on past performance, is that really smart? I confess I also used to use past performance as a major guide until I started to pay attention to the metrics and other factors.

No, the events inspired me to consider them. The events also provided great information not easily available otherwise. With Apple, it was the marketing, quality and attention to detail. With Boeing, it was the relentless pursuit of safety, compliance and customer service. With Brunswick, it was the direction the company was going, the recent capital upgrades and the new product platforms in the pipeline. 

 

I've worked in manufacturing most of my and I've been though I'd bet over a hundred plants in seven countries, and I know what a great operation looks like, and what competent people sound like. 

 

Yes, I select funds based on past performance. I would much rather select them based on future performance, but I can never find the data. 

 

 

41 minutes ago, Mike Lister said:

Today, I have several gates that any fund must pass through before I considering buying. Volatility must be below 16 fund P/E must be below 16 also, I look for Beta's less than 1.0, 1.5 at absolute max and Alpha's of 3.0 or more. Every fund must operate in more than one geographic region with no more than 60% in the US. Fund Size is also an indicator I look at closely, funds can be too small and at risk of closure but also too big which means they are not capable of being nimble. A P/B with a max of 3.0 and a P/S of with a max of 2.0. Giant and large caps around 75%, medium caps of 16% and small caps of 8% is about right in these uncertain times. As far as style is concerned, I try to stick with blends rather than trying to time growth and value, I reckon that's the FM's job, another good reason to go with a managed fund.  Lastly, I try not to hold more than 10% in any one fund or fund house, unless its short term money market fund and even then it's usually giants like Fidelity of Vanguard. Once I've done all those things, I check my entire portfolio for the extent of overlap. Some duplication across funds is inevitable and even desirable to some degree but too much defeats the purpose of holding multiple funds. My best fund currently is Royal London Global Select which I bought into early, the fund is now closed to new buyers. It's returned over 27% this year and has an alpha of 14.5! Happy days.

 

Yeah, I'm not real bright, and it seems to me like pretty much all that stuff is based on past performance too. 

 

When I first got into it, I watched CNBC Asia religiously listening to everyone's analysis. Special guest comes on about a particular company that had been in the news and goes all wild-eyed graphing in different colors on the glass. I'm a graph guy and this guy has me riveted. He goes for like ten minutes graphing and talking and I'm on the edge of my seat. He turns to the host, and the host asks something like Sooo, how do you see them doing going forward? or some-such and dude turns the glass point to a blue line trending up and says; if it goes up it will look like this, and if it goes down it will look like this, and points at the red line trending down. That's the last time I watched the show.

 

Like the man said, "It's a monkey with a handful of darts. How much do you want to pay the monkey?" 

 

[Mike Lister]

3 hours ago, Yellowtail said:

No, the events inspired me to consider them. The events also provided great information not easily available otherwise. With Apple, it was the marketing, quality and attention to detail. With Boeing, it was the relentless pursuit of safety, compliance and customer service. With Brunswick, it was the direction the company was going, the recent capital upgrades and the new product platforms in the pipeline. 

 

I've worked in manufacturing most of my and I've been though I'd bet over a hundred plants in seven countries, and I know what a great operation looks like, and what competent people sound like. 

 

Yes, I select funds based on past performance. I would much rather select them based on future performance, but I can never find the data. 

 

 

 

Yeah, I'm not real bright, and it seems to me like pretty much all that stuff is based on past performance too. 

 

When I first got into it, I watched CNBC Asia religiously listening to everyone's analysis. Special guest comes on about a particular company that had been in the news and goes all wild-eyed graphing in different colors on the glass. I'm a graph guy and this guy has me riveted. He goes for like ten minutes graphing and talking and I'm on the edge of my seat. He turns to the host, and the host asks something like Sooo, how do you see them doing going forward? or some-such and dude turns the glass point to a blue line trending up and says; if it goes up it will look like this, and if it goes down it will look like this, and points at the red line trending down. That's the last time I watched the show.

 

Like the man said, "It's a monkey with a handful of darts. How much do you want to pay the monkey?" 

 

Thats funny! When you look at past performance of a fund, you're not really assessing the things that a  fund invests in, all your doing is looking at how much money the fund made and when you know that, you don't know how it was made or why. The fund could have made money for any number of reasons, perhaps because it owned one stellar company that did uniquely well but it also owned ten dogs that lost money! When you consider the P/E ratio of the companies within the fund, then you begin to get an idea of the things that made the company attractive to the Fund Manager. Is P/E ratio performance data? Yes of of course, but only on the basis that every bit of data pertaining to a company is performance data!

 

It's a question of granularity, how detailed do you want to view your investment, at the highest level (the bottom line only) of all companies in total or do you want to dig deeper to understand what why and how. Fund volatility is worth looking at, at the fund level, that's the extent to which a funds price surges and falls beyond the average which is a good measure of risk. 

 

Personally, I want to see what I'm investing in and to do that, I need to get inside the fund and look at the detail, that way you can get a look inside the FM's head and see what he saw that made him buy what he did. When you buy a house, you don't just buy it because it looks nice from the outside, you go inside and check out each of the rooms. And you don't just buy it because the one next door made money, you look at the one you're buying to see if you want to live in it for a while.

 

The difference between us is that you say you're graphs guy, whereas I prefer the underlying numbers and the numbers that underpin them. Do you remember Poseidon shares in 1969, you're probably too young.  They were penny stocks of an Australian mining company that found nickel deposits at a  time when nickel was in demand because of the Vietnam war. UK brokers put out graphs showing how the price would soar to 383.o and everyone piled in. It was pure speculation, there was no proof, the graphs were pretty and impressive but if any buyer would have checked things out they would have quickly seen that there was nothing to underpin that valuation. A lot of people lost a lot of money. 

[Thailand J]

The longer the time span, the less likely active funds were  to have outperformed  the benchmark.

 

https://www.spglobal.com/spdji/en/research-insights/spiva/

Edited December 31, 2023 by Thailand J

[Thailand J]

My best performing investment in 2023 was not any fund, it was Microsoft up 56.96%. Closed at $376. I bought in at $50. My investment in Vanguard VGT ( tracking Nasdaq tech stocks) was up 53%.

Berkshire Hathaway was up 15%, no complains, better then keeping cash which I would have done if I didn't buy BRK/B.

Overall up 30%, a quick rebound from 2022 downturn, not too bad long term neither.

Edited December 31, 2023 by Thailand J

[Mike Lister]

2 hours ago, Thailand J said:

The longer the time span, the less likely active funds were  to have outperformed  the benchmark.

 

https://www.spglobal.com/spdji/en/research-insights/spiva/

Agreed. Which is why following the herd and buying into a popular fund that has out performed, is risky.

[Thailand J]

41 minutes ago, Mike Lister said:

following the herd and buying into a popular fund that has out performed, is risky.

Buying and selling is not my strategy anyway. 

[Mike Lister]

9 minutes ago, Thailand J said:

Buying and selling is not my strategy anyway. 

Which was my initial point in all of this. A younger person has time to do that, for a retiree aged 70 or 75, buy hold and wait is inherently high risk. 

[save the frogs]

1 hour ago, Thailand J said:

Buying and selling is not my strategy anyway. 

 

Yeah, good luck with fake quotes from con artists. 

 

[Mike Lister]

29 minutes ago, save the frogs said:

 

Yeah, good luck with fake quotes from con artists. 

 

Do you realise how stupid that comment is? Have you ever sat down and read about the development and growth of Berkshire Hathaway and the people who run it? Do you realise how many ordinary people have profited handsomely from the company? You would do well to not comment on subjects you nothing about. otherwise you confirm what people suspect. 

[save the frogs]

16 minutes ago, Mike Lister said:

Do you realise how stupid that comment is? Have you ever sat down and read about the development and growth of Berkshire Hathaway and the people who run it? Do you realise how many ordinary people have profited handsomely from the company? You would do well to not comment on subjects you nothing about. otherwise you confirm what people suspect. 

 

Isn't the minimum investment in a Berkshire Hathaway stock 1 million USD? 

 

[Mike Lister]

5 minutes ago, save the frogs said:

 

Isn't the minimum investment in a Berkshire Hathaway stock 1 million USD? 

 

No!

 

https://www.fool.com/investing/how-to-invest/stocks/how-to-invest-in-berkshire-hathaway-stock/