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Another excellent commentary by David. While most of my holdings do not match what David has espoused on this site, I have tried to diversify my portfolio even further and I believe I have succeeded, in part due to what I have picked up here. While it is too soon to know what the ultimate result will be, the commentary does mention that even during cycles of what are called stupidity on the part of managers (and investors), as long as you have done your due diligence your picks will bear fruits.
I was very interested in the Japan commentary. I have only been to Japan twice in 2013, and will be there again in a short few months. All visits are to Tokyo. While Japan has been buffeted by the earthquake and resulting tsunami which led to the Fukushima nuclear accident, I still get the feeling that Japan is very resilient. The energy in Tokyo has never ebbed from what I could see and I would imagine that The Kansai region is also sharing the same energy. One additional story regarding Japan's defense structure; The Philippines has been at the front of the China squabble over land and ocean territories. There is no way this small country could stand up to China. The US has promised their support but the biggest news is that Japan has promised money and equipment to boost the Philippines defense forces which are very weak. This included the full backing of the Japan Defense Force if needed. I'm sure China noticed that gesture. The world is responding to China and clearly they are saying, "back off."
Once again to David, thank you for a great year and your expertise you share with the rest of us.
A continuation of some of the Japan centric themes expressed in the Commentary. investors showed renewed appetite for commodities as the new year got underway. Gold grabbed the limelight with a 1.5 percent jump to $1,223.46 an ounce, recouping just a little of the losses that made last year its worst in three decades. The buying spilled over into silver and copper, with dealers talking of Chinese demand for commodities in general. The other action was in the yen, which resumed its long decline as investors used it to fund purchases of higher-yielding assets abroad. The drop in the yen has been viewed as positive for Japanese exports and corporate earnings, and a major reason its share markets outperformed all others last year.
Japan's Nikkei <.N225> was closed on Thursday but ended 2013 with an annual gain of 57 percent. Many analysts look for a further advance this year as the Bank of Japan remains committed to its massive stimulus campaign. Nomura's global strategy team is forecasting that Japanese equities will provide the greatest return of all global stocks in 2014, thanks in large part to rising corporate earnings. They see the Nikkei at 18,000 points by the end of this year, up from the current 16,291, and said even 25,000 was possible by 2018 should Prime Minister Shinzo Abe's aggressive economic program prove successful in defeating deflation.
Charles, am I correct that it was you who wrote SEQUX was greatest in history or some such? Uh, are the Celtics still the greatest bball team (uh, no). Why would you of all historically minded people say such a thing of a fund whose manager has been aboard since 1999 or thereabouts? He is significantly bested by DODGX, FCNTX, FLPSX over that period, one manager or team, just to name three; ditto Gabelli and Yacktman, to add two more individuals. I am sure others have others. What am I missing about your Sequoia assertion? I cannot find that my reading is in error or mistaken. I believe most of us are interested in success over time of managers, not nominal funds.
Lovely write up. Have a comment on the Vanguard Minimum Volatility fund. There is something seriously missing in the objective. It is paraphrased in the post as
Volatility is then a sort of fallout from the system. Vanguard reverses the process here by working to minimize the volatility of an all-equity portfolio within a set of secondary constraints dealing with diversification and liquidity. Returns are then a sort of fallout from the design.
A fund mostly in cash will satisfy that criterion very well, wouldn't it? The Vanguard article linked to doesn't shed much more light on it either saying more about what it is not than what it is.
I think a constraint that is missing is a commitment to some minimum level of investment or maximum cash position, so they do not satisfy their objective trivially by mostly staying out of the market!
I am beginning to think Minimum Volatility is something dreamed up by the marketing departments as what customers may be looking for in the current environment. The same thinking that led to Absolute Return funds, Market neutral funds, etc. No two funds defining it the same way and able to justify any performance or lack thereof in the ill-defined objective.
So these funds may return widely varying numbers with no way of knowing who might return what in advance.
Reply to @davidrmoran: Morning David and Happy New Year! No mistake. SEQUX is indeed one of greatest mutual funds ever...no fuzz on that...going back to its inception in 1970. Here is a direct comparison of SEQUX with a couple funds you mentioned that have been around as long:
Wonderfully informative comments, thanks for your persistent efforts!
I have a question/comment about the BlackRock Emerging Markets Long/Short Fund (BLSAX). Its performance since inception was underwhelming, despite the BlackRock marketing which you so well described. However I must say that his relative BlackRock Global Long/Short Equity Fund (BDMAX) looks very impressive. If one plots simultaneously BDMAX and MSCI World Index, or VT, one finds that BDMAX during the one year of its existence produced essentially the same returns as the MSCI World Index, but with an incomparably smaller volatility, even much smaller than MFLDX, which is one of the absolutely best global long/short funds.
An obvious problem with BDMAX is its high sales load, and its institutional brother BDMIX has $2M minimum, but in general it is a very intriguing fund. If it were possible to buy it without load I would consider it very seriously. I wonder whether you or anybody else have an opinion on this impressive fund.
I am beginning to think Minimum Volatility is something dreamed up by the marketing departments as what customers may be looking for in the current environment. The same thinking that led to Absolute Return funds, Market neutral funds, etc. No two funds defining it the same way and able to justify any performance or lack thereof in the ill-defined objective.
My thinking exactly. That why I am taking a wait-and-see attitude.
Reply to @Ted: Wow, how touchy, and what a jerk thing to write (also erroneous). Is the point about serial management invalid? Is that what you're saying? It's simply the name of the fund that matters? I was very surprised that you yourself did not pick up on this; seems like the kind of thing you would flag. (I guess the Celtics still are the greatest, and will be for years to come. I also guess one of us should become next manager of Sequoia, or coach of the Celts. Then we, or you, can proclaim that we too were perhaps the greatest of all time.)
Charles, I am very surprised that historical you would defend your fuzzy assertion in this way, when it does not apply to Goldfarb's choices, and, as I say, others' investment work has been superior for the last 15 years. So easy to check. I named five managers, and I bet other readers could add more. What you wrote was "perhaps greatest fund of all time."
Now, if what you both are really meaning is that with this magical fund it is not the individual but the fund's magical process, well, that's a different argument and a different article, revolutionary, just begging to be written, how the Sequoia method has shown itself to be the best way to invest for all time. But since August 1998, when Goldfarb had been on the job a month, in $10k growth M* appears to shows that Tillinghast has beaten him ~57k to ~34k, Yacktman ~45-34, and D&C Growth ~39-34. So maybe we should say "perhaps greatest fund of all time except the last 14 years." Caw.
Reply to @davidrmoran: You're absolutely right, of course. Yankees are certainly one of greatest teams ever, but not lately. Seem more like a broken team. So, maybe a more precise description is one of greatest franchises ever?
As for SEQUX, it's been doing much better than Yankees lately. It's continued to perform in superior fashion. I believe it was named Morningstar's Equity Fund of Year a couple years ago. It is currently a 20-year MFO Great Owl fund. And, its continued success has SEQUX closing its doors once again to new investors.
But all the funds you list are superior funds. Would be happy to own any of them. I do own DODGX. But wish I owned SEQUX, even today.
Reply to @Charles: An intriguing response. Do you have thoughts, since you dive into so much data, about the franchise aspect of funds, and the likelihood of good inertia from methodology and culture and process? Is it quantifiable in any way, or just chance? Certainly it is what makes many people invest in Fidelity funds and other fund companies too. M* tries to capture something of this in their stewardship and metallic grading, right?
I confess that I have not looked up the relative performance starting in 2000 compare to your certainly excellent funds but SEQUX did very badly in 1999 (just about its worst year ever)since the fund owned no technology .The fund had a relatively good performance in 2000 2001 and 2002. Similarly it had an excellent performance in 2010-2013. Investors in SEQUX know or should know that in very strong years for the market it will underperform (I am pretty sure it has 15+% in cash at the moment.
I've been outside fighting against round one of a winter storm here in MI, so I may have brain freeze; but where did you note the $2,500 min. for BDMIX at the Fido site?
Here is their internal site link for the fund at the fees section.
As always, thank you for your time and efforts here.
Reply to @catch22: Fidelity's fund pages are often wrong about minimums, and sometimes also about whether they allow automatic investments (which affects whether you can add to a TF fund for $5). I've indicated errors to them on more than one occasion.
If you have an IRA account, try placing a test trade. When you enter the fund symbol, it will tell you the minimum order the system will accept. In the IRA account, their system reports $2.5K, in a taxable account, it reports the same $2M that is shown on the fund page.
Thank you. And yes, I have noted to them several times about various "malfunctions" with data indicated. I have, in the past; been able to make purchases of various funds (non-Fido) far below the minimums, although the system indicated otherwise.
Reply to @msf: I haven't tried to buy anything since they redesigned about 1.5 months ago, but almost every fund I looked at had it's minimum raised to $2.5k unless the fund company require a higher minimum. The minimum purchase thereafter seems to have risen to $250, again unless the fund company's minimum is higher. These minimums seem to apply even to IRA accounts, and the few test trades I've tried (for instance, $50/$100 repurchase for MAPIX/PRBLX or $1000 original purchase for ARTGX) have been denied.
Have not tried automatic purchases yet, though will soon for 2014 IRA.
Comments
I was very interested in the Japan commentary. I have only been to Japan twice in 2013, and will be there again in a short few months. All visits are to Tokyo. While Japan has been buffeted by the earthquake and resulting tsunami which led to the Fukushima nuclear accident, I still get the feeling that Japan is very resilient. The energy in Tokyo has never ebbed from what I could see and I would imagine that The Kansai region is also sharing the same energy. One additional story regarding Japan's defense structure; The Philippines has been at the front of the China squabble over land and ocean territories. There is no way this small country could stand up to China. The US has promised their support but the biggest news is that Japan has promised money and equipment to boost the Philippines defense forces which are very weak. This included the full backing of the Japan Defense Force if needed. I'm sure China noticed that gesture. The world is responding to China and clearly they are saying, "back off."
Once again to David, thank you for a great year and your expertise you share with the rest of us.
investors showed renewed appetite for commodities as the new year got underway.
Gold grabbed the limelight with a 1.5 percent jump to $1,223.46 an ounce, recouping just a little of the losses that made last year its worst in three decades.
The buying spilled over into silver and copper, with dealers talking of Chinese demand for commodities in general.
The other action was in the yen, which resumed its long decline as investors used it to fund purchases of higher-yielding assets abroad.
The drop in the yen has been viewed as positive for Japanese exports and corporate earnings, and a major reason its share markets outperformed all others last year.
Japan's Nikkei <.N225> was closed on Thursday but ended 2013 with an annual gain of 57 percent. Many analysts look for a further advance this year as the Bank of Japan remains committed to its massive stimulus campaign.
Nomura's global strategy team is forecasting that Japanese equities will provide the greatest return of all global stocks in 2014, thanks in large part to rising corporate earnings.
They see the Nikkei at 18,000 points by the end of this year, up from the current 16,291, and said even 25,000 was possible by 2018 should Prime Minister Shinzo Abe's aggressive economic program prove successful in defeating deflation.
http://news.yahoo.com/global-shares-start-slow-motion-yen-resumes-decline-020911109--finance.html
I think a constraint that is missing is a commitment to some minimum level of investment or maximum cash position, so they do not satisfy their objective trivially by mostly staying out of the market!
I am beginning to think Minimum Volatility is something dreamed up by the marketing departments as what customers may be looking for in the current environment. The same thinking that led to Absolute Return funds, Market neutral funds, etc. No two funds defining it the same way and able to justify any performance or lack thereof in the ill-defined objective.
So these funds may return widely varying numbers with no way of knowing who might return what in advance.
Regards,
Ted
I have a question/comment about the BlackRock Emerging Markets Long/Short Fund (BLSAX). Its performance since inception was underwhelming, despite the BlackRock marketing which you so well described. However I must say that his relative BlackRock Global Long/Short Equity Fund (BDMAX) looks very impressive. If one plots simultaneously BDMAX and MSCI World Index, or VT, one finds that BDMAX during the one year of its existence produced essentially the same returns as the MSCI World Index, but with an incomparably smaller volatility, even much smaller than MFLDX, which is one of the absolutely best global long/short funds.
An obvious problem with BDMAX is its high sales load, and its institutional brother BDMIX has $2M minimum, but in general it is a very intriguing fund. If it were possible to buy it without load I would consider it very seriously. I wonder whether you or anybody else have an opinion on this impressive fund.
Charles, I am very surprised that historical you would defend your fuzzy assertion in this way, when it does not apply to Goldfarb's choices, and, as I say, others' investment work has been superior for the last 15 years. So easy to check. I named five managers, and I bet other readers could add more. What you wrote was "perhaps greatest fund of all time."
Now, if what you both are really meaning is that with this magical fund it is not the individual but the fund's magical process, well, that's a different argument and a different article, revolutionary, just begging to be written, how the Sequoia method has shown itself to be the best way to invest for all time. But since August 1998, when Goldfarb had been on the job a month, in $10k growth M* appears to shows that Tillinghast has beaten him ~57k to ~34k, Yacktman ~45-34, and D&C Growth ~39-34. So maybe we should say "perhaps greatest fund of all time except the last 14 years." Caw.
As for SEQUX, it's been doing much better than Yankees lately. It's continued to perform in superior fashion. I believe it was named Morningstar's Equity Fund of Year a couple years ago. It is currently a 20-year MFO Great Owl fund. And, its continued success has SEQUX closing its doors once again to new investors.
But all the funds you list are superior funds. Would be happy to own any of them. I do own DODGX. But wish I owned SEQUX, even today.
I confess that I have not looked up the relative performance starting in 2000 compare to your certainly excellent funds but SEQUX did very badly in 1999 (just about its worst year ever)since the fund owned no technology .The fund had a relatively good performance in 2000 2001 and 2002. Similarly it had an excellent performance in 2010-2013. Investors in SEQUX know or should know that in very strong years for the market it will underperform (I am pretty sure it has 15+% in cash at the moment.
I've been outside fighting against round one of a winter storm here in MI, so I may have brain freeze; but where did you note the $2,500 min. for BDMIX at the Fido site?
Here is their internal site link for the fund at the fees section.
As always, thank you for your time and efforts here.
Regards,
Catch
If you have an IRA account, try placing a test trade. When you enter the fund symbol, it will tell you the minimum order the system will accept. In the IRA account, their system reports $2.5K, in a taxable account, it reports the same $2M that is shown on the fund page.
Thank you. And yes, I have noted to them several times about various "malfunctions" with data indicated.
I have, in the past; been able to make purchases of various funds (non-Fido) far below the minimums, although the system indicated otherwise.
Take care of you and yours,
Catch
Have not tried automatic purchases yet, though will soon for 2014 IRA.