FYI: (Click On Article At Top Of Google Search)
While stock market selloffs are painful, there is an upside to all that downside: a fresh profusion of bargain-priced shares. Just ask the three top-notch investors featured in this final installment of the 2016 Roundtable—Scott Black, William Priest, and Meryl Witmer. Value investors all, they suddenly see ample opportunities that didn’t exist a few months ago to invest in companies with attractive prospects, strong financials, and invitingly cheap shares.
Regards,
Ted
https://www.google.com/#q=Barron’s+2016+Roundtable,+Part+3:+12+Stocks+That+Could+Outperform+Barron's
Comments
For many investors the Barron’s annual forecast is an eagerly awaited event. Barron’s assembles some of the keenest, experienced, and well paid minds on Wall Street, and reports their anticipated annual market trends and specific stock picks for the coming year.
That’s great! Not only do we get to examine and possibly invest in their forecasts, but we also get to test their accuracy. How good is the Barron’s expert panel?
And we don’t need to do the labor ourselves. Barron’s does that for us with their annual scorecards. On a global basis, the Barron’s team failed in their 2015 direction forecast since they universally predicted a 10% 2015 equity market return. They did somewhat better with their individual investment choices. Here is a Link that summarizes their individual picks and the subsequent 2015 performance:
http://online.wsj.com/public/resources/documents/2015RoundtableReportCard.pdf
At best, it is a mixed Roundtable Report Card. That really is not a new finding; that’s always been the case. In the past, Marc Faber and Felix Zulauf have scored extremely well. In general, there seems to be a reversion-to-the-mean being enforced. Persistence remains a difficult challenge. Experts come and go at a rapid pace.
I have never been overly impressed with these or any other set of expert opinions. Market forecasting is not an easy task; it’s a daunting challenge with much complex uncertainty.
Phil Tetlock has collected tons of data with regard to these challenges by running a precise forecasting test with careful scoring over many decades. He reports some of his findings in his book titled “Superforecasting, the Art and Science of Prediction”.
A rare group of screened volunteers has been identified that are consistently superior over the entire participant list over an extended timeframe. In his book, Tetlock summarizes the characteristics of this rare group. To some extent, these characteristics are teachable. Thinking in a probabilistic framework is one of these traits.
We are forever confronted with uncertainty. Some deep thinkers identify two types of uncertainty. In their dichotomy, there is “epistemic” and “aleatory” uncertainty. Epistemic uncertainty is not now known, but is knowable. Aleatory uncertainty is not now known and is unknowable. I suspect, stock movements fall more on the side of the aleatory category.
It’s sort of like the famous Donald Rumsfeld quote: “There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.” And this latter category is the most insidious and most dangerous for our personal and our portfolio wellbeing.
Projecting individual stock price changes is a mountain that only a few climb successfully, and most of us fall into unseen crevasses in our attempts. What is true for us is almost equally true for professional money makers.
However, their records are better than those of the bulk of us individuals. I suppose that’s one reason why I trust my portfolio management to mutual funds. The other primary reason is that I don’t have the time or resources to follow and select a diversified portfolio of individual stocks. Too much work.
Best Wishes.