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Q&A With Eric Cinnamond, Manager, Aston/River Road Independent Value Fund

Comments

  • I wonder just how big a crash he is waiting for? In 2011 small value dropped over 20% and he didn't bite. Market timing is hard to do.
  • edited July 2014
    expatsp said:

    I wonder just how big a crash he is waiting for? In 2011 small value dropped over 20% and he didn't bite. Market timing is hard to do.

    Then invest in index fund:)
  • 300 names seems too small of a focus list IMHO.
  • that's the very first thing that came to my mind too.

    Maybe he starts with the 2000 stocks in the Russell 2000, and is very picky about quality, so only finds 300 of them to meet his quality screens.

    Then uses his valuation measures with those 300, and as a result of strict valuation criteria, ends up with 71% cash
  • Regarding the 300 companies, I believe what he's saying is, it is impossible to get to know the Management and culture of over 2000 companies. However, if done over time, it is possible to become familiar with 300. After this vetting process, all he has to do is pay attention to the valuations. Seems pretty simple from a macro viewpoint. I remember when Don Yacktman's board attempted to oust him for having a similar point of view. I'm enjoying the returns Mr Market has provided, but I'm always aware of human nature's frailty. That's why I always hold on to a good share of contrarians (E Cinnamond, Appleseed, Yacktmans, FMI, Artisan [value] and Rommick), just to keep me well grounded. As we all know, reversion to the mean is just around the corner and it doesn't hurt to have guys like Cinnamond on your team.
  • beebee
    edited July 2014
    For investors who are thinking of going to cash (timing "out of the market"), but don't like the idea of (timing "back into the market") you might consider using these contrarian fund managers as an alternative to "holding cash". "Hold Cinnamonds"..."hold Yacktmans"..."hold Rommicks" verses going to cash and "holding Yellens".

    The opportunity cost of holding these contrarian funds (cash heavy funds periodically anchored at sea) might be better than the opprotunity costs of pure cash. These managers are experienced at putting money back to work. Most individual investor are talented at pulling money out of funds (cash that sits drydocked on the shore) and never getting their cash back into the water (market). Individuals are not usually well disciplined or skilled at buying back into a corrected market.

    If it is your strong suit keep posting here for the rest of our benefit.

    Related Article:
    bloomberg.com/news/2013-10-25/weitz-to-yacktman-hold-cash-as-managers-find-few-bargains.html
  • I agree with Bee. If this has been your main small value fund, you've missed out on one of the great bull markets in SV, and unless we get another 2008 style crash (which Cinnamond, in the above article, makes clear he is expecting), you'll never make up for that lost opportunity.

    But as a cash alternative, 5% a year is pretty amazing. Plus you get the potential for big gains if the market does crash. Not bad at all.

    Yet Cinnamond failed to take advantage of what was, in retrospect, a great buying opportunity -- the 20% corection in SV in 2011. He is, I'll say it again, betting on another 2008 crash. In fact, with his top holdings all precious metals, I'd say he's betting on apocalypse. (Perhaps he should consider renaming his fund teapx, since this is investing the tea party might like.)

    Of course, with 1.4% E.R. on 700 mln in assets, that's a cool 10 million a year Mr. Cinnamond is getting paid to wait for apocalypse, so if I were him I'd be patient too.
  • Sorry people. Anyone buying ARIVX knows how Cinnamond invests. Unless of course one did not do one's homework. ICMAX which Cinnamond also managed is run in the same way. Check out the cash stake in that one.

    Finally we should not complain about how much money fund managers are making on their ER. Why invest in active managers then? Invest in index fund. That's what I do in my retirement accounts.
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