Author Topic: "The Nifty Fifty" - yesterday and today  (Read 11485 times)

KinAlberta

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Re: "The Nifty Fifty" - yesterday and today
« Reply #20 on: April 24, 2015, 03:08:57 PM »
I think Jurgis is taking issue with your return number, not whether or not value outperforms over time.

15% over time is reee - donk - you - lous and should not be expected of any mechanical process.

Exactly.

Hmm. In business, there's little that can't be quantified. Though much isn't broadly quantified ( like market penetration by product line, etc.) So why couldn't a mechanistic process perform at least at the 15% level.  It's just a lot of data would have to be manually collected and added to a database.

I also imagine some non-standard time metrics would need to be used to seek expected returns beyond more typical investor time horizons.

Think about how minimalist most indices are. A fixed number of securities, often just capitalization weighted/based, etc. Even fundamental indexing is pretty simplistic in design and "value" indexes are based on some pretty old views differentiating value from growth. Yet guys like Buffett and Miller have said that value and growth are two sides of the same coin.  Small and midcap indices abandon successful investments because of their size. Pulling the flowers and keeping the weeds, as Peter Lynch once said, seems irrational to me.  So I figure there has to be a more creative indexing to substantially beat a broad market.
« Last Edit: April 24, 2015, 03:19:37 PM by KinAlberta »


AzCactus

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Re: "The Nifty Fifty" - yesterday and today
« Reply #21 on: April 28, 2015, 02:05:28 PM »
To me, mechanically earning 15% seems pretty tough.  I would have a hard time thinking of many mutual funds that have averaged 15% for any prolonged period of time.


Cigarbutt

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Re: "The Nifty Fifty" - yesterday and today
« Reply #22 on: May 30, 2018, 05:29:03 AM »
Nifty-Fifty re-visited.
http://www.fortunefinancialadvisors.com/blog/price-is-what-you-pay-value-is-what-you-get-nifty-fifty-edition
The angle taken by the author has flaws and limitations but potentially useful conclusion.
Long term active thinking is not what it used to be.

"The lesson from this exercise, I believe, is that investors should always be conscious of starting valuation when placing their bets.  With few exceptions, eventually valuations that are simply too high will drift back down to more reasonable levels, often at the expense of poor intermediate-term performance.  This appears to be true no matter how revolutionary the new business appears to be, and no matter how much potential you believe it has.  Of course, if your conviction is such that you plan on holding your shares for multiple decades, valuation may indeed matter less to long-term returns, but that is assuming you follow through on your commitment.  Over several years of sub par performance, that is much easier said than done."

A lesson I got too is that the best long term performers have been selling carcinogenic and coronary artery blocking products.
« Last Edit: May 30, 2018, 05:35:27 AM by Cigarbutt »

cameronfen

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Re: "The Nifty Fifty" - yesterday and today
« Reply #23 on: June 11, 2018, 03:04:26 PM »
Nifty-Fifty re-visited.
http://www.fortunefinancialadvisors.com/blog/price-is-what-you-pay-value-is-what-you-get-nifty-fifty-edition
The angle taken by the author has flaws and limitations but potentially useful conclusion.
Long term active thinking is not what it used to be.

"The lesson from this exercise, I believe, is that investors should always be conscious of starting valuation when placing their bets.  With few exceptions, eventually valuations that are simply too high will drift back down to more reasonable levels, often at the expense of poor intermediate-term performance.  This appears to be true no matter how revolutionary the new business appears to be, and no matter how much potential you believe it has.  Of course, if your conviction is such that you plan on holding your shares for multiple decades, valuation may indeed matter less to long-term returns, but that is assuming you follow through on your commitment.  Over several years of sub par performance, that is much easier said than done."

A lesson I got too is that the best long term performers have been selling carcinogenic and coronary artery blocking products.

I think "highly addictive" had more to do with the long term performance. 

Cigarbutt

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Re: "The Nifty Fifty" - yesterday and today
« Reply #24 on: June 11, 2018, 03:15:15 PM »
I think "highly addictive" had more to do with the long term performance.

Agreed. Probably the best scenario involves selling addictive products that kill slowly or pills that stabilize chronic diseases without curing them.  ::)
Did you know that Coca-Cola used to contain cocaine? The ingredient has been substituted with happiness. :)

cameronfen

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Re: "The Nifty Fifty" - yesterday and today
« Reply #25 on: June 16, 2018, 01:49:46 PM »
I think "highly addictive" had more to do with the long term performance.

Agreed. Probably the best scenario involves selling addictive products that kill slowly or pills that stabilize chronic diseases without curing them.  ::)
Did you know that Coca-Cola used to contain cocaine? The ingredient has been substituted with happiness. :)

+1 for the happiness bit.  I once had a romantic interest of mine tell me very early on, that she got over her boyfriend "through her friends and lots of cocaine".  I don't usually run in that crowd so I thought it was a pretty amusing statement. 

Hielko

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Re: "The Nifty Fifty" - yesterday and today
« Reply #26 on: June 18, 2018, 06:00:47 AM »
I think Jurgis is taking issue with your return number, not whether or not value outperforms over time.

15% over time is reee - donk - you - lous and should not be expected of any mechanical process.
There are plenty of simple mechanical strategies that have provided those returns in the past (think stuff like simply buying low P/B, low P/E and/or momentum stocks). Whether or not these returns can be expected in the future is a different discussion. I'm not so sure of that. Those inefficiencies might have been competed away, and secondly, future expected stock returns are in the current interest rate environment probably lower than the historical realized average of ~10%. But still, maybe those returns are still there, precisely because (almost) no-one believes following such a strategy is a smart idea (but with all the factor ETF's popping up everywhere I doubt that, and the opposite might be true...)