Thursday, February 22, 2018
Saturday, February 20, 2016
Investing In Your Health
Diet pills. Diet products. Diet fixes. Supplements. Programs. Ezines. So many business are directed at diet. Since nearly 50% of North Americans are overweight, this certainly makes sense. And the newest dietary push attempts to recreate our ancestors diet by eliminating processed foods, carbs and sugars and focusing on hunter-gatherer-forager diets of mostly fat, protein and fibrous carbs. This great movement toward a "ketoadaptation" or, the use of fats for primary energy source in place of crappy carbs, is at the heart of a growing business and an investment opportunity--from both a health perspective on an individual note, and a financial perspective on a business note.
How can we invest in the revolutionary diet focus? One way is to get involved in the network marketing companies that sell ketogenic products and meal replacements:
It is essentially a ketone supplement in a drink formula that is sold by the tub or in individual packets which help dieters enter a ketoadapted state. To learn more about ketoadaptation watch Nora Gedgaudas here.
Another network marketing company, Ketopia offers a selection of products including meal replacements which also help dieters enter a ketoadapted state to enhance weight loss.
Weight Watchers: when Oprah Winfrey bought 10% of the most famous weight loss firm in the world, the stock soared. "Winfrey will spend $43 million on the investment, according to a regulatory filing, buying 6.4 million newly-issued shares at $6.79 apiece."
Herbalife- one of the original manufacturers of meal replacements and supplements to aid in diet and nutrition, Herbalife is a network marketing company that is also public. They have a P/E ratio of 11.4 and an EPS of 4.9 and have been recently upgraded.
Nutraceutical International makes and markets thousands of nutritional products that are sold in stores throughout the U.S.
The wave of "organic" products, healthy alternatives to fast food, healthful restaurants, and nutritional programs is growing in response to the fat epidemic in the US and UK. I've been watching with interest a program "Fat Surgeons" on Youtube, filmed in the UK, featuring bariatric surgeon Shaw Somers and his team of fat-busting specialists as they attack the problem one stomach at a time. What I learned from the series, in addition to a second series of interest "Supersize v Superskinny"--another UK hit, is that we are getting super big super fast in the world and it may be as simple a reason as the availability of crap carbs to eat and the lack of incentive to forage, hunt and gather.
Have a low carb week!
Saturday, May 7, 2011
Hedge Funds Trading on the TSX?
I must admit I've been jealous of those investors qualified to purchase hedge fund positions. I have a dream goal of entering a long term position with Stephen Palmer's AlphaNorth Partners Fund, which I've discussed before in past blogs. The returns over time are excellent, not without higher risk of course, and seem to perform much better than the index and most mutual funds.
You need to have money to make money
The problem is, however, that you must be an accredited investor or have a great deal of cash to enter a position in most of the highly ranked hedge funds in Canada.
The FUND of Hedge FUNDS Investment
I've found a fund of funds, trading in a manner most similar to an ETF, of three top hedge funds available for investment on the TSX.
Star Hedge Managers Corp .
These "funds" issue "units" which trade like stocks, and aim to provide long term capital growth by investing in a portfolio of private investment funds managed by three of Canada's leading portfolio managers: Rohit Sehgal, Eric Sprott, and Frank Mersch. The Fund invests on a equal weighted basis in units of the Dynamic Power Hedge Fund (Sehgal), the Sprott Hedge Fund (Sprott) and the Front Street Fund (Mersch).
Trading Like a Stock is An Attractive Alternative
These "units" are attractive to me since investing in these funds individually is typically only available to high net worth or institutional investors requiring a $100,000 or $150,000 initial investment.
For example, the Dynamic Power Hedge prospectus can be found here. A $150,000 investment in 2002 would be worth around $2 million dollars today.
The Sprott Hedge Fund boasts an 805% cumulative return since inception in November 2000 which correlates with 23.4% annualized compared to a 4.9% loss by the S&P500 (CAD) over the same time. Therefore a $100,000 investment in 2000 would be worth over $800,000 today.
The Front Street Canadian Hedge Fund launched in August of 1999 has returned an average of 10.9% per year compared to a 6.4% return by the S&P/TSX Composite Index over the same period.
The Canadian Newswire reported on March 31, 2011 the availability of the Star Hedge Manager Corp II units.
If you know of any other Canadian Hedge Funds or groups of hedge funds trading on the TSX in this way, please drop me a line. I would love to review them here.
Happy Investing
Disclosure: the author does not own positions in any of the funds listed here at time of publishing.
You need to have money to make money
The problem is, however, that you must be an accredited investor or have a great deal of cash to enter a position in most of the highly ranked hedge funds in Canada.
The FUND of Hedge FUNDS Investment
I've found a fund of funds, trading in a manner most similar to an ETF, of three top hedge funds available for investment on the TSX.
Star Hedge Managers Corp .
These "funds" issue "units" which trade like stocks, and aim to provide long term capital growth by investing in a portfolio of private investment funds managed by three of Canada's leading portfolio managers: Rohit Sehgal, Eric Sprott, and Frank Mersch. The Fund invests on a equal weighted basis in units of the Dynamic Power Hedge Fund (Sehgal), the Sprott Hedge Fund (Sprott) and the Front Street Fund (Mersch).
Trading Like a Stock is An Attractive Alternative
These "units" are attractive to me since investing in these funds individually is typically only available to high net worth or institutional investors requiring a $100,000 or $150,000 initial investment.
For example, the Dynamic Power Hedge prospectus can be found here. A $150,000 investment in 2002 would be worth around $2 million dollars today.
The Sprott Hedge Fund boasts an 805% cumulative return since inception in November 2000 which correlates with 23.4% annualized compared to a 4.9% loss by the S&P500 (CAD) over the same time. Therefore a $100,000 investment in 2000 would be worth over $800,000 today.
The Front Street Canadian Hedge Fund launched in August of 1999 has returned an average of 10.9% per year compared to a 6.4% return by the S&P/TSX Composite Index over the same period.
The Canadian Newswire reported on March 31, 2011 the availability of the Star Hedge Manager Corp II units.
Star Hedge Managers Corp I and Star Hedge Managers Corp II trade on the TSX under the symbols XHM.A (priced at $5 on opening day Dec 31, 2008 and closing at $15.80 on May 5, 2011--an over 300% increase in less than 2.5 years) and XHG.A (ranging from $9.40 -$10.40 since launching on April 20th, 2011).
If you know of any other Canadian Hedge Funds or groups of hedge funds trading on the TSX in this way, please drop me a line. I would love to review them here.
Happy Investing
Disclosure: the author does not own positions in any of the funds listed here at time of publishing.
No News is Good News for Market Mood
How News and Mood Affect the Markets
The old adage "no news is good news" seems to relate well to the stock market. And investor moods plays a big role in market swings.
Market volatility can be very different at different times. For example, the announcement of rising unemployment is good news for stocks during periods of economic expansion and bad news during economic decline.
A rise in unemployment tends to signal a decline in interest rates--good for stock prices-- and yet a decline in future corporate earnings--bad for stock prices. The combination of these two effects and the result in stock prices varies depending on the state of the economy.
Pietro Veronesi, University of Chicago, showed that investors rationally anticipate that during periods of high uncertainty their expectations of future cash flows tend to react more swiftly to news. This predictable higher sensitivity to news tends to increase the asset price volatility, against which risk-averse investors are willing to hedge. His research shows that "in equilibrium, investors' willingness to hedge against changes in their own "uncertainty" on the true state makes stock prices overreact to bad news in good times and underreact to good news in bad times."
Good News in Bad Times Ignored?
The main result is that when times are good, a bad piece of news leads to greater price reductions in investments greater than the reduction in expected future dividends.
Bad News in Good Times Overreacted?
Conversely, a good piece of news in bad times tends to increase the expected future dividends, but also increases the discount investors require to hold the asset, such that the increase in price is lower than the increase in expected future dividends.
As well, the degree of investor reactions to news tends to be high in good times and low in bad or uncertain times. Volatility as a response to news in bad times is also much higher than volatility in good times.
Some Funny Cartoons:
Twitter Predicts Market Swings!
Twitterverse mood predicts stock market moves. In a study from the University of Indiana, it was found that the overall mood of Twitter users could be used to predict market swings.
By creating search queries for popular phrases using keywords such as "happy", "sad", "fearful" or optimistic, a daily "Twitterverse Mood Score" could be compiled which correlated with the direction of market expansion or contraction.
Shifts in Twitterverse moods scores predict market shifts by nearly 90% accuracy.
So What Does Mood and News Mean for Private Investors Like Us?
1. No news is likely good news.
2. Investor mood seems to play a major role in driving markets on any given day.
3. Bad news in good times tends to lead to greater reactions from investors.
4. Good news in bad times does not necessarily lead to increase in stock prices.
5. Twitter can be used a social barometer and therefore predict market moves. 6. Maybe I should get out of the market and put my money in a savings account. (just kidding!)
Happy Investing!
Some funny cartoons
The old adage "no news is good news" seems to relate well to the stock market. And investor moods plays a big role in market swings.
Market volatility can be very different at different times. For example, the announcement of rising unemployment is good news for stocks during periods of economic expansion and bad news during economic decline.
A rise in unemployment tends to signal a decline in interest rates--good for stock prices-- and yet a decline in future corporate earnings--bad for stock prices. The combination of these two effects and the result in stock prices varies depending on the state of the economy.
Pietro Veronesi, University of Chicago, showed that investors rationally anticipate that during periods of high uncertainty their expectations of future cash flows tend to react more swiftly to news. This predictable higher sensitivity to news tends to increase the asset price volatility, against which risk-averse investors are willing to hedge. His research shows that "in equilibrium, investors' willingness to hedge against changes in their own "uncertainty" on the true state makes stock prices overreact to bad news in good times and underreact to good news in bad times."
Good News in Bad Times Ignored?
The main result is that when times are good, a bad piece of news leads to greater price reductions in investments greater than the reduction in expected future dividends.
Bad News in Good Times Overreacted?
Conversely, a good piece of news in bad times tends to increase the expected future dividends, but also increases the discount investors require to hold the asset, such that the increase in price is lower than the increase in expected future dividends.
As well, the degree of investor reactions to news tends to be high in good times and low in bad or uncertain times. Volatility as a response to news in bad times is also much higher than volatility in good times.
Some Funny Cartoons:
Twitter Predicts Market Swings!
Twitterverse mood predicts stock market moves. In a study from the University of Indiana, it was found that the overall mood of Twitter users could be used to predict market swings.
By creating search queries for popular phrases using keywords such as "happy", "sad", "fearful" or optimistic, a daily "Twitterverse Mood Score" could be compiled which correlated with the direction of market expansion or contraction.
Shifts in Twitterverse moods scores predict market shifts by nearly 90% accuracy.
So What Does Mood and News Mean for Private Investors Like Us?
1. No news is likely good news.
2. Investor mood seems to play a major role in driving markets on any given day.
3. Bad news in good times tends to lead to greater reactions from investors.
4. Good news in bad times does not necessarily lead to increase in stock prices.
5. Twitter can be used a social barometer and therefore predict market moves. 6. Maybe I should get out of the market and put my money in a savings account. (just kidding!)
Happy Investing!
Some funny cartoons
Saturday, April 23, 2011
The Next Warrent Buffett and Berkshire Hathaway!
Who is the Next Berkshire Hathaway?
Like any great empire, it's time for Berkshire Hathaway to fall from the top and relinquish the throne of SuperStock to a contender. Berkshire is simply too big to sustain the kind of growth seen in previous decades as evidenced by flattening returns over the past few years. Although Buffett and his team may find a second wind to their astronomical past success, it would seem that as Buffett readies to pass on the crown, it may be time to consider a new ruler altogether in the multinational conglomerate superstock competition.
There seem to be a number of contenders for the next gold medalist in the fight to become the Goldilocks stock story of this new century. The top candidates mentioned most frequently by financial analysts, writers and researchers are Markel (NYSE: MKL), Sears Holdings (Nasdaq: SHLD), Fairfax Financial (TSE: FFH.TO), Leucadia (NYSE: LUK), Brookfield Asset Management (NYSE: BAM), Alleghany (Y), and Harbinger Group (NYSE: HRG).
Markel (MKL): Located in the US, Markel Corporation markets and underwrites specialty insurance products and programs to a number of niche markets. It operates in three markets: excess and surplus lines, specialty admitted, and the London markets.
Markel's chief investment officer, Tom Gayner, is a conservative investor like Buffett who has returned 14% annually over the past 10 years compared to the sideways trading S&P 500. Gayner is a long-term value investor, investing in companies with high return on equity, low price over book and low price over cash flows.
Sears Holdings (SHLD):
Sears Holdings Corporation, through its subsidiaries, operates as a retailer in the United States and Canada. The company operates through three segments: Kmart, Sears Domestic, and Sears Canada.
Man at the top, Edward Lampert started his own hedge fund in his 20's, with an investment style similar to Warren Buffett's, averaging returns of 29% per year.
Fairfax Financial (FFH.TO):
Fairfax is run by Prem Watsa, another long-term value investor dubbed “the next Warren Buffett”. Watsa is best known for his most famous calls include selling half his stocks before the 1987 crash and buying S&P puts before the index dove in 2000. He also bet against the Japanese Nikkei but his biggest success came just recently when he bought credit default swaps on the premise that banks and financial institutions would struggle if a credit and liquidity crisis arose.
Since 2005, Fairfax revenue has stayed at roughly $5 billion. Net earnings, however, have grown at 100% compounded annually, from $53 million in 2005 to $856 million in 2008. The market price of Fairfax shares listed on the NYSE has doubled in value over this period. According to filings, Watsa has returned a compounded 23% annualized return in book value between 1993 and 2008.
There are very few who can match a record like that. Over the last ten years, Fairfax’s wholly owned investment management company Hamblin Watsa Investment Counsel has produced a common stock investment return of 19.1% compounded annually, against a (1.4%) decline for the S&P index over the same period.
Leucadia (LUK):
Leucadia National's Ian Cumming and Joseph Steinberg have their hands in every sector, invest fearlessly, and buy good companies at low prices. Invested in a diversified portfolio of stocks and businesses, Leucadia has generated impressive returns and gained dedicated fans amongst value-oriented investors.
Leucadia is considered to resemble the Berkshire Hathaway of 20 years ago. But unlike Berkshire, Leucadia tends to focus on speculative companies rather than operating businesses and presents an attractive play on its depressed investments and on the ability of Cumming and Steinberg to continue to find new investments.
Brookfield Asset Management (BAM):
Brookfield Asset Management Inc. is a global asset manager focused on property, renewable power and infrastructure assets with over $100 billion of assets under management. The company's investment guidelines include investing in areas of competitive advantage, aquiring assets on a value basis with a goal of maximizing return on capital, building sustainable cash flows and recognizing that superior returns often require contrarian thinking.
The company's remarkably consistent objective over the years simply has been to earn a 12% to 15% compound annual return per share. 45 year old Bruce Flatt runs a conglomerate that manages $108-billion worth of real estate, utilities and infrastructure across the planet. In the nearly a decade Flatt has been in charge, Brookfield has emerged as the world's biggest owner of prime office space, and its 165 power plants constitute one of the largest hydroelectric portfolios.
But more impressive is how Brookfield weathered the 2009 flashcrash that crippled many of its rivals. Over two years, as its stock plunged by two-thirds along with the markets, the company quietly added to its capital and waited out the storm.
Alleghany (Y):
Alleghany has found its comfort zone in property/casualty insurance with real estate mixed into the formula. Its goal is to create stockholder value through ownership and management of a small group of operating businesses and investments.
Alleghany’s subsidiaries include Capitol Transamerica and RSUI Group. In its last quarter, the company beat EPS estimates by 1.19 (4.85 actual vs. 3.66 estimated). Alleghany Corporation has had an average earnings growth of 1.9% over the past 10 years. As of the end of February, Alleghany holds $825 million in cash for use in future investments and has no debt to note.
Harbinger Group (HRG):
Harbinger's strategy is to buy controlling and significant equity stakes in companies competing in six industries: Consumer products, insurance and other financial products, telecommunications, agriculture, power generation and lastly, water and natural resources.
Harbinger Group Inc. is a holding company with approximately $144.8 million in consolidated cash, cash equivalents and investments as of June 30, 2010. HGI's principal focus is to identify and evaluate business combinations or acquisitions of businesses. HGI continues to review acquisitions and business combination proposals with the assistance of its advisors. A majority of HGI's outstanding common stock is owned by investment funds affiliated with Harbinger Capital Partners LLC.
Have a look at these companies for yourself.My current favorites are Leukadia, Brookfield and Fairfax.
Disclosure: the authors owns shares of BRK.B.
Like any great empire, it's time for Berkshire Hathaway to fall from the top and relinquish the throne of SuperStock to a contender. Berkshire is simply too big to sustain the kind of growth seen in previous decades as evidenced by flattening returns over the past few years. Although Buffett and his team may find a second wind to their astronomical past success, it would seem that as Buffett readies to pass on the crown, it may be time to consider a new ruler altogether in the multinational conglomerate superstock competition.
There seem to be a number of contenders for the next gold medalist in the fight to become the Goldilocks stock story of this new century. The top candidates mentioned most frequently by financial analysts, writers and researchers are Markel (NYSE: MKL), Sears Holdings (Nasdaq: SHLD), Fairfax Financial (TSE: FFH.TO), Leucadia (NYSE: LUK), Brookfield Asset Management (NYSE: BAM), Alleghany (Y), and Harbinger Group (NYSE: HRG).
Markel (MKL): Located in the US, Markel Corporation markets and underwrites specialty insurance products and programs to a number of niche markets. It operates in three markets: excess and surplus lines, specialty admitted, and the London markets.
Markel's chief investment officer, Tom Gayner, is a conservative investor like Buffett who has returned 14% annually over the past 10 years compared to the sideways trading S&P 500. Gayner is a long-term value investor, investing in companies with high return on equity, low price over book and low price over cash flows.
Sears Holdings (SHLD):
Sears Holdings Corporation, through its subsidiaries, operates as a retailer in the United States and Canada. The company operates through three segments: Kmart, Sears Domestic, and Sears Canada.
Man at the top, Edward Lampert started his own hedge fund in his 20's, with an investment style similar to Warren Buffett's, averaging returns of 29% per year.
Fairfax Financial (FFH.TO):
Fairfax is run by Prem Watsa, another long-term value investor dubbed “the next Warren Buffett”. Watsa is best known for his most famous calls include selling half his stocks before the 1987 crash and buying S&P puts before the index dove in 2000. He also bet against the Japanese Nikkei but his biggest success came just recently when he bought credit default swaps on the premise that banks and financial institutions would struggle if a credit and liquidity crisis arose.
Since 2005, Fairfax revenue has stayed at roughly $5 billion. Net earnings, however, have grown at 100% compounded annually, from $53 million in 2005 to $856 million in 2008. The market price of Fairfax shares listed on the NYSE has doubled in value over this period. According to filings, Watsa has returned a compounded 23% annualized return in book value between 1993 and 2008.
There are very few who can match a record like that. Over the last ten years, Fairfax’s wholly owned investment management company Hamblin Watsa Investment Counsel has produced a common stock investment return of 19.1% compounded annually, against a (1.4%) decline for the S&P index over the same period.
Leucadia (LUK):
Leucadia National's Ian Cumming and Joseph Steinberg have their hands in every sector, invest fearlessly, and buy good companies at low prices. Invested in a diversified portfolio of stocks and businesses, Leucadia has generated impressive returns and gained dedicated fans amongst value-oriented investors.
Leucadia is considered to resemble the Berkshire Hathaway of 20 years ago. But unlike Berkshire, Leucadia tends to focus on speculative companies rather than operating businesses and presents an attractive play on its depressed investments and on the ability of Cumming and Steinberg to continue to find new investments.
Brookfield Asset Management (BAM):
Brookfield Asset Management Inc. is a global asset manager focused on property, renewable power and infrastructure assets with over $100 billion of assets under management. The company's investment guidelines include investing in areas of competitive advantage, aquiring assets on a value basis with a goal of maximizing return on capital, building sustainable cash flows and recognizing that superior returns often require contrarian thinking.
The company's remarkably consistent objective over the years simply has been to earn a 12% to 15% compound annual return per share. 45 year old Bruce Flatt runs a conglomerate that manages $108-billion worth of real estate, utilities and infrastructure across the planet. In the nearly a decade Flatt has been in charge, Brookfield has emerged as the world's biggest owner of prime office space, and its 165 power plants constitute one of the largest hydroelectric portfolios.
But more impressive is how Brookfield weathered the 2009 flashcrash that crippled many of its rivals. Over two years, as its stock plunged by two-thirds along with the markets, the company quietly added to its capital and waited out the storm.
Alleghany (Y):
Alleghany has found its comfort zone in property/casualty insurance with real estate mixed into the formula. Its goal is to create stockholder value through ownership and management of a small group of operating businesses and investments.
Alleghany’s subsidiaries include Capitol Transamerica and RSUI Group. In its last quarter, the company beat EPS estimates by 1.19 (4.85 actual vs. 3.66 estimated). Alleghany Corporation has had an average earnings growth of 1.9% over the past 10 years. As of the end of February, Alleghany holds $825 million in cash for use in future investments and has no debt to note.
Harbinger Group (HRG):
Harbinger's strategy is to buy controlling and significant equity stakes in companies competing in six industries: Consumer products, insurance and other financial products, telecommunications, agriculture, power generation and lastly, water and natural resources.
Harbinger Group Inc. is a holding company with approximately $144.8 million in consolidated cash, cash equivalents and investments as of June 30, 2010. HGI's principal focus is to identify and evaluate business combinations or acquisitions of businesses. HGI continues to review acquisitions and business combination proposals with the assistance of its advisors. A majority of HGI's outstanding common stock is owned by investment funds affiliated with Harbinger Capital Partners LLC.
Have a look at these companies for yourself.My current favorites are Leukadia, Brookfield and Fairfax.
Disclosure: the authors owns shares of BRK.B.
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