Apologies to Paul Simon. In his book, Greenblatt devotes an entire chapter to why you should use his magic formula. He doesn't mince words when it comes to trusting a stock broker to pick your stocks for you:"If your stockbroker is like the vast majority, he or she has no idea how to help you! Most get paid a fee to sell you a stock or a bond or some other investment product. They don't get paid to make you money."
The esteemed Warren Buffet (in his 2005 Chairman Letter) also takes his swipes at trusting other people to pick your stocks. (I would encourage any investor to read his Chairman Letters in BRK's annual reports at least, errr, annually (Annual Reports)).
Here in an excerpt about a family called the Gotrocks who own the entire stock market:
"But now let's assume that a few fast-talking Helpers approach the family and persuade each of its members to try and outsmart his relatives by buying certain of their holdings and selling others. The Helpers - for a fee of course - obligingly offer to handle these transactions. The Gotrocks still own all of Corporate America: the trades just rearrange who owns what. So the family's annual gain in wealth diminishes, equaling the earnings of American business minus commissions paid. The more that the family members trade, the smaller their share of the pie and the larger the slice received by the Helpers. This fact is not lost upon the broker-Helpers: Activity is their friend, and in a wide variety of ways, they urge it on."
There is a good deal more, building up to "manager-Helpers", "consultant-Helpers" and then "hyper-Helpers"... it is kind of like reading Dr Suess, I highly recommend it.
Enough said,
"Make a new plan, Stan
You don’t need to be coy, Roy
Just get yourself free"
I thought Randy on the magic investing yahoo group board had a tremendous insight on our abilities as stock pickers to differentiate the good from the bad (the wheat from the chaff, the goats from the sheep, the men from the boys... you get the picture) in the MFI lists. Here is what he said:
"Here's another way to think about it -- the S&P 500 consists of 500 stocks. Surely it should be easy to identify the 100 worst and 100 best stocks of that index, shouldn't it? But if that were the case,it should be EASY to beat the performance of the S&P 500 index. Either buy those top 100 or toss out those bottom 100."
But we know in reality that sophisticated mutual funds struggle to beat the S&P 500... so it isn't so easy.
Cramer Watch - I watched Mad Money and Cramer did have an interesting observation. He commented about the inverse correlation of the stock market and the amount of margin being utilized. (the does make sense). He bragged about how he used that to call the top of the 2000 bubble (it made me wonder why he brings it up in hindsight on his show... hmmm). He didn't tell us how to check the margin levels (any one know?). He also kind of alluded that it was you and me (the small guys) using margin. That may be right to some extent, but as I have read "When Genius Failed" (a superb look inside the largest hedge fund collapse ever) I know it is these hedge funds that leverage their investments to the hilt.
What a day in the market, "whoa Nellie!". My MFI portfolio was up 3.8% with two (TGIS & RAIL) up over 10%. MGLN was the only stock in red (funny how that works). OVTI reports earnings after the bell, I'll give a short snapshot here.
OVTI earnings were quite upbeat.
- Y o Y growth: 27%
- 2006 Q1 o 2005 Q1 growth: 28&
- Gross margin down to 36.8% from 40.3%
- Expect solid Q o Q sequential growth in 2nd Q
- $1.56 per share in fiscal 2006 vs $1.24 in 2005.
- Current Qtr revenue guidance $135m to $145m vs $132m this past quarter.
Made up a bunch of ground today as up about 3.7%... still in the red though:
| Stock | Cost | Current | Gain |
| NCOG | $19.39 | $27.05 | 39.5% |
| UST | $39.36 | $43.88 | 14.4% |
| MGLN | $38.34 | $42.17 | 10.0% |
| NSS | $45.89 | $48.15 | 4.9% |
| CHKE | $37.55 | $38.72 | 4.7% |
| PGI | $7.71 | $7.97 | 3.4% |
| PCU | $78.13 | $77.94 | 3.3% |
| TRLG | $17.02 | $17.35 | 1.9% |
| PTEN | $27.74 | $28.14 | 1.7% |
| PNCL | $6.68 | $6.71 | 0.4% |
| MSTR | $94.36 | $92.70 | -1.8% |
| OVTI | $27.79 | $26.81 | -3.5% |
| PACR | $32.53 | $30.68 | -5.2% |
| FDG | $34.03 | $32.19 | -5.4% |
| KG | $17.31 | $16.33 | -5.7% |
| ANF | $61.13 | $57.23 | -6.1% |
| ELX | $17.85 | $16.75 | -6.2% |
| TGIS | $10.34 | $9.50 | -8.1% |
| ORCT | $11.83 | $10.68 | -9.7% |
| MTEX | $13.11 | $11.79 | -10.1% |
| RAIL | $58.18 | $52.04 | -10.6% |
| FTO | $57.52 | $51.30 | -10.8% |
| IVII | $10.93 | $9.60 | -12.2% |
| PONR | $32.97 | $28.75 | -12.8% |
| DLX | $26.36 | $21.34 | -17.5% |
| TBL | $34.50 | $27.54 | -20.2% |
| PTSC | $1.31 | $1.03 | -21.8% |
| HW | $37.42 | $25.65 | -31.5% |
| Total Gain/Loss | -$12,968 | ||
| Benchmark Gain/Loss | -$6,193 | ||
| Annual IRR | -27.3% | ||
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