Lamer Lehman

Wow, this is the new blog format. Out of beta. We'll have to see what is different. Great day for my portfolio. I actually caught back up with the benchmark as I was up about 1% today. I don't have the graph with me right now (actually I do have it nearby but I am too lazy to get it).

I wanted to highlight this evening the performance of Lehman's Uncommon Values from the ned of June. Faithful, long time readers will recall that I have been tracking their performance. After about 6 months, their performnce is "ahem" lame.

Symbol	Holdings Value	Gain
-	-	44.50	225	10,942.89$10,942.89	ADP	10,942.89$10,942.89	943.74 $943.74	9.44%
-	-	84.00	119	9,165.38$9,165.38	COF	9,165.38$9,165.38	-830.62 $830.62	8.31%
-	-	57.00	175	10,462.60$10,462.60	EXC	10,462.60$10,462.60	464.81 $464.81	4.65%
-	-	21.50	465	9,315.95$9,315.95	GLW	9,315.95$9,315.95	-683.70 $683.70	6.84%
-	-	27.78	360	10,904.40$10,904.40	INTU	10,904.40$10,904.40	903.31 $903.31	9.03%
-	-	61.50	163	10,835.66$10,835.66	JNJ	10,835.66$10,835.66	835.76 $835.76	8.36%
-	-	44.60	224	8,710.17$8,710.17	OCR	8,710.17$8,710.17	-1,289.13 $1,289.13	12.89%
-	-	77.80	129	15,407.15$15,407.15	PD	15,407.15$15,407.15	5,409.85 $5,409.85	54.11%
-	-	18.90	529	11,809.51$11,809.51	RGC	11,809.51$11,809.51	1,809.52 $1,809.52	18.10%
-	-	61.00	164	10,558.43$10,558.43	UTX	10,558.43$10,558.43	560.54 $560.54	5.61%
-	-	124.09	1	71.62$71.62	SPY	71.62$71.62	9.58 $9.58	15.43%
-	-	-	-	108,183.76$108,183.76	Total (USD):	108,183.76$108,183.76	8,133.67 $8,133.67	8.13%

So overall up 8.1% while the benchmark SPY is up 15%. I don't have dividends in, but at best that would narrow the gap by a point.

This of course begs the question: How can Lehman spend a ton of time analyzing stocks and put their ten best ideas out there for the world to see and then have the net results of those stocks fall flat on their face???

It has to be embarrassing for them. Why would I let Lehman manage my portfolio if their best ideas aren't good? And this isn't like the first time. Last year 2005-06 they also underperformed. I wrote about in June ( Lame Lehman).

Ok, all you readers! I would like your opinion on how this can happen. Toss in your comment below.

My opinion:

1. It is difficult to out-perform the market. Many studies have shown the majority of mutual funds underperform the market.
2. I think to out-perform the market, you have to buy some unloved stocks.
3. This is because everyone knows what the "best of breed" stocks are (to use a Cramer-phrase) and you pay a premium (not a good word for a deal) for those stocks.
4. Lehman (and mutual funds) are scared to buy out-of-favor stocks as if they turn sour they can be subject to critiscm.
5. Thus Lehman under-performs the market.

Yes, it is just a hypothesis. But there seems to be a grain of truth. And that is the power of MFI. Greenblatt says as much. To paraphrase, he comments that the difficulty in sticking with his approach is that you will find that some of his stocks have a lot of warts. Unloved. Out of favor. But he gives us a tool that allows us to create a portfolio of these unloved stocks that will outperform the market. Think about it.

King of Stocks

A stock I comment very little on is KG (King Pharma). The reason I rarely comment is that it has been a non-eventful stock for the 8 motnhs I have owned it. But today it was interesting. And interesting catcxhes my eye. People may remember my commenting on interesting trading patterns for PNCL about 2 motnhs ago. I don't think that was totally unrelated with their pop in December. I don't think secrets are kept that well on Wall Street.

Anyway, for no reason I could see, KG spiked in volume and price the last 40 minutes this Friday. It went up about 5% and is almost about to go green for me. Not sure what it means, but it bears watching.

Weekly graphs and charts later this weekend. Take care! Happy investing!