Was reading Barron's this weekend (a bit rainy today in White Mountains) and they had an article about what a bear market might look like in today's world. Here was a thought-provoking paragraph:
"The market works differently than it did even 10 years ago, with exchange-traded funds now playing a far more dominant role. Some $2.4 trillion sits in equity ETFs, up from $534 billion at the end of 2007. These funds now account for more than 20% of equity assets under management, according to Morningstar.
Why does this matter? Imagine that there’s a selloff, and investors move to lighten their stock positions. If they have different portfolios of individual stocks, they’ll pick and choose among them, spreading out the selling, says Michael Shaoul, CEO of Marketfield Asset Management. But if they all own the same ETFs, everyone selling will be dumping the same stocks at the same time, exerting enormous downward pressure on their prices. “A bear market dominated by passive investing will be more volatile,” Shaoul warns."
So a bear market will impact everything and Shaoul says that makes it different this time. I guess.
I remember well the bear market of 2007-2009, and I promise you everything went down a ton then. It was d*mned volatile. But I also remember that the baby, being thrown out with the proverbial bath water created some incredible opportunities for Magic Formula Investing. Take a look at returns by year for index versus MFI:
| Annual | ||
| Year | Russell | MFI |
| 2006 | 11.40% | 15.03% |
| 2007 | 4.09% | -6.69% |
| 2008 | -37.05% | -37.97% |
| 2009 | 32.51% | 45.18% |
| 2010 | 18.38% | 22.77% |
| 2011 | -0.56% | -10.47% |
| 2012 | 16.43% | 9.70% |
| 2013 | 33.01% | 51.70% |
| 2014 | 12.26% | 12.07% |
| 2015 | 0.38% | -8.95% |
| 2016 | 12.50% | 13.19% |
| 2017 | 11.21% | -0.50% |
Note we had back-to-back years of out-performance in 2009 and 2010. Funny, 2013 was just an insanely good year as well. Let us revisit those 50 stocks:
| Stock | Initial Price | End Price | Percent Change |
| NUS | 36.38 | 138.22 | 279.9% |
| GTAT | 3.03 | 8.72 | 187.6% |
| SAVE | 17.73 | 45.41 | 156.1% |
| HLF | 32.17 | 78.70 | 144.6% |
| CPLA | 28.08 | 66.44 | 136.6% |
| PBI | 10.03 | 23.30 | 132.3% |
| USNA | 32.93 | 75.58 | 129.5% |
| QCOR | 26.23 | 54.45 | 107.6% |
| GME | 24.34 | 49.26 | 102.4% |
| POZN | 5.01 | 9.79 | 95.4% |
| UIS | 17.30 | 33.57 | 94.0% |
| ESI | 17.31 | 33.58 | 94.0% |
| WCRX | 11.89 | 22.93 | 92.9% |
| STX | 29.59 | 56.16 | 89.8% |
| RPXC | 9.04 | 16.90 | 86.9% |
| JCOM | 29.91 | 50.01 | 67.2% |
| DLX | 31.47 | 52.19 | 65.8% |
| RTN | 56.15 | 90.70 | 61.5% |
| SAI | 10.28 | 16.35 | 59.0% |
| AGX | 17.37 | 27.56 | 58.7% |
| CA | 21.22 | 33.65 | 58.6% |
| PETS | 10.61 | 16.63 | 56.7% |
| LPS | 24.30 | 37.38 | 53.8% |
| BAH | 12.88 | 19.15 | 48.7% |
| MSFT | 25.93 | 37.41 | 44.3% |
| VG | 2.37 | 3.33 | 40.5% |
| DELL | 9.97 | 13.86 | 39.0% |
| VCI | 24.69 | 34.25 | 38.7% |
| NATR | 13.02 | 17.32 | 33.0% |
| DLB | 29.33 | 38.56 | 31.5% |
| APOL | 20.92 | 27.32 | 30.6% |
| PDLI | 6.54 | 8.44 | 29.1% |
| USMO | 11.26 | 14.28 | 26.8% |
| MANT | 25.14 | 29.93 | 19.1% |
| CSCO | 19.22 | 22.43 | 16.7% |
| GNI | 58.55 | 68.10 | 16.3% |
| CF | 201.02 | 233.04 | 15.9% |
| HFC | 43.60 | 49.69 | 14.0% |
| TZOO | 18.99 | 21.32 | 12.3% |
| KLIC | 11.99 | 13.30 | 10.9% |
| NTI | 22.27 | 24.60 | 10.5% |
| DMRC | 20.30 | 19.26 | -5.1% |
| INTX | 8.72 | 7.79 | -10.7% |
| TNAV | 7.99 | 6.59 | -17.5% |
| NSU | 4.08 | 3.32 | -18.6% |
| EGY | 8.65 | 6.89 | -20.3% |
| IDCC | 40.78 | 29.49 | -27.7% |
| SVLC | 2.52 | 1.68 | -33.3% |
| STRA | 56.17 | 34.47 | -38.6% |
| POOSF | 1.42 | - | -100.0% |
Posts
No comments:
Post a Comment