Understanding how markets function is critical when making investment decisions. This is why Hendrick Bessembinder’s 2018 study of historical stock returns was so important; it revealed to investors that the vast majority of individual stocks underperform. This information is critical. It helps us better understand why active stock-picking managers underperform at such a high frequency, and it gives us a deeper understanding of the importance of portfolio diversification--not just to mitigate ... [Continue Reading]
Articles and resources related to Active Management.
One of the foundational underpinnings of our investment approach at CCM is the simple premise that “costs matter.” Over the last 30 years, the internal and execution costs of how we manage portfolios has dropped significantly. This has resulted in savings of hundreds of thousands of dollars for our clients. We are diligent in our analysis of costs relative to the value received by our clients. When investing in mutual funds, the costs of ownership matter. Importantly, these costs need to be ... [Continue Reading]
There’s a classic line in the 1987 movie “Wall Street,” where Michael Douglas’ character Gordon Gekko states, “lunch is for wimps.” The implication is that in the business of money management, there’s no time to waste, certainly not for something as trivial as lunch. With only so many hours in the workday and a never-ending stream of new information to digest, the idea is that analysts and portfolio managers must spend every waking minute trying to gain an edge. This narrative is powerful, and ... [Continue Reading]
At the end of September, another hedge fund titan called it quits, continuing a trend since the global financial crisis began in 2008. Whitney Tilson, a well-known name on Wall Street, announced the closure of Kase Capital Management because in his own words, “Reporting sustained underperformance…was making me miserable.” Just ten years ago, Tilson was one of the hottest names in the hedge fund arena, having outperformed the S&P 500 by more than 100% since his fund opened its doors in the ... [Continue Reading]
This week’s recommended reading comes with an experiment. Find a coin and flip it until it lands on heads three times in a row. Go ahead, we’ll wait. It’s not easy to do. Everyone will have a different experience, but if we conducted this experiment with a large crowd we’d find that most people would require eight attempts before succeeding. We know this because the probability of flipping a coin and it landing on heads is 50%, and if we repeat that probability three times, we find that ... [Continue Reading]