More Than 2 Years In, Still Beating the Market (Thanks Joel!)

Fortunately I've been more rigorous in actually investing than in blogging about it, but since I'm taking the week off work, I thought it a good time to do the "two-year update" post I'd meant to do back in May.

So I guess this is a "28-month-update."

I've been generally following the strategy outlined in Joel Greenblatt's "Little Book that Beats the Market," which in a nutshell says:

1. Pick stocks using this screener


2. Hold them for about a year (if they're down, sell just prior to one year; if they're up sell just after one year, for tax purposes)


3. Lather, rinse, repeat (holding about 20 stocks at any one time)

Current/previous holdings now updated, and the chart below shows my performance since May 2006.

Also, in an attempt to get myself posting more frequently, I'm considering folding this blog into my main personal one. I'll try to maintain all the relevant links, but may well fail miserably. Check back at andrewsavikas.com/blog for updates.

Anecdotal Evidence from the Boston Real Estate Market

My wife and I have been in the market for our first house for a little over a year now; the stars finally aligned recently and we pulled the trigger. Apparently we're not alone. And from the Completely Anecdotal department, all of the property alerts I set up on Redfin while we were house hunting are showing a distinct uptick in the number of properties going under contract. While my experience is limited to one square mile here in Boston, in that square mile, I've seen sellers slowly get much more realistic with prices, and perhaps that's finally bringing buyers back to the table.

Changing the Rules in the Middle of the Game

Just caught Maxed Out on Showtime. Opinions on credit cards and bankruptcy aside, it does seem totally unreasonable to change the interest rate on money someone has already borrowed. it's one thing to say, "hey, you're being risky -- if you want to borrow any more money, we're going to jack up your interest rate."; quite another to reprice your product after a customer has already purchased it.

Recommended Reading

Recently finished, and highly recommended:

The Black Swan: The Impact of the Highly Improbable. From Chris Anderson's review:

Our brains are wired for narrative, not statistical uncertainty. And so we tell ourselves simple stories to explain complex thing we don't--and, most importantly, can't--know. The truth is that we have no idea why stock markets go up or down on any given day, and whatever reason we give is sure to be grossly simplified, if not flat out wrong.

Nassim argues that most of the really big events in our world are rare and unpredictable, and thus trying to extract generalizable stories to explain them may be emotionally satisfying, but it's practically useless. September 11th is one such example, and stock market crashes are another. Or, as he puts it, "History does not crawl, it jumps." Our assumptions grow out of the bell-curve predictability of what he calls "Mediocristan," while our world is really shaped by the wild powerlaw swings of "Extremistan."

Why Smart People Do Dumb Things: Lessons from the New Science of Behavioral Economics. This one's more than 10 years old, so some of the contemporary examples feel quite dated, but still well worth a read.

Why ATM Fees Now Make Me Smile

I travel a lot, and while Wainwright Bank here in Boston has been great, I was just so rarely near one of their ATMs when I needed cash, that I often had to swallow obnoxious ATM fees.

As they say, you don't know what you've got until it's gone (true story: I saw them in concert in 1987. Twice.), and I had no idea just how annoying those fees really are until I stopped paying them. OK, I technically do still pay the fee, but every month I now get all of those fees refunded:

    01/31/2008    ATMREBATE    ATM Fee Rebate    $10.75

Schwab's not the only bank to offer ATM fee rebates, and now may be a great time to find one that works for you.

New Round of MFI Picks

I picked up my (now quarterly) basket of new MFI stocks on Monday (I was a bit too tied up to post sooner). All of these had recent data in the MFI screener:

• Cal Dive International (DVR)
• Maximus (MMS)
• Supertex (SUPX)
• American Eagle Outfitters (AEO)
• Administaff (ASF)

Also sold the following:

• FDG (+45.89%)
• WDC (+47.02%)

The full list of holdings has been updated.

Performance Update (Live from New York)

I'm in New York this week, where I had the opportunity to attend the O'Reilly Money:Tech Conference, and while the conference content was excellent, I was left with mixed feelings about the market.

On the plus side, seeing and hearing so many market luminaries left me re-energized about investing, and excited to make my next round of picks (doing bi-weekly picks was problematic for two reasons: it was a lot of work; and the MFI site only updates with quarterly reports, so in some cases I was working off data nearly 3 months old).

One of the highlights from the conference was a conversation between conference program chair Paul Kedrosky and Mad Money's Jim Cramer. Not only is Jim as entertaining as you'd expect in person, he was very bullish on GOOG. (He said a lot of people were making "momentum" decisions: they open the drawer today, it says 'sell google'; after the market improves, they'll open the drawer again and it'll say 'buy google'.)

On the downside, there's a strong consensus among the Wall Street crowd that we're either in or heading toward a recession (an interesting data point here). While that does mean market opportunities, it also means a lot of people are looking at some lean times ahead.

Regardless, I'll be making a new round of MFI picks on Monday, this time five at a time (done every quarter to leave me with 20 at any given time). On that note (and because I'm tired of that Covestor widget to your right mocking me -- that precipitous decline you see in July coincides almost exactly with my Covestor signup), I thought I'd post my performance since inception, which now represents about 18 months of data. Still short-term, but I find the results encouraging: 25.32% against the S&P's 8.66% for the same period.

You can read about how this performance is calculated here. (There was actually someone from FolioFN at the conference, but unfortunately I didn't get a chance to connect.)