The ones that got away

It’s that time of year; everything seems to be winding down, everyone is looking forward to a well deserved break over Christmas and time becomes scarce as free moments are taken up with shopping for gifts, writing cards to relatives you haven’t spoke to all year, and of course, eating all those cakes and mince pies. It is a great time to look back over the year and contemplate the good times and the bad times, to hopefully learn some new lessons for next year.

For the purposes of this article, I’m going to focus on some of the companies I’ve followed this year, who’s stock prices have rocketed. Unfortunately for me, I have either sold too soon, or not bought at all. I’ve tried to hold back the tears while writing this.

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Most investors should beat the market

Almost all investors assess their performance against ‘the market’. The premise is that if you are spending time actively managing funds then to make it worthwhile you should at least beat a simple tracker fund which would take no effort whatsoever.

But just how easy is it to beat the market? Looking at the performance of most mutual fund managers you could be forgiven for thinking that it isn’t easy at all! The fact is a lot of managers fail to beat the market, while the ones that do, like Warren Buffett, are catapulted to stardom as heroes of the industry. But I would argue it is easier than people think

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JCP – what went wrong

As a value investor, you are likely to come across many struggling companies when doing research. These tend to be the ones trading at low Price/Earnings ratios due to pessimism about the future, so will frequently appear in stock screens. Some will inevitably have the attention of an activist investor who believes they can turn the business around, and in the process produce outsized returns for shareholders. It is easy, as an individual, to believe their assertions and they will often have a good track record to back them up too. But it doesn’t always go to plan as was the case with JCPenney (JCP), and it is an interesting case study to review so that hopefully investors don’t get caught out in this same trap in future.

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Social media frenzy

I haven’t had a lot of time to look at stocks recently, so with the markets hitting all time highs I thought I’d do a post about some of the ludicrous valuations in the market today, and cap it off with one extraordinary story I read in the news.

Anyone that keeps tracking of whats going on in the market will know there is currently a lot of hype around social networking websites that reminds one of the dotcom IPO’s back in the 90s. Facebook for one was offered last year for a whopping 100x earnings. Any value investor will have avoided that one, and the subsequent 50% drop that happened in the next few days. It’s strange how the market can go from loving a stock, to hysterical paranoia about mobile revenue and completely change its mind. Early investors can breathe a sigh of relief now however, Facebook is now back over its IPO price.

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