Monday, October 30, 2017

Stock picking blues

These days when doing basic research on stocks that I own(should they be added to or sold?),  stocks that might be an opportunity, and stocks that can be bet against(rarely done here), a crutch that was widely used in the past is mostly gone.

When I worked in financial services and then for ten years or so after, many institutional fund managers were well known.  When working they were business associates and long hours were spent on the phone with many of them.  They were visited at their offices in Boston, New York, Los Angeles, San Francisco, Denver, Chicago, Kansas City, Philadelphia, Valley Forge, London, and other places.  Meals were shared and conferences were held where they all gathered.

Getting to know the portfolio managers well was far more instructive than working with the brokerage firm securities analysts.  Of course, strong opinions were developed about those who were the smartest and most astute investors.  That opinion was not based just on the industry that I represented but on their stock picking prowess overall.  When that opinion was current, and staying fresh for years after, one way to research stocks was not only to look at financials, industry trends, the strength of CEO's, and other variables that could be interpreted, but also to check on who owned the stocks being researched.  More explicitly, checking the funds managed by those considered to be the most talented was used as a guide to confirm or reject thoughts, or create new ideas.

Over time that knowledge has become stale.  Most talented portfolio managers retire at some point.  Forty-five or fifty was often seen as a good age to back off.  Some that have their own firms stick with it, like Buffett, but that's unusual.  Almost all continue to manage money, but privately.  At this point there are few that can be checked on.  Among the last is Will Danoff of Fidelity's Contrafund who was met when he was just beginning, in his mid-twenties I would guess.  For the most part now, few that were personally known are still out there.

In some ways that makes me feel like I am alone when making investment decisions.  For many years my prowess, if I can be so bold as to call it that, was aided by tracking those highly regarded acquaintances, many in fact as much friends as job required contacts.

So the stock picking blues hits here at times and while a  new song is not in the works, there are old ones... "if the river was whiskey and ..."

Postscript:  as a morning follow up, it is noted that this "blues" did not stop activity yesterday.  A recent position in ODP was added to and a new position in Sprint(S) was added as it dropped significantly on the news that a merger possibility was faltering.  These actions are speculative and not recommended for others.  In addition, the final piece of a long held and profitable position in Wells Fargo was sold.  Evidence of bad management at that firm continues unabated.


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