Top 17 Value Investing Blogs You Should Be Reading

In the constant race against the clock, you shouldn’t waste time reading mediocre content. We put together this list of must-read blogs based on feedback from our team of former analysts and additional in-depth research.

1. ValueWalk

Started in 2010, ValueWalk.com offers breaking financial industry news — with a focus on hedge funds, large asset managers, and value investing. The site provides quality content that is important to value investors (most of which is free).

It is read by senior level executives at the largest banks, hedge funds, asset managers, and Fortune 500 companies.

2. The Reformed Broker

This blog was started in November 2008 by the New York City-based financial advisor and CEO of Ritholtz Wealth Management, Joshua M. Brown.

The blog covers markets, politics, economics, media, culture and finance. Brown uses “statistics, satire, anecdotes, pop culture references, sarcasm, fact, fantasy and any other device” to communicate his market-related insights.

Brown has been featured in or has written for Fortune, Forbes, the Wall Street Journal, MarketWatch, Dow Jones Newswires, Bloomberg, Reuters, and more. He is also an on-air contributor to CNBC.

3. SumZero

This site describes itself as “the world’s largest community exclusively for professional investors, providing quality, peer-reviewed investment research from top analysts and rising stars in the fund industry.” Members describe this site as network-enriching and career-enhancing.

4. Base Hit Investing

John Huber is the portfolio manager of Saber Capital Management, LLC, a value-focused investment firm. Saber’s objective is to compound capital over the long-term by making investments in undervalued stocks of high-quality businesses. A few of his article topics include:

    1. Case Studies
    2. Education
    3. How to Improve Results
    4. Industry-Banks
    5. Industry-Insurance
    6. Industry-Oil
    7. Industry-Railroads
    8. Investment Ideas & Company Research

5. Zero Hedge

The mission statement of ZeroHedge on their website gives a good sense of their content:

    1. to widen the scope of financial, economic and political information available to the professional investing public.
    2. to skeptically examine and, where necessary, attack the flaccid institution that financial journalism has become.
    3. to liberate oppressed knowledge.
    4. to provide analysis uninhibited by political constraint.

Readers can subscribe to their newsletter for daily alerts and a weekly digest of articles.

6. Contrarian Edge

Vitaliy Katsenelson, author of this blog and a couple books, is a former analyst, portfolio manager, and now CEO of Investment Management Associates. His blog posts cover everything from behavioral investing, to capitalism, to cryptocurrency and specific tickers.

7. The Brooklyn Investor

The Brooklyn Investor is somewhat mysterious, in that he doesn’t reveal his real name on his blog. However, he explains that most of his career has been on Wall Street, starting in investment strategy/portfolio management, trading, futures/options and OTC derivatives structuring and trading, proprietary trading, special situations, and systems trading of futures at “one of the big hedge funds.”

He has always been a fan of Warren Buffett and other long term investors, and “it is reasonable to assume that [he is] long stocks that he thinks] are interesting and short the ones that I don’t like etc.” His blog covers everything from AAPL and GOOG to the gold standard.

8. Memos from Howard Marks

Oaktree Capital Management is a global alternative investment management firm with expertise in credit strategies. A section of their website is devoted to insights specifically from their internal team about investment strategies and investment philosophy. Howard Marks (CFA and Co-Chairman of Oaktree) covers topics from index investing to macro-fragility, to algorithmic investing.

9. Berkshire Hathaway Reports

Quarterly and annual reports – also easily accessible within Sentieo Document Search!

10. The Manual of Ideas

Through invitation-only events and member publications, MOI Global fosters a community of intelligent investors united by a passion for lifelong learning. The Manual of Ideas started out nearly a decade ago, focused on content. As the founders went out to gather and generate uniquely differentiated content for value-oriented investors, they came to appreciate the tight-knit value investing community that had been developing for many years thanks to a strong network formed by the Berkshire Hathaway annual meeting.

11. KASE Learning

Whitney Tilson is one of the most public longstanding value investors. Rooted in sharing their half century of experience as value investors and fund managers, Tilson and his long-time partner, Glenn Tongue have produced a multitude of resources on this site.

12. Value Investor Insight

Whitney Tilson also co-founded this monthly newsletter in 2004, in which he and editor in chief John Heins interview two portfolio managers about current topics.

13. Value Investors Club

Value Investors Club is “an exclusive online investment club where top investors share their best ideas.” VIC prides itself in the fact that its members are admitted only because of the strength of their investment ideas, and not their job titles. This selection process adds a number of diverse perspectives the forum.

14. csinvesting

The author of csinvesting has an interesting background: “In my peripatetic life I have been a ruby smuggler, commodity trader, securities analyst, investment banker, and entrepreneur. Each role taught me more about value investing.” His philosophy is for investors to learn from the successes and failures of others, so his blog covers mostly case studies.

15. Value Investing World

Value Investing World is a blog self-described as “dedicated to promoting the multidisciplinary approach to investing and development of – as Charlie Munger describes it – a latticework of mental models…and largely focused on linking to investing and economic material it deems of interest.”

16. Investor Junkie

Articles for everyone from beginner to advanced investors. Topics include everything from “socially responsible investing” to  “investing as an expat.”

17. A Wealth of Common Sense

A Wealth of Common Sense focuses on wealth management, investments, financial markets and investor psychology. Author Ben Carlson, CFA, manages portfolios for institutions and individuals at Ritholtz Wealth Management LLC. Ben has written a few books and has a weekly podcast called “Animal Spirits” which covers financial markets, personal finance, movies and dad life.

 

 

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Assessing Fed Chair Hopefuls With NLP Analysis Of Past Speeches

This article was originally published in Forbes

Our third article on the Fed leverages third-party political trend data as well as powerful Sentieo opinion mining to break down past speeches from top contenders for the Fed Chair. We discuss possible 2018 scenarios and delve deeper into the surprising results we come across. Brush up on the previous articles and see what’s coming up next in our series using the FedSpeak lexicon here:

Sentiment Analysis Of FOMC Statements Reveals A More Hawkish Fed
Why Is The Fed Still Raising Rates? The Yellen Effect
Assessing Fed Chair Hopefuls With NLP Analysis Of Past Speeches
Predicting The FOMC Statement With Beige Book Sentiment Data

From left, Gov. Jerome Powell, Former Vice Chairman Stanley Fischer, Federal Reserve General Counsel Scott Alvarez, and Federal Reserve Chair Janet Yellen, speak together following a Board of Governors meeting. (AP Photo/Andrew Harnik)

We set out to analyze the historical speeches of the top Fed candidates with Sentieo’s natural language processing capabilities and in the process, we learned something interesting. It doesn’t matter.

The Federal Reserve is not a one-woman organization and while the chair tends to drive policy, the minutes reveal that the entire committee weighs in on decisions. Some subtle changes over the course of this year have changed the makeup of the FOMC into a more hawkish committee. Furthermore, the composition of the FOMC will change when four of the regional bank presidents and voting members rotate out for their peers.

Earlier this year, Daniel Tarullo resigned. And just a little over a month ago, Stanley Fischer, a longtime central banker, resigned from Fed Board of Governors. In their place, Donald Trump has nominated Randal Quarles, a monetary hawk who favors a rule-based approach to monetary policy, as vice chair for bank supervision. Unfortunately, transcripts of Mr. Quarles views on monetary policy are not readily available, so he is not included in the quantitative analysis.

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Why Is The Fed Still Raising Rates? The Yellen Effect

This article was originally published in Forbes

Our second investigation of the Fed’s sentiment discusses the impact Chairwoman Yellen has had on the Federal Reserve since her rise to the Chair in 2014. We created and utilized our ‘FedSpeak’ lexicon to delve into the correlation between the Fed’s intentions and Yellen’s speeches before colleagues, Congress, and the press. Read the previous article and see what’s coming up next in our series here:

Sentiment Analysis Of FOMC Statements Reveals A More Hawkish Fed
Why Is The Fed Still Raising Rates? The Yellen Effect
Assessing Fed Chair Hopefuls With NLP Analysis Of Past Speeches
Predicting The FOMC Statement With Beige Book Sentiment Data

Federal Reserve Board Chairwoman Janet Yellen speaks during a news conference following a meeting of the Federal Open Market Committee September 20, 2017 in Washington, DC. Yellen announced that the Fed will not change interest rates this quarter. This is one of the last meetings before Chair Janet Yellen’s four-year term ends in February.

The Federal Reserve conducts the nation’s monetary policy under a mandate from Congress to promote maximum employment, stable prices, and moderate long-term interest rates in the U.S. economy.

The Fed began its current round of rate hikes in 2015, and the Fed Funds target rate now stands at 1.25%, up from 0% two years ago.

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Sentiment Analysis Of FOMC Statements Reveals A More Hawkish Fed

This article was originally published in Forbes

This piece kicks off our new series on the analysis of the Federal Reserve using Sentieo’s natural language processing power and flexible Doc Search technology. We will focus on bringing interesting ideas and surprising revelations derived from thousands of public federal reserve documents. Join us as we scrutinize meetings, congressional testimonies, and press conferences with some truly impressive technology; and see what’s coming up next in our series:

Sentiment Analysis Of FOMC Statements Reveals A More Hawkish Fed
Why Is The Fed Still Raising Rates? The Yellen Effect
Assessing Fed Chair Hopefuls With NLP Analysis Of Past Speeches
Predicting The FOMC Statement With Beige Book Sentiment Data

The Federal Reserve System’s Federal Open Market Committee (FOMC) meets eight times a year, at 2 p.m. Eastern Time in the basement of a nondescript, Washington, D.C. office building. The terse statements released after those meetings drive the direction of global financial markets and the meeting minutes are carefully scrutinized carefully by the media.

We parsed recent statements and minutes since 2012 using Sentieo’s natural language processing and sentiment analysis and found some interesting trends.

For the most recent statement 9/20, the strongest topic continued to be inflation, as highlighted in the unfiltered word cloud shown here.

The intensity was roughly equivalent to the prior statement, as the Fed continues to be vexed by an inflation shortfall versus expectations. Based on the statements alone, this analysis would suggest that Fed intentions have barely changed.  However, when we apply sentiment analysis to the words in the documents using the Loughran-McDonald context-specific lexicon, which assigns a simple positive or negative value to words based on the financial services industry context, the 9/20 statement occurs as much more hawkish.

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Wells Fargo Cross-Sell, Senator Elizabeth Warren And Unstructured Financial Data

On August 31, 2017, Wells Fargo (WFC) announced it completed an expanded third-party review of retail bank accounts which increased the number of potentially unauthorized consumer and small business accounts to 3.5 million from 2.1 million. In addition, an additional 528,000 accounts had potentially unauthorized online bill pay enrollments.

Nearly a year ago on September 20, 2016, WFC CEO, John Stumpf, testified in front of the Senate Banking Committee regarding the “cross-selling” scandal which also cost 5,300 employees their jobs. WFC never provided the “cross-sell” metric in a table format in public filings, and as a result the data cannot be derived from legacy financial research platforms.

During the hearing, Senator Elizabeth Warren highlighted:

  • The word “cross-sell” appeared in every transcript from 2012 through 2014.
  • Stumpf first mentioned “cross-sell” in 2010 AR, highlighting he picked the target 8. He picked the target 8 because it rhymed with great.
  • The correlation between the WFC stock price and the number of times “cross-sell” was mentioned.
  • All 12 printed transcripts were submitted as evidence.

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According To One Metric, This Could Be The Best Time For Stock-Picking In A Decade

This article was originally posted on Forbes.

The last three years have been dismal for fundamental long/short managers, and stock picking at large. However, at Sentieo, our analysis shows that we are currently in the best environment since before the 2008 crash for picking stocks. Now, that isn’t to say that this is the best time to buy stocks, nor is it a prediction of fund performance. But, according to an analysis of one metric, cross-correlation, the current market should provide an unusually ripe environment for stock picking.

First, a bit about what we mean by cross-correlation: The pairwise correlation between two stocks is a value between -1 and 1, that indicates how likely the two securities are to move in the same direction. Over a given time period, two stocks that perform identically will have a value of 1, two stocks have no correlation at all will have a value of 0, and two stocks that are perfectly inversely related will have a value of -1.

We ran the pairwise correlations between every stock in the S&P 500 and every other stock in the index (249,500 computations!) from the 2007-8 financial crisis until now. Averaging all of the correlations provides an indicator of how much stocks move in tandem with each other. If the cross-correlation is 1, there would be no opportunities for stock picking since all stocks would move in tandem with each other. The higher the value of the index, the more difficult it is to make money by selecting individual securities at that point in time.

The graph below shows the cross-correlation for the entire S&P 500 over the past decade. There are a few important takeaways from this chart. First, it is clear that the cross correlations of the S&P 500 are at decade lows. Second, we see a preponderance of large spikes in the data.

S&P 500 Cross-Asset Correlation
S&P 500 Cross-Correlation

As you can see, the spikes correspond with market shocks, the major macro events of the last decade. The jump in cross-correlation following a market shock is to be expected. When this sort of event happens, the entire market tends to turn in one direction as it collectively decides to buy or sell. The most recent inflection point, however, the 2016 election of Donald Trump in the United States, behaves differently.

The 2016 US Presidential election has driven correlations to new lows. Furthermore, correlations in the market actually began dropping prior to the November 8th election day, around the time when then-FBI Director James Comey sent a letter to Congress on October 28th. As opposed to the market shocks where the market all reacts in the same direction, it seems the collective market doesn’t know how to react to Donald Trump with any certainty. In other words, as of today, Donald Trump is an inherently uncertain entity that is creating opportunities for security selection.

Impact on Hedge-Fund Returns
As shown in the chart below, hedge fund monthly returns for long/short equity managers tend to react inversely to cross-correlation, as we would expect. This provides further validation to the idea that cross-correlation is a solid predictor of the overall environment for stock picking.

Monthly Returns of Long/Short Equity Funds
Monthly Returns of Long/Short Equity Funds

We can further apply cross-correlation to show the volatility of selected sub-sectors of the S&P 500. Doing so, we can demonstrate which specific sectors may have benefitted the most from the US election, again, purely from a stock-picking perspective.

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The VIX Is Back To Pre-Crisis Lows. Does It Matter?

The CBOE Vix Index is a popular measure of the implied volatility of the S&P 500 index options, calculated and published by the Chicago Board Options Exchange.

The Sky – Is It Falling?

If you watch major business news channels, you may have recently heard that the last time the VIX fell to its current low coincided with the beginning of the Great Financial Crisis of 2007-2008.  It’s a sensational storyline.

Shown below is a chart from the Sentieo platform with the S&P 500 Index (^GSPC) in light blue and the VIX Index in black.  The chart shows that the VIX has recently moved down to levels not seen since right before the financial crisis in 2008.  At the same time, the broad stock market appears unconcerned.

It’s a sobering historical comparison and, based on this data point alone, one might think that the S&P 500 Index is on the brink of sailing right back into the Bermuda Triangle of finance.

But does television chatter of a potential stock market selloff – premised solely on exceptionally low volatility – square with reality?

Fortunately, quick use of the Sentieo Plotter function shows that while the VIX and the S&P 500 do trade inversely, low volatility by itself is not at all a good predictor of stock returns.

The following is a regression analysis run using the Plotter function in Sentieo comparing the VIX Index vs. the S&P 500.

The r-squared is 0.67, and the coefficient is a healthy -7.02.  In fact, the VIX Index has a -0.82 correlation with the S&P 500 over this time period (of course, higher volatility is almost always associated with lower stock returns).

S&P 500 and VIX Index Regression analysis in Sentieo Plotter.

But Is Volatility Predictive?

One way to test the significance of volatility on forward returns is to lag one of the data series and re-run the regression with the lagged series.  Fortunately, this is easy to do in Sentieo’s Plotter: We simply lag the S&P 500 returns, as shown, using the “Axis Options” feature.  In this case, we’re lagging by a positive 8 weeks as shown.  Now when we re-run the regression we will see if a change in the VIX Index is associated with an 8-week-later change in stock prices.

Axis Options: add 8 weeks to the S&P 500.

The result?  After comparing the VIX Index with the following 8 weeks’ returns of the S&P 500, the R-squared between the two series actually drops from 0.67 to 0.24!  That is to say, based on this sample, that, while a significant coincident indicator of stock returns, the VIX Index is not a future indicator of returns.

Conclusion:

Tune out the TV chatter.  Try Sentieo and do your own homework.

It’s a great headline, but the analysis here suggests the VIX does not foretell another crisis.

 

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Banks’ Cyber Attacks up 4x in 4 Years, Spending to grow at least 12%/yr for Next 5 Years

Cyber security has become one of the most important issues in this year’s election, with the leak of hacked emails and the potential for electronic vote tampering commanding the spotlight in recent months. WikiLeaks, foreign hackers, and cyberwarfare have influenced the national conversation and the campaigns. In the first presidential debate, both candidates stressed that cyber security is a top priority for the next President of the United States.

These types of politically-motivated hacks  – such as those that plagued the DNC and the email accounts of Clinton campaign staffers – are generally ‘state sponsored Information security breaches’ designed to give the attacker a political or military advantage. A different sort of hack is carried out by non-state ‘independent hackers’ whose purpose is usually financial gain, or occasionally political protest.

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