Wednesday, May 28, 2014

Book review: "Stock Market Superstars" by Bob Thompson

Stock Market Superstars is a collection of interviews with a bunch of Canada's best-known money managers. When it was published in early 2008, the investors that the book profiles had achieved compounded returns of 15%, 20% or more annually. Many of them got destroyed later that year during the Lehman crisis and have yet to fully recover. Rohit Sehgal had the best track record when the book was published, but his main fund finished 2008 down more than 70%. Tim McElvaine and Wayne Deans were down almost 50% in 2008 and have had middling performance since then. McElvaine's interview mentions that he'd historically earned high returns despite holding a lot of cash in his mutual funds, yet he only had 6% of assets in cash during 2008. In the interview he touted a leveraged radio broadcaster that later went bankrupt.

I think some of the interviewees, particularly Eric Sprott, were bull market geniuses who had achieved strong returns at the time of publication by riding a bubble in commodities producers and low-quality cyclicals. Others, like McElvaine, seemed like good guys who were naturally conservative but got blindsided by Lehman because nothing in their careers had prepared them for it.

Most of the interviewees talk about investments that had been significant to their career in some way-- big winners, big losers, or investments that had taught them some important lesson. I found it interesting to look up some of these investments online, reading old SEDAR filings and looking for old news releases as a way of getting a fuller picture about them. The book didn't impart any concrete lessons, though. My biggest takeaway is that many investors who achieve high returns do so by optimizing their investing strategy for a specific economic or financial environment. When that environment changes, so do their returns (for the worse).

Sunday, May 25, 2014

Alice Schroder takes questions on Reddit

Like her previous interviews, this one is very good. She mentions that Buffett is much more bearish in private than in public, which reaffirms my sense that his public persona and all the hype surrounding it don't help people become better investors.