What do you guys think of Jim Chuong?

[augustabound]

 

For someone who is allegedly retired Derrick Foster sure works alot.  He self published the first book with his gimmick tag line, and now sells enough books to support his meager lifestyle.  Each book is written to the formula of writing the same thing every 18 months as per David Bach, Suze Orman, Robert K. etc.  The Chicken Soup for the soul of personal finance.

 

His wife also works.

[Myth465]

Myth, I have refused a few people as well.  Friends and relatives.  Generally I will refer them to Chou Associates.  Amounts are too small for General Partnerships.  

 

 

Its interesting I would like to Manage money, but the right kind of money with the right expectations. Also I can hold severe concentration or alot of leaps and deep value dingy stuff but dont know if I would want to put someone else in those plays. If I lose my money its just a bad day, other people dont really work the same.

 

Its easy to look at returns, but its a world of difference doing your own thing, vs being a fiduciary.

[NormR]

IIRC, Jim ran a partnership for a few years but then closed it down.  At last check he was running real estate seminars or some such.

 

IMHO, as a general rule of thumb, besting Buffett's long-term return record should be viewed as hard and not achievable by most.

 

A poll of results, even on this esteemed board, should be viewed with suspicion.  The results are both unaudited and subject to selection bias (i.e. those that didn't do so well aren't likely to speak up.)  But undoubtedly a few have done very well indeed.

 

If you do have a good performance record, that can be backed up via brokerage statements, I know that Money Sense has a hard time finding top performing 'retail' investors who are willing to talk.  If you fall into this category, send me a PM.

 

Derek seems to generate a fair amount of ire in some quarters.  IIRC, the Canadian Business forum has several long Derek slag fests.

[Parsad]

Norm, I think you are dead on the money.  Investing one's own personal capital is a very different animal than investing other people's money, even if "other people's money" is partly your money. 

 

Unless you have a five-year lockup or longer, you cannot do the same things you would do with your own money.  In our case, we have NO lock-up!  Your partners temperament for volatility is no different than the general makeup of the markets.  They may be modestly better if you have investors who have studied a "margin of safety" approach, but nonetheless the makeup will be the same as the general public.  The members on this board are no different.

 

There is no way in hell that the average return on this board would be anywhere near 20% annualized...whether you are managing your own money or other peoples money.  Just not possible.  While you may have a significantly higher concentration of outperformers, not unlike the "Superinvestors of Graham & Doddsville", the average would be nowhere near that number.  If the markets return 7% long-term, I would expect the average board member to do modestly better at around 8-9% annualized.

 

I hear about all these numbers in personal portfolios, but then where the heck are these people in the money management business?  They just don't exist.  Only 1% of investment managers beat the market long-term by 3% or more.  I don't think that number would be different for the average investor.  And I think that percentage would be modestly higher for investors versed in "value investing"...at best 5%.  Cheers!

 

 

[Uccmal]

I hear about all these numbers in personal portfolios, but then where the heck are these people in the money management business?  They just don't exist.  Only 1% of investment managers beat the market long-term by 3% or more.  I don't think that number would be different for the average investor.  And I think that percentage would be modestly higher for investors versed in "value investing"...at best 5%.  Cheers!

 

The majority get institutionalized! - not the sort between bars, but the other sort.  That really bad year you had when everyone else was going up.  Sorry Pal... Heard that AIC might be hiring.  There is a whole host of reasons you have heard about for pro underperformance:

- Having to sell mutual fund assets or partnership assets at inopportune times i.e. 2008/2009 locks in a bad year.  Non-pro experts dont face this.

- Having to carry cash for redemptions at all times - Non-pros can go negative cash as needed.

- Drag fees that non-pros dont have - legally related.

- size matters 

I think this is a rare endeavours where the pros are handicapped versus the non- pros, and often not as skillful.

[Parsad]

True, I agree Uccmal.  But I don't believe the numbers are as high, thus the 5% rather than 1%.  Temperament plays a big part, and naturally this philosophy is going to attract more of people of the right temperament than other philosophies, but I still don't think the advantage would be enough to allow an enormously skewed result.  Cheers!

[Guest broxburnboy]

A quick filter search at globefund.com turns up 424  funds who have greater than 20% return since inception. I am assuming that is net of fees.

Perhaps overperformance is not as rare as some think.

My own experience with friends and acquaintances who manage their own money indicates that 16% is common and attainable for individuals. Most of these are retired businessmen however, with a practised eye in picking value. Modesty prevents me from pointing to my own 12 year annualized return - 34%.

[NormR]

The majority get institutionalized! - not the sort between bars, but the other sort.

 

I'm with you there.  The longer I've been in the field, the more I agree that various behavioural biases the come up.  Montier does a good job of describing many in his books / articles.  (If you don't already have them, his last two books are quite good.)

 

So a smart individual can have an advantage over institutions but they also have disadvantages in some areas.  (Try buying a CDS for instance.) 

 

However, most people don't have the right temperament and others get lured into Dreman's red room (about half way down).

 

Anyway, as Sanjeev said, I think most value guys and gals who aren't too skittish should be able to nab the value premium - say 200 bp to 400 bp better than the market - reasonably easily.  Alternately, reaching for very high returns can be dangerous because such return expectations tend to lead one to lotto-ticket type stocks. 

[Uccmal]

Most of these are retired businessmen however, with a practised eye in picking value. Modesty prevents me from pointing to my own 12 year annualized return - 34%.

 

Except you just did!   ;)

Well done.

[Uccmal]

Norm, I was just reading the start of Montier's larger book of recent vintage (Value Investing, 2009).  He goes into this in some detail. 

[Tim Eriksen]

Uccmal

 

I am not following your point on taxes.  Everyone reports pre-tax results (mutual funds, hedge funds, and I would assume individuals).  Am I missing something?

 

Tim

[NormR]

A quick filter search at globefund.com turns up 424  funds who have greater than 20% return since inception. I am assuming that is net of fees. Perhaps overperformance is not as rare as some think.

 

Oh, be careful with that one.  Going with since inception muddles up the time period under study.

 

Searching for annual returns on globefund (tracks funds based in Canada) ...

20%+ over 5 years search comes up with 23 funds. (didn't bother to spot dups)

20%+ over 10 years comes up with 18 funds and the funds are all basically precious metals / resource heavy funds.

20%+ over 15 years comes up with 2 funds.

20%+ over 20 years comes up with 1 fund. (Front Street Growth for the curious)

 

So, most of the winners you highlighted were likely very new funds that are getting big returns since the lows of 2009.  They've yet to prove themselves over the long term.  

 

Going down a notch,

15%+ over 20 years yields 5 funds

10%+ over 20 years yields 40 funds

5%+ over 20 years yields 287 funds

Total number of funds with 20 year numbers (ok, with returns > -99%): 376 (all fund categories)

However, the long-term numbers are likely heavily biased upwards by survivorship bias.

 

IMHO 15%+ returns should be viewed as quite excellent over the last 20 years.

[nodnub]

 

For someone who is allegedly retired Derrick Foster sure works alot.  He self published the first book with his gimmick tag line, and now sells enough books to support his meager lifestyle.  Each book is written to the formula of writing the same thing every 18 months as per David Bach, Suze Orman, Robert K. etc.  The Chicken Soup for the soul of personal finance.

 

His wife also works.

 

I find that hilarious. Doesn't the guy boast of how he retired at a young age?  

 

Maybe I just need to get married to a generous working woman so I can "retire" as well.

 

 

[NormR]

Norm, I was just reading the start of Montier's larger book of recent vintage (Value Investing, 2009).  He goes into this in some detail. 

 

If you like it, his slightly older book Behavioural Investing is similar and even larger.  :)

 

His first (?) book, Behavioural Finance wasn't great. 

 

Oops, I forgot that he wrote a "little book" which I skipped.  Value investing and Behavioural investing are my recommendations to this more sophisticated audience.  :)

[Uccmal]

Tim, you are correct.  It's been a long time since I held a mutual fund.

 

Things are much more dire than I thought.  I work all my returns out after tax.  So, I will remove 25% from Chuong's numbers. 

[twacowfca]

Most of these are retired businessmen however, with a practised eye in picking value. Modesty prevents me from pointing to my own 12 year annualized return - 34%.

 

Except you just did!   ;)

Well done.

 

 

 

Good show, broxburnboy!  How did you do it?  Any details would be much appreciated.

[Guest broxburnboy]

 

Good show, broxburnboy!  How did you do it?  Any details would be much appreciated.

 

Looking back, I really didn't start investing in a big way until I was 46 years old. By that time I had accumulated a lot of business knowledge through owning and running my own small businesses. Some were successful but I had one catastrophic failure which found me broke, demoralized and unemployed at age 40. Incidentally this is a recurring theme amongst entrepreneurial types, the worst that can happen to you when you stick your neck out is that you get to start over with a clean slate and try to get it right. More cautious, risk averse types can end up spending their life mired in mediocrity through fear of failure or worse they eliminate the best opportunities from fear of risk (which they probably miscalculated in the first place).

If you want outstanding results you have to look for outstanding opportunities.... the time to buy BRK was when no one else was buying it.

You also need the courage of your convictions to stick with an investment you have picked through due diligence.  As long as the company keeps executing its business plan on schedule, don't be afraid to double down. Once it stops executing, cut your losses. When you make a contrarian pick, you will be  called a fool, you will be called a "contrarian" only in retrospect, when the investment proved out and everyone else starts buying it.

My results have been skewed upwards by 4 "home run" events. When the tech boom started, I was in the industry, selling hardware and local area networks and had a front row seat. I got in early on switching equipment manufacturers like Fitel, later known as JDS Uniphase. I got in well ahead of the bandwagon. I traded frequently amongst a few choice companies, got out when things were getting crazy P/E wise, then took a small beating on the way down, trying to pick up "bargains".

In 2003, I found myself heavily committed to FFH through my own due diligence and respect for Prem and his team. By accident I had another front row seat at the time of the short attack. The biggest boon to the small investor has been the advent of internet discount trading.  It puts you in control of your own destiny. I was sitting at my computer that day and remember picking up shares  as low as 62 bucks. My own due diligence had solidified my belief in FFH and I took advantage of it... don't think I wasn't shitting bricks the whole time either .. believe me I was.. but I saw it as an outstanding opportunity, more risk averse types did not act.

I like to dabble in small businesses as well, I know that there is nothing more profitable than a well run, closely held small business. These are largely ignored by the investment community because they are too small and defy calculator based risk asessment. This is where you will find tommorow's ten or twenty bagger. I bought into 3 small oil and gas explorers in 1999, and by 2001 had whittled down to one that kept on implementing its business plan on schedule and generating its own cash flow. The share price had languished from .70 to .40. I bought more. In 2004 it turned out to be the leading % gainer on the TSX - Centurion Energy. I sold out at an average of 9.00 bucks, netting 250K in capital gain over 5 years.

I cruised along like everyone else until the financial crunch hit in 2008. It made me reassess the whole "macro" environment. I was asleep at the switch just like everyone else, but I do have the advantage of a degree in history and economics from the time before Reagonomics became the accepted operating philosophy of business. It is nothing more than increasing public debt, giving it to business, which malinvests the proceeds and is bailed out by more public debt. At some point the debt becomes unpayable, tax cuts become an entitlement, and dillution of the money supply is the only way the situation can be maintained. As long as malinvestment continues, tax revenues fall and the rate of money creation accelerates, there can only be one outcome... hyperinflation.  These trends are accelerated by a coincident srtuctural economic depression: high unemployment, decreasing productivity, endless trade deficits.

My last home run has been then to invest in gold producing businesses, in effect looking for sound investments as calculated in gold ounces instead of US dollars. My results over the last 2 years confirm the timeliness and soundness of this still "contrarian" play. I like this forum in part because I am still regularly castigated for my belief in gold...I know there is no "bubble" in gold as long as I still get called out here.

I am so deeply hooked on this new "reality", I could very well take a good beating and my results skew quickly back to average, so it's probably too early for my sanctification. Here's a look at my results as taken from my provider's analysis tools (allowing for flows in and out of this account).

 

 

 

view chart

Prior Years' Performance  % Rtn

 2010 96.40%  

 2009 47.88%  

 2008 -38.50%  

 2007 11.04%  

 2006 21.71%  

 2005 22.97%  

 2004 101.88%  

 2003 83.71%  

 2002 10.63%  

 2001 6.75%  

 2000 126.01%  

 1999 0.47%  

 1998 20.76%  

 

view chart

Avg. Annual Compound Rate of Return

 1 Year 96.40%  

 2 Years 70.42%  

 3 Years 21.33%  

 4 Years 18.67%  

 5 Years 19.27%  

 6 Years 19.88%  

 7 Years 29.15%  

 8 Years 34.96%  

 9 Years 32.02%  

 10 Years 29.24%  

 11 Years 35.98%  

 12 Years 32.59%  

 13 Years 34.14%  

 

[twacowfca]

Congrats broxburnboy on your success and sharing your story.

 

However, let us not forget that if there are hundred people playing the market, if 50% beat the market 50% will lag the market.

 

From "Charles Munger"

 

“The iron rule of life is that only 20% of the people can be in the top fifth.”

 

 

 

 

 

Unless you're from Lake Wobegone.  There, all the children are above average.  :)

[Guest broxburnboy]

If you "play" the market, you deserve what you get. If you carefully invest in carefully chosen companies, you will outperform. After all, 100% of the players can perform at par by simply buying an index fund. Outperformance arises from consistency picking the better investments from the average.

[EdWatchesBoxing]

 

Looking back, I really didn't start investing in a big way until I was 46 years old. By that time I had accumulated a lot of business knowledge through owning and running my own small businesses. Some were successful but I had one catastrophic failure which found me broke, demoralized and unemployed at age 40. Incidentally this is a recurring theme amongst entrepreneurial types, the worst that can happen to you when you stick your neck out is that you get to start over with a clean slate and try to get it right. More cautious, risk averse types can end up spending their life mired in mediocrity through fear of failure or worse they eliminate the best opportunities from fear of risk (which they probably miscalculated in the first place).

 

 

broxburnboy, thanks for sharing your experiences. I like to think I'm the entrepreneurial type, but I'm only that way with investing. I believe I'm "risk averse" when it comes to my career choices. Most likely, I will work for someone else until I have a large enough investment portfolio to do that full time. I think it takes a lot of guts to dust yourself off and try again. I think a lot of people cannot recover after a big failure. Good for you!

 

As for Derek Foster, I stopped searching for news on him after reading this article in the star:

http://www.thestar.com/Business/article/600754

[Packer16]

The 20% average may not be an anomoly.  You need to find out how that 20% was achieved.  If it was via a diversified group of large/mid caps, I would agree but I think 20% is possible by concentration and with small more neglected firms (where the funds cannot compete).  The two people that I knew who made enough money to retire with stocks both took concentrated/leveraged positions in stocks they knew well.

 

I like Ellis' tennis analogy.  You are playing tennis and player who gets the most point wins.  What you are saying it is impossible for the average person beat Andre Aggasi (a good value oriented hedge fund manager) over the long term and I agree.  But what if an individual had the choice of playing Aggasi or the beer "bumb" nest door (the compeition for small or neglected stocks).  In addition, your professional opponent cannot use the same swing too many times he has to mix things up even though he knows that using the same swing would be the best thing to do (diversification).  The huge advantage the individual investor has is playing against "bumbs" to get points (positions in small stocks can have a significant impact on performance) and he doesn't have play by the different swings rule. 

 

I think this is why Buffett ssid he would get much higher returns (50%) with a smalller pot of money and how personally I have been able to outperform by about 19% per year over the past 10 years.  I am surprised by how may "wipe-outs" I have had and still performed well.  If could avoid just half of my "wipe-outs" (typically highly levered financial firms), I would have done better.  My 5 year average of 26% hopefully is indicative of this.  But comparing my funds to others managing money is comparing apples and oranges as I don't think many clients would be willing to deal with the odd small securities (many of my holdings trade less than amount I hold in the account) and LEAPs and I know I don't have liquidity and could not provide immediate redemption with many of these.  If these techniques of concentration and neglect cannot be implemented by professionals then the only folks left are individuals that are the "do-it-yourself" types which would attracted to this board.  Maybe someday this inefficiency will be arbitraged away when there are enough "do-it-yourselfers" doing this.  I do enjoy the experts and academics who make our job easier by discouraging the "do-it-yourselfers".   

 

Finally, these techniques are not rocket science and do not require a high IQ (a high IQ may be a handicap) to implement.  What suprises is that small investors have no idea of the advantages they are giving up by sending their money to mutual fund managers who are playing Andre Aggasi versus thier option to play the "bumb" next door.

 

Packer

[king888]

I am from Thailand.The emerging market. The market here is very volatile. I knew many people in my value investment forum made a killing in market. One guy made like 2 million baht to north of 100 million baht in 7 year. This guy used a lot of leverage. And one very famous investor icon in Thailand,"Nivate Hemvachiravarakorn"(you can google his name to see how famous he is) .His portfolio up to 1500 million baht from 10 million baht in 13 years (it was Thailand last crisis).His track record is real ,i checked it myself on major shareholder list in thai stock market data. And he wrote an value investment book 10 year ago and still publish an article on newspaper twice a month. He merely uses leverage.Actually he used it once in 2008 because he said there was very cheap stock and he didn't have cash (He is always 100% equity) . He said in his article that it was just about 10% of his portfolio that time. This track record seems to be unbelieavable but it is real.Someone in Thai investment forum also has a track record of his portfolio done by historical data check.And sorry for English I am not native speaker.

[king888]

I forgot to mention that two guys are individual investor not an instuition.

[QLEAP]

 

Looking back, I really didn't start investing in a big way until I was 46 years old. By that time I had accumulated a lot of business knowledge through owning and running my own small businesses. Some were successful but I had one catastrophic failure which found me broke, demoralized and unemployed at age 40. Incidentally this is a recurring theme amongst entrepreneurial types, the worst that can happen to you when you stick your neck out is that you get to start over with a clean slate and try to get it right. More cautious, risk averse types can end up spending their life mired in mediocrity through fear of failure or worse they eliminate the best opportunities from fear of risk (which they probably miscalculated in the first place).

If you want outstanding results you have to look for outstanding opportunities.... the time to buy BRK was when no one else was buying it.

You also need the courage of your convictions to stick with an investment you have picked through due diligence.  As long as the company keeps executing its business plan on schedule, don't be afraid to double down. Once it stops executing, cut your losses. When you make a contrarian pick, you will be  called a fool, you will be called a "contrarian" only in retrospect, when the investment proved out and everyone else starts buying it.

My results have been skewed upwards by 4 "home run" events. When the tech boom started, I was in the industry, selling hardware and local area networks and had a front row seat. I got in early on switching equipment manufacturers like Fitel, later known as JDS Uniphase. I got in well ahead of the bandwagon. I traded frequently amongst a few choice companies, got out when things were getting crazy P/E wise, then took a small beating on the way down, trying to pick up "bargains".

In 2003, I found myself heavily committed to FFH through my own due diligence and respect for Prem and his team. By accident I had another front row seat at the time of the short attack. The biggest boon to the small investor has been the advent of internet discount trading.  It puts you in control of your own destiny. I was sitting at my computer that day and remember picking up shares  as low as 62 bucks. My own due diligence had solidified my belief in FFH and I took advantage of it... don't think I wasn't shitting bricks the whole time either .. believe me I was.. but I saw it as an outstanding opportunity, more risk averse types did not act.

I like to dabble in small businesses as well, I know that there is nothing more profitable than a well run, closely held small business. These are largely ignored by the investment community because they are too small and defy calculator based risk asessment. This is where you will find tommorow's ten or twenty bagger. I bought into 3 small oil and gas explorers in 1999, and by 2001 had whittled down to one that kept on implementing its business plan on schedule and generating its own cash flow. The share price had languished from .70 to .40. I bought more. In 2004 it turned out to be the leading % gainer on the TSX - Centurion Energy. I sold out at an average of 9.00 bucks, netting 250K in capital gain over 5 years.

I cruised along like everyone else until the financial crunch hit in 2008. It made me reassess the whole "macro" environment. I was asleep at the switch just like everyone else, but I do have the advantage of a degree in history and economics from the time before Reagonomics became the accepted operating philosophy of business. It is nothing more than increasing public debt, giving it to business, which malinvests the proceeds and is bailed out by more public debt. At some point the debt becomes unpayable, tax cuts become an entitlement, and dillution of the money supply is the only way the situation can be maintained. As long as malinvestment continues, tax revenues fall and the rate of money creation accelerates, there can only be one outcome... hyperinflation.  These trends are accelerated by a coincident srtuctural economic depression: high unemployment, decreasing productivity, endless trade deficits.

My last home run has been then to invest in gold producing businesses, in effect looking for sound investments as calculated in gold ounces instead of US dollars. My results over the last 2 years confirm the timeliness and soundness of this still "contrarian" play. I like this forum in part because I am still regularly castigated for my belief in gold...I know there is no "bubble" in gold as long as I still get called out here.

I am so deeply hooked on this new "reality", I could very well take a good beating and my results skew quickly back to average, so it's probably too early for my sanctification. Here's a look at my results as taken from my provider's analysis tools (allowing for flows in and out of this account).

 

 

 

view chart

Prior Years' Performance  % Rtn

 2010 96.40%  

 2009 47.88%  

 2008 -38.50%  

 2007 11.04%  

 2006 21.71%  

 2005 22.97%  

 2004 101.88%  

 2003 83.71%  

 2002 10.63%  

 2001 6.75%  

 2000 126.01%  

 1999 0.47%  

 1998 20.76%  

 

view chart

Avg. Annual Compound Rate of Return

 1 Year 96.40%  

 2 Years 70.42%  

 3 Years 21.33%  

 4 Years 18.67%  

 5 Years 19.27%  

 6 Years 19.88%  

 7 Years 29.15%  

 8 Years 34.96%  

 9 Years 32.02%  

 10 Years 29.24%  

 11 Years 35.98%  

 12 Years 32.59%  

 13 Years 34.14%  

 

 

Fantastic post, very generous of you to share your experiences.

[Myth465]

I am from Thailand.The emerging market. The market here is very volatile. I knew many people in my value investment forum made a killing in market. One guy made like 2 million baht to north of 100 million baht in 7 year. This guy used a lot of leverage. And one very famous investor icon in Thailand,"Nivate Hemvachiravarakorn"(you can google his name to see how famous he is) .His portfolio up to 1500 million baht from 10 million baht in 13 years (it was Thailand last crisis).His track record is real ,i checked it myself on major shareholder list in thai stock market data. And he wrote an value investment book 10 year ago and still publish an article on newspaper twice a month. He merely uses leverage.Actually he used it once in 2008 because he said there was very cheap stock and he didn't have cash (He is always 100% equity) . He said in his article that it was just about 10% of his portfolio that time. This track record seems to be unbelieavable but it is real.Someone in Thai investment forum also has a track record of his portfolio done by historical data check.And sorry for English I am not native speaker.

 

I just spent 2 weeks in Thailand. Walking around you really get a feel for the growth and the energy. It must be nice. North America feels grey and depressed and Europe even worse. I have thought about being fully invested and gone back and forth on it vs. holding cash. I believe Buffett said he would  be fully invested as a small investor.

 

What do you guys do for leverage, is it just margin or do you all have leaps / options? Also your English is better than our Thai, no need to apologize.

 

----

 

Packer thanks for the Tennis analogy.