west

Good luck guys!

Yes, a very long post. Imho, after collecting data from the magic formula screen for about 3 years, learning *how* to invest, and investing in a way where you *understand* what's going on, is a much more rewarding approach than the blind screener/basket approach. For one, you will avoid torpedo stocks that show up occasionally in screeners that will absolutely decimate your portfolio's returns. I've seen this happen a few times in the magic formula screener. For two, you will actually understand what's going on. When you're running a quantitative strategy blind, and you know there's some probability of getting a whole portfolio of torpedo stocks, fear sets in. It's one thing to pooh-pooh this sentiment now. It's another thing to live through a market downturn or two and know actual fear (and sell out lower than you should have). When the market's going down, it's good to know that you've got a bungie cord, and to know how it works, versus not knowing if you do and having the fear of turning into a big, warm splat keep you up at night. For three, although I've found that some of the magic formula portfolios reliably outperform the market, the transaction costs kill the deal, unless you're willing to allocate at least $150k to the strategy. I haven't updated the data recently, but here's this if you want to play around: http://www.dusthimer.net/MF_DATA/ The above $5000m market cap, 50 stocks selected seems to perform the best, as far as reliability of returns goes, from the data I've collected. I'd still recommend actually learning how to invest tho. It's not too tricky. Especially if you follow the small cap/Oddball Stocks/OTC Adventures approach.

lol. Yeah, no paradigm shifts, just lots and lots of rapid iterative improvement. Although it's a little mind blowing to think about what a paradigm shift would be like in this day of age. Infinite energy sources? Speed of light travel? Dunno... All seems pretty sci-fi to me... Hrm... After doing a bit of research on wikipedia, it looks like even Semmelweis, the precursor to Pasteur, was even "standing on the shoulders of giants". Maybe all "innovation" is just iterative improvement?

Test day is coming up soon! Who all's planning on taking one of the exams? And how's the studying doing? :D

I'm not too familiar with them, but I don't see why you couldn't use an online escrow service to do this.

No one's stopping you. :D Honestly, I just googled "equity research" and found the job through one of the sites that popped up. (And the sites all used that geolocation stuff to know I was located in the Bay Area so I just got Bay Area results). There were plenty of jobs that popped up, but only two that really intrigued me. (And I'm not going to talk about the other one. :D) I'm sure if you google "equity research" + "New York" or "Toronto" or "San Francisco" (actually, stay away from that one; that's my territory!) plenty of stuff will pop up. And, for better or for worse, almost of all of it will be sell-side positions.

I've thought long and hard about working at a non-investing job while doing investing in my spare time. For example, the SF startup market is on fire right now and doing a startup is something I've always wanted to do. (That and software engineers are getting paid bank right now. :D Although it's my guess that salary levels are not going to persist at the levels that they're at right now for more than an another year or two... but I digress.) So it's my understanding that in order to do something like work for a hedge fund, you've got to be involved in the industry at a pretty young age and work your way up. I'm not 100% sure that working at (or running) a hedge fund is what I really want to do. However, I'm young-ish and really don't want to worry about thinking "What if..." ten or twenty years from now. So I figure doing equity research for a few years isn't a bad way to test the waters. Worst case scenario, I hate it (unlikely :D) and I go back to my old career and do investing in my free time :).

Agreed. But as long as I'm learning... well, I may not always be happy with the job, but at least I'll be learning! And I'm perfectly fine with enduring a little bit of pain today as long as I end up better off tomorrow!

Just the standard one (Investment Survey?). I tried some of the others but was generally underwhelmed.

If you subscribe to ValueLine, I recommend reading the Ratings and Reports section cover to cover, as much as you can, every week. This will help you get a lay of the land. If you can do this, maybe while writing an aggressive (read: a heavy discount to what you think the intrinsic value is) "buy" price for every company in the margins as you read about them, I think you'll become familiar with a lot of industries, and a lot of companies, very fast. And if you do ever see a company that's at your agressive "buy" price, dig in! If you can read 10 years of 10-Ks for the company, and the 10-Ks of its competitors, and then decide if you want to invest, I think you will do well. :)

I think you're right. At this point, the focus is getting *into* the industry. Not getting the perfect job. That can come later, once I can show people that I really know my stuff. And once I really do know my stuff, of course. Thanks Kraven.

Thanks guys! Especially kiwing100! I really appreciate the help. It really sounds like sell-side isn't that great. I guess if it's a necessary evil to get to the next phase, I can do it. But honestly, I'm not someone who's very comfortable BS-ing answers to people when the real answer is "I don't know". And I'm not really big on selling products I don't believe in myself... Maybe I should try harder to find a buy-side job...

It was my understanding that while sell-side Equity Research guys sometimes answer questions for clients working with brokers, they spend most of their time doing actual research, talking with the management of the companies they cover, etc. Basically all the things you'd do on the buy-side, just without the "buying" part. And little to no selling, despite the name. Am I mistaken about this? I hate to pester the board about this again, but I really would like to hear what people think about this. I'd love to break into the investing industry, but considering the jobs for entry level guys, this seems like the best bet. Is there something I'm not thinking about? Or anything else? This is a big career decision for me, so if you have experience with this, I'm all ears if you have opinions :D

Hi all. I'm considering getting a job as an (entry level) sell-side equity research associate. The position is for one of the top ranked teams for the industry it focuses on, according to Institutional Investor. Any thoughts on this? I was thinking that doing sell-side research for a few years or so would really help me gain a solid understanding about how to do depth focused research, when it comes to specific companies and the industries they're in. I could then leverage this skill later on when doing more breadth focused activities either in a buy-side position (at a value investing firm, of course) or for myself. Honestly though, I have no real world experience or knowledge about sell-side or buy-side research. So I'm only guessing doing sell-side research is going to help me with my practical value investing skills (and hopefully give me a better chance of switching to buy-side research later on.) Is my thinking correct, or am I missing something somewhere? Thanks for your help on this! (Btw, I would immediately jump into a buy-side position, but I don't think my analytical skills are that great at this point. I've done the first two levels of the CFA exam and have done a good amount of accounting courses, but that's about it. And the only reason why I think I'd even get the sell-side job is because I know a lot about the industry the position focuses on. That and I think the CFA stuff would help me at least get an entry level position. Maybe I'm wrong.)

From his 11-03-06 Columbia lecture (courtesy of John Chew) the longest period of underperformance vs. the market was 46 months. The second longest period was 39 months. He starts talking about it an hour and fourty minutes in if you have the video. If not, you may want to meander over to csinvesting.org :). I'm still not convinced on using the strategy blind at this point myself. And I've got about two and a half years worth of data now...

Not necessarily. A top tier MBA like this could be a "catalyst" that helps the OP realize his intrinsic value so to speak. Totally agree with this. As long as we're dropping credentials, I went to a top five engineering school in my specialty. Because I went to that school, I was offered some pretty sweet jobs fresh out of school. The recruiters came to us. I was better than most when I left college, but then I started working with people who were insanely good at what they did. Like genius good. I still pale, grossly, in comparison to those guys, skills-wise. But being around them for just a few years made me much, much better at what I do. If you can jump start your investing career by getting a job with geniuses, do it. And on HBS vs. Columbia.. Well let's say that as Columbia is to HBS, the school I went to for engineering is to MIT or Stanford. *In my specific profession*, if I apply to a job I *always* get an interview. People know what it is. However, I have a friend from my school who's trying to switch careers. He has a 3.8+ GPA, and multiple degrees from this school, all of which he got an undergraduate. Insane credentials. Now that he's trying to switch careers, no one *outside his specialty* is familiar with the school, or they think it's a much lower ranked school than it actually is. So instead of getting *every* interview, he's having to fight for them. If you go to Columbia, and you ever want to do something besides value investing, this same thing could happen to you.

Iirc, the assets under management fee is only 0.75% in a year where there's a loss. I believe it's 1%-ish otherwise. In regards to whether to switch or not, it depends on what you think Berkowitz is going to do in the future. I think that if he keeps FAAFX around it will probably outperform FAIRX in the long run. Maybe even grossly so. My fear, however, is that, with whatever he's holding up his sleeve right now, he may not keep FAAFX around... This all being said though, I've only been doing investing for a few years now. So I really have no idea what fund managers tend to do in situations like the one Berkowitz is in now. So you may want to consider giving my thoughts a small discount :)

If this individual has *no* interest in learning about investing or how it works, as much as I hate to say it, an index fund (ETF) is probably the best choice. First, he won't have to worry about annual tax bills if he goes with an ETF, like he would with mutual funds. The effects of no tax over a long time can compound to an awful lot of money. Second, he, his potential future or current spouse, or an outside investment manager will never have to worry about what the fund *really* is or if it will *really* outperform like it's supposed to. This, for your typical person, is worth more than the outperformance they could receive if they were invested in an "above average" fund.

There's also the Templeton approach. Sell enough to cover your original investment and then ride the rest out.

Imho, sell! Don't get greedy! Of course, you might not want to listen to me. I sold my 2013s to harvest tax losses the day before the big run up. After which they would have been gains. Ouch!

Just to clarify, by Ca., do you mean Canada or California? I'm assuming California, but I'm biased. :)

Yuck! So, thinking about it a bit, the reason why areas start to go downhill is probably due to economic deterioration? Or Woodwards leaving, in the East Hastings case? And things probably *really* go downhill once you're in the inner city, where the population density is much higher and people can't really just get up and leave. Just a theory, I'm sure there are other reasons why neighborhoods deteriorate...

Sounds worse than the Tenderloin! It's a shame. I kind of know how the Tenderloin got started out (*part* of it actually happened due to a public policy decision - we were bringing homeless and mentally ill people to the city to help them, and then allowing them to camp out without prosecution while simultaneously paying them), but I am curious how neighborhoods in general start to degrade. I'm sure that almost none of them besides the tenderloin are shitty due to some old, weird public policy decision like we had here. As far as crackheads getting onto buses to invade gated suburban homes, I agree. It's probably not an issue, except for in a post-apocalyptic world kind of scenario. And then I'm sure they'd find a way to take a car. :D Still, some of us hate the suburbs, and prefer to live where there's risk. If I lived closer to the Tenderloin, or if I lived in Oakland, I would prefer to have the option to hedge my risk. Probably with a shotgun loaded with few beanbag shells followed by buckshot. :D

I'm not sure what the point being made here is, but people are more than willing to treat the homeless/and/or/addicted in SF. We have some amazing organizations to work with all these issues, including Glide (glide.org), the charity that receives the proceeds from Warren Buffett's lunch auctions. It's located in the Tenderloin, the area I'm talking about. However, drug addicts still do *lots* of crimes in the area. "Crackheads" are unfortunately very real here.

I live in San Francisco and spend a lot of time in (but do not live in, thankfully) the Tenderloin area, where there are a *lot* of sketchy people wandering the street. Ditto with Oakland. I wasn't just talking in hypotheticals. I know that while there are a lot of places in the US (and Canada, of course) where the "crackhead" argument *is* "bullshit", there are a lot of other places, such as the Tenderloin or Oakland, where it does apply.