No alpha for Marty Whitman

[CorpRaider]

https://theirrelevantinvestor.wordpress.com/2015/10/26/historic-underperformance/

 

That's interesting but wasn't really my point here. My point was that Whitman underperforms value indexes.

 

So if hes got a greater factor exposure to hml or perhaps another better value metric then his underperformance should be even greater then the value index with its inherent contra factor weighting due to the float adjusted cap weighting mechanism.

 

Really perhaps more interesting point w/r/t goldfarb 10 and other threads.  The real estate fund has carried this shop for as long as i can remember. 

[JBird]

Unsurprising results but nonetheless interesting comparison between Third Avenue's performance against value index funds:

 

What is a value index fund?

[feynmanresearch]

Isn't the man like 90 years old or something?

[original mungerville]

Before the crisis he was way ahead of the S&P500.  Over the prior decade he had made something like 12% annualized vs 7% for the S&P500.

 

Perhaps he did very well by buying up the discounted shares of various companies every time some little worry came along (the reason for their discounts to NAV were those worries).  Each time the crisis never came, and he made a lot of money as the shares recovered.

 

That works great until the "worries" du jour escalate into a full-blown crisis. 

 

Perhaps a study could be done of how value investors as a group do over periods of time where no true crisis ever fully develops (the group outperforms) versus periods when a true crisis comes along (they get crushed by buying a concentrated mix of the "cheap" stuff before the party really gets going!).

 

Yes, value gets crushed in these situations because low price/book and low p/e usually translates to businesses which are inherently weaker, say relative to higher priced businesses. In a crisis, the weaker businesses go out of business while the valuations of the higher priced businesses might drop dramatically, they don't go to zero. All that to say, the best approach is to look at high quality businesses and a fair or low price (Buffett's approach). In this manner, if a crisis hits, you should still outperform as a value investor.