Illquidity,barbed wire and holiday music

A kind soul on twitter sent me a study the other day by Thomas M. Idzorek, CFA, James X. Xiong, CFA, and Roger G. Ibbotson that studied liquidity in the equity market. Want to guess what they found? The same thing they found every other time it has been studied. This studied mutual funds and they found that mutual funds investing in illiquid stocks beat those that favored more liquid issues. Further more those that had a value bias and bough illiquid stack best the ants off everything else out there. The study concludes “Overall, the liquidity investment style is clearly present in mutual funds and leads to dramatic differences in performance.” This is similar to the earlier Ibbotson study that found that illiquid value stocks crushed liquid growth stocks and the market indexes.

So we know it works. Stretch out time frame a bit, quit trading and own a portfolio of undervalued illiquid stocks and beat the market by a wide margin over time. A lot more naps and a lot less screaming at screens and throwing coffee cup across the office. It is good for everyone but the manufacturers of stress balls and coffee cups. It works. We know it does. It has been proven in theory and practice. Yet no one does it.

The want the liquidity to get in and out on a moment’s notice. Gotta be able to hit that bid baby. Ben Graham once said that investing works best when it is most business like. What in the world is business like about short term trading. What other capital asset would you demand provide you instant liquidity? Can’t do with a house. Can’t do with a private company, a tract of land, an office building and other investments but when it comes to fractional ...

Read More
Comments

Doubling Down, Momentum and Spanish Pipedreams

I couldn’t help myself. I really did not want to do it. Circumstances forced my hand. I bought another energy related company today after they (shocker) missed earnings forecast. This firm I bought on the services side of the coin ...

Read More
Comments

Oil, Banks and Fish

It has been an interesting week to be an oil and gas investor. While I am not an energy specific investor I certainly I have a bunch of oil and gas related names in the deep value portfolios. I was ...

Read More
Comments

Piracy, Legendary Returns and 104 Days of Darkeness

I confess that I was at a bit of a loss about what to write today. I have sent a lot of content out this week including an hour long discussion with Chris Swatta of RBC in Annapolis on his ...

Read More
Comments

Talking Banks ,REITS and Special Situations

Read More
Comments

GDP, Vomit Bags, and Frank Zappa

If anything about todays muted GDP report is a surprise to you then you simply are not paying attention. If I could get my hands on some of these folks telling us how robust and wonderful the US economy is ...

Read More
Comments

Wal-mart, Activists and the Cubs

Once again the only surprise is that anyone is surprised. Wal-mart (WMT) is dealing with wage stagnation, higher wages and intense price competition from Amazon and other on line retailers. They are being hit on all fronts right now and ...

Read More
Comments

1776, Preparing for Battle and Financial Engineering

Whenever the conversation turns to stock sooner or later I am going to talk about community bank stocks. There are other small pockets of opportunity in the stock market like small REITs, some oil stocks and special situations but the ...

Read More
Comments

Another Takeover- Bonus Pick CBKS for 70% gain

On August 29th we suggested buying CBKS which was then trading around $7.75. This was a tiny bans so we did it as a bonus pick and it looks like orders ahve been filled pretty regularly between 7.75 and $8 ...

Read More
Comments

Carl, Caution and Small Banks

Most of my week has been taken up with travel time and the FIG bank conference. It was not until today that I had a chance to sit down and spend any time with the rest of the news. I ...

Read More
Comments

Carl, Small Banks and Caution

Most of my week has been taken up with travel time and the FIG bank conference. It was not until today that I had a chance to sit down and spend any time with the rest of the news. I ...

Read More
Comments

Baby Alligators, Small Banks and Last Chances

Read More
Comments

Reviews Average Rating          

         
         
See All Reviews →