#4: Warren Buffett is not an Index Hugger

Two weeks ago, the Financial Times (FT) Unhedged Newsletter (URL) joined many others to write about Warren Buffett and Berkshire Hathaway (BRK) in the week of its famous annual general meeting in Omaha. The FT also published an outstanding series on the future of Berkshire Hathaway without the now 93 year-old legendary CEO and Chairman (URL).

I stumbled across some statements in the two Unhedged Newsletters “Warren Buffett: The world’s richest index-hugger” (URL) and “Berkshire’s next move” (URL) from May 6 and 7, respectively. I have nothing qualified to say about Buffett’s succession, but I do believe the statement that Warren Buffett is an index hugger deserves some more discussion.

  • Berkshire Hathaway’s returns over the last 21 years
  • Berkshire Hathaway’s “risk” over the last 21 years
  • What is risk?
  • Berkshire Hathaway in good and bad markets
  • Is Warren Buffett an index hugger?

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How to Use This Site

After more than one year and just short of 100 posts, it is more than overdue to bring some structure to the page. From now on, I will organize the content on AgnosticInvesting.com by two (hopefully) very simple principles:

  • Each post belongs to exactly one category or sub-category.
  • Each post gets multiple tags. Those tags are again grouped for better filtering.

Filtering by categories will thus give you a unique list of all posts within a category. Filtering by tags will give you all posts about the desired topic across categories.

You will always find the current structure in this post or, if you are on desktop, in the right sidebar.

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#3: Big Data & Machine Learning in Asset Management

This week I gave a talk on “Big Data and Machine Learning in Asset Management” at Goethe-University in Frankfurt. Thanks again to my thesis-supervisor Sasan Mansouri for the invitation. In this post I will summarize a few points of the talk and share the slides. The key result is the following framework to evaluate investment strategies that claim to use big data and machine learning. I also apply this to several real world funds.

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#2: Copy-Paste Outperformance

Every year, US companies must publish three quarterly and one annual report. Preparing those reports, however, is a lot of effort, does not improve operations, and reveals information to competitors.

How to deal with this? Correct, spend the time to create one comprehensive template and reuse it as long as possible. In an excellent research paper titled “Lazy Prices” (2020), the authors show that US companies are no exception from this: many annual and quarterly reports are basically just updated copies from the previous year.

What does this mean for investors? Since most of the report is just copy-paste, they should rather focus on differences between the current and previous report (for example, new paragraphs). It turns out that such changes are indeed very important: quantitative measures for report copy-paste predict future stock returns and help to achieve outperformance vs. common US indices.

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Why is this website called AGNOSTIC INVESTING?

There are several reasons:
– I am not very creative
– It is what I am planning to do
– It starts with A

I believe that agnostically looking at facts and data should, at some point, lead to decent results. Like (almost) everyone else, I don’t have the ultimate investing strategy. Being agnostic is therefore my only chance.

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