Yeah and in the very next paragraph, he gets intimidated by a truck driver being annoyed that they are driving 63 mph, so decide.... to slam on the accelerator and go so fast they no longer see the truck's headlights on the flat desert highway. Much better alternative then just letting him pass you.
It's almost like they wanted the trip to fail to write this article.
It's patently false the claim that individual investors generally don't beat the market, or that the ones that do only do so by chance.
Warren Buffet, a very famous investor you may have heard of, even mentions that he knows plenty of small individual investors who follow many tenets of the philosophy of value investing and they have consistently beat the market.
I, personally, have been individually investing, following the principals of value investing, knowing the companies I invest in, and asset allocation, diversification across industries, and I have slaughtered the market for over 20 years.
All the points he raised in the article are valid, but they read like pop culture one liners. If you are serious about investing I recommend reading Ben Graham's Intelligent Investor and Security Analysis, and follow along with Buffet's letter to shareholders.
Understanding the stock market takes time, and you won't find the answers in a 1000 word blog post.
I think the key here is that you are "buying" stocks rather than "trading" stocks. If you invest Warren Buffet style you make a significant investment in a company you think is a good value and you never sell. Thus, your transactions costs are exactly the same as someone buying a broad market ETF and you have more fun at the expense of a little diversification for a while. But once you get to 15 stocks you're basically diversified as long as you didn't industry clump.
So, the only reason not to trade is that you should expect to do exactly as well as the market and pay a bunch of transactions costs which makes you strictly worse off, but the Buffet approach doesn't pay more than you would have anyway.
A point not mentioned is that individual investors can have planning horizons 3 to 50 years long while a lot of Wall Street money is on a 3 month put up or shut up investment time frame. Strategies that take a long time to mature are tough to do when you can get performance-fired for not having your thesis pan out fast enough. You don't have that restriction with your own money.
Sorry, maybe I wasn't being clear. When I said "Doesn't pay more than you would have" what I meant was "Doesn't pay more [transactions costs e.g. fees and bid / ask spread] than you would have [had you just pursued an indexing strategy" In that light the current price of Berkshire Hathaway isn't particularly relevant because even if I just bought Berkshire stock I would still pay the spread. In fact the current B/A spread on BRK.A is 183218.7-174644 = 8574.7 which is considerably higher in percentage terms than a stock with more volume. Of course that's probably exactly how Uncle Warren wants it given he's let the price go so high with out a split.
How many value investors actually manage to have positive three-factor alpha[1] though? Sure, adding a value tilt gives you an expectation of beating the market. Doing so on a risk-adjusted basis, after taking into account both increased volatility and the idiosyncratic risks of value stocks, is more difficult.
That said, if one is not sensitive to those idiosyncratic risks - ie if they have good job security and/or a large financial cushion - a value tilt can indeed provide an edge over the market. I personally would rather get it with low cost value index funds though, rather than taking on the non-systematic risks of investing in individual stocks.
I came here to say exactly this. I have been following Buffet/Graham's value investing principles for ~ 5 years and have well outperformed the market (S&P) in that time span. If you follow their approach, it's pretty clear to see when a valuable company is being undervalued by the market (this was happening a bunch during the '08/09 financial crises).
Mind you, it's much easier to buy index funds and sit on them than actively maintaining a value portfolio which you should be re-examining every 6 months, but it can be very worthwhile.
>> ... even mentions that he knows plenty of small individual investors who follow many tenets of the philosophy of value investing and they have consistently beat the market
Can anyone tell us who a few of them are? I'd like to know how many of them might exist, how consistently they've beaten the market, and for how long.
And if those answers are strong, I'd like to invest some money with them.
For a good summary of the value investing philosophy checkout these books:
Intelligent Investor by Benjamin Graham
Margin of Safety by Seth Klarman
If you want to know this group of high performing value investors, c2 is referring to Buffet's article called "The Superinvestors of Graham-and-Doddsville". It's a pretty fascinating read. You'll have a hard time investing in most of these folks as they are all early proteges of Ben Graham (father of value investing) and as such many are dead or retired.
Regardless, I highly recommend reading those as they give you an idea of why some think a strong value investor can beat EMT & the market.
Sure, it's something the CFO thinks about, but it isn't really something that plays a factor into decisions about how to run the business for other C-level executives.
It seems like the trend lately is to float a tiny amount of shares to the public. From my perspective this creates an artificial supply problem for the stock and makes higher valuations easier as you need less institutional buy in to maintain the price, and a few good quarters can result in disproportionate gains in the market.
Can anyone comment on that or shed some light? As a potential investor, those factors make me shy away from these investments as it makes the stock more volatile to changes and puts the fate of the stock in a few large holders hands.
It worked really really well for Groupon. (Well for their key stockholders at least). But this is the key ...
As a potential investor, those factors make me shy away from these investments as it makes the stock more volatile to changes and puts the fate of the stock in a few large holders hands.
Good, you're being smart about it. Not everyone will be, there will be a number of people who say "Gee, Twitter is everywhere this is going to be a huge stock some day." and will jump in with both feet. Betting with their feelings rather than an analysis of the fundamentals. For someone to 'win big' you either need someone to 'lose big' or a lot of people to 'lose somewhat.' Once there is enough float for the market to balance out the real expectation of the company will emerge (positive or negative).
As a potential investor I think buying it at $10 is probably reasonable and re-selling when it gets back to $20.
I don't think many companies see volatility as a good thing. Market makers, yes. Analysts, maybe. But companies and officers?
There is certainly a psychological sweet-spot for IPO pricing, between $10 and $20 a share. You've seen recent IPOs do reverse splits before going public -- Yelp did a 1:4, Trulia a 1:3, etc -- in order to arrive at an offering price in this range.
I don't think it needs to be any more complicated than that?
This is because all that the insiders need is to make their private shares public, i.e. liquid (notwithstanding officer's planned sales/insider restrictions). Potential liquidity of the insider's shares is the primary objective of a modern internet IPO, like Twitter's.
I respectfully disagree. At a company like Twitter, the so-called "insiders" have been able to take plenty of money off the table. And in fact, I'm not totally sure what share (if any) of the offering is from shares held by officers and investors. Have you seen the data?
Moreover, there is liquidity on the secondary market for Twitter like there was for FB, etc.
I think the primary object here is to raise capital and lubricate M&A activity. And most companies have no secondary market, so an IPO really helps unlock value for the rank-and-file who aren't part of the Series-XYZ rounds. There are a lot of engineers and middle managers there who will be able to buy homes and lots of other nice toys not to mention diversify their net worth a little.
RSU grants given to employees (including large grants given to new executives and key employees) are typically illiquid until 6 months following an IPO. The company has to IPO to make good on the compensation given to hire and retain their employees. If they never go public, employee compensation is worthless, and they cannot hire nor retain the best people.
Most often pre-IPO companies grant options not RSUs. And the lock-up period is a post IPO lockup designed to stabilize the price of a newly offered security while it finds its market.
The existence of a lock up period does not inhibit pre-ipo trading on the secondary market, though to be clear there is no truly liquid "secondary market" for most companies.
Interesting move. While I can see some overlap in experience leading large technical projects where industrial design and battery life are of paramount importance, I wonder how much of that experience will translate into actual car development.
From the outside looking in I'd rather fill that role with someone with car industry experience bringing actual cars to market, because battery life and industrial design are somewhat fungible, but if Tesla is late on bringing car models to market that has a serious effect on their timelines.
I missed it the first time through, although I'm not surprised as in the article his previous automobile engineering experience seems downplayed.
Equating his segway experience to all of transportation seems a stretch.
According to his linked in profile he was a development engineer at Ford for 6 years and hasn't worked in the car industry for 20 years. Certainly he does not seem to possess any executive experience in the car industry or related to car development.
As a TSLA investor, it makes more sense to me to have someone in that role who actually has experience getting cars to market (ie. someone like Bob Lutz).
I would say his industrial design experience at Segway (and Deka) was more relevant to Apple.
Let's not forget history here. Musk had a very hard time releasing the Roadster, and it was one of the most painfully delayed automotive launches in history. They were close to running out of money numerous times in the launch, and needed key loans and cash at key times (including a huge cash infusion from Musk himself) otherwise they would have failed. At least some of that based on the public information at the time can be attributed to Musk's inexperience in the car world.
They made it, but it wasn't without a lot of luck. I worry about decisions like this because if there's one thing Tesla really needs to execute on, it's getting new car models out the door in a very timely fashion.
Another example - Nardelli was also a brilliant leader at Home Depot, but he couldn't do enough to save Chrysler.
The car industry is a very different beast then building wheel chairs and segways. Personally I would prefer someone in the new car development driver's seat with a bit more experience. Putting someone without that experience is such a leadership role seems like a reckless move by Tesla.
This is all just my opinion. I'd be happy to discuss further and share opinions.
No, saying he is a founder is misleading. He played a critical role in Tesla and it surely would have failed if he were not involved but his initial involvement was as an investor in an existing enterprise.
There was a settlement that allows Musk to call himself "founder" in exchange for, I presume, some compensation. There was no legal ruling on facts only a private agreement between parties.
Yes, "that logic" being just plain old "logic". Jobs didn't start Pixar he invested in a spin-out of a division of an existing company.
From wikipedia
"the group, which numbered 40 individuals back then,[1] was spun out as a corporation in February 1986 with investment by Steve Jobs shortly after he left Apple Computer.[1]"
I agree but it's inevitable. The creators are busy creating, and the fact that there is no shortage of "non-creators defined by their taste" (who also have an abundance of free time) - means it is a bit of a hopeless battle maintaining the integrity of the comments.
Tesla Roadster's have been on the roads now for 6 years, and I think you'll find it is pretty hard to find one at any significant discount off it's MSRP.
Tesla also offered a $12000 replacement plan for the Tesla Roadsters, so you could get a fresh set of batteries if there was a failure.
Sounds like you just had a bad manager. At a big company (like Amazon) there are good managers and bad managers. I'm sure your opinion would be different if you actually made it to the AWS group like you wanted.
You're turning a bad experience with a single manager into a personal vendetta against the company as a whole. I have friends who work there who work normal hours (and have for years) and they even said they feel like they are more respected employees as engineers then the business owners.
> "At a big company (like Amazon) there are good managers and bad managers."
This is a lousy excuse and doesn't stand up to scrutiny. I too had a bad manager at Amazon. So did my roommate. So did my friends in the company. So did his friends.
In fact, I was a returning intern who went back full-time with dozens of other employees, and here we are 3 years in... and practically no one remains. I can count the number of people who have stuck around on a single hand.
Look into Amazon's employee attrition rate. Eye-opening. Hell, if you can, go to one of the company all-hands, where at some point they encourage new employees to stand up (hired in the last quarter)... that's not company growth, that's replenishment.
Amazon has consistently one of the worst retention rates, if not the very worst out of all the tech "majors". The problematic management is incredibly pervasive, and I'd argue that the islands of sound management are the exception, not the rule.
Where the hell are all of you people working? I'm about 18 months in, and on my team or any of the other teams I've worked with I haven't seen any of the horror stories people here are describing.
I was in Ops, but I knew people in RCX, Customer Service, Data Warehouse, Search, Fraud, Identity, and a bunch of other places who were absolutely miserable (and have since left).
I lasted 24 months. Management was mediocre for the first 18 months, accelerating very quickly downwards in the final 6 months after repeated re-orgs.
The seeds were planted early though - one of the major reasons I left was the constant death-marches due to the high attrition rate, and some boneheaded desire to "maximize engineering utilization" by instituting a hiring freeze in the middle of 2010, despite the fact that we already had more work than we could do in 3 lifetimes. It took a little while for the full impact of this to materialize.
Also be wary about anecdotes from previous employees who feel slighted by the company, because they are usually passionately vitriolic and have a bone to pick :)
It's weird how many isolated anecdotes from different people, each one passionately vitriolic about the company, that we run into everywhere in the software engineering community.
It's also pretty weird how many ex-Amazon employees I know who would never, ever go back, regardless of the size of the paycheck.
Either there's an organized hit job against Amazon as an employer, and myself and nirvana (among many, many others) are all shills.
Or perhaps the notion that Amazon, as a whole, is a heavily mismanaged company, has some merit ;) Food for thought.
Why is it when someone talks about a bad experience they had, then they are biased? Why do you feel the need to minimize my experience? "Slighted"? No, I was slighted by microsoft thru an unintentional sequence of events. I'd still say "Congratulations" to any friend who was excited about a job he got there.
I was abused by amazon, lied to, and when I attempted to resolve the issue, my trust was betrayed by HR, and my ability to transfer to a better job with a non-abusive manager within the company was blocked.
This was not being slighted, this was a systematically broken system.
But still, since what happened to me doesn't portray amazon in the best light, then I must be "vitriolic" in all my anger and thus not actually telling the truth....while you, whose only been there 18 months, is the beacon of objectivity, because you're saying nothing bad, right?
CEOs in general tend to be hard to work with. There are also anecdotes about Gates being rude.
Further, I would say the people who want to judge a character by a few anecdotes are being lazy, small minded, and short sighted. Jobs, Gates, and Mayer are all different people with their own styles. I'm not sure if Mayer's style will be what Yahoo needs, but I wish her the best of luck.
No one's lunch was eaten by Wii. I think by now it's pretty much been concluded that Wii was an alternative to the PS3/XBOX demographic (that is, people interested in PS3/XBOX also bought Wii), and that Wii itself brought a lot of new players into the console gaming world. Not much if any actual cannibalization of sales occured.
Also besides ignoring game sales, it also ignores the fact that Wii sold the most during the early part of it's release. This year Xbox 360 and PS3 are on pace to massively outsell Wii and have been doing so for a while. This is the part in the cycle where hardware sales are most profitable, so who really has the last laugh?
Besides, with the PS3 it was mission accomplished for Sony as they used it as a large bargaining chip to win the blu-ray format war.
Looking at 10 year stock trends, you can see the real story. Nintendo had a massive stock surge after the release of the Wii, but now they have fallen to pre-Wii levels. Sony has been steady throughout.
Wii sales where always profitable, because Nintendo did not subsidize the Wii. More importantly, sales late in a consoles life cycle are worth a lot less because the company's get a cut of game and accessory sales and someone that has a console for longer probably buys more games or at least more new games. People who buy late have a lot of great cheap games to keep them entertained, where someone who had the console from the beginning probably already played those games and is therefore interested in new titles.
It's almost like they wanted the trip to fail to write this article.