I guess it is a huge question whether we can do better than auto-MF. My guess would be that we can do better when we step outside MF universe and invest (or choose not to invest) in something different. E.g. if I decide that E&Ps are the way to go due to Peak Oil and low POI (like it was in 2009), I may outperform auto-MF, because I compete outside its universe. Or similarly, if I decide that stocks are overpriced and I should hold cash, I may outperform by being outside the universe again. (Obviously, I can also underperform if my calls are bad).
IMHO, it is very hard to outperform MF by adding adjustments inside the universe. I saw the same video you mention and Greenblatt mentions adding/changing a bunch of criteria and most things backtested worse than original MF. If we start picking and choosing, we risk to lose the turnarounds of our hated sectors like for-profit education or home healthcare or Chinese stocks or RIMM/GRMN.
I'm still in a picker and chooser camp, but more because I look for value in various other places and I run my own valuation. If I only chose from MF stocks, I'd probably go with auto-MF.
From the stocks you mentioned:
- MICC is actually a good company, I missed it when it went cheap in 2009 crash.
- PPD. I don't think it's a pyramid scheme, since the revenues (and income) have not grown for four years. The issue is more that the revenues and income have not grown, so perhaps the pool of people who would buy prepaid legal services has been exhausted. That's not a positive, since it's unclear if they can diversify into something else without diworsifying. It's also unclear if there would be a price war at some point (probably not, but I'm not sure). Worth watching IMO, but good price has been missed. :/
- I own some ARO, but I'd like a better price before buying more.
- GRMN/RIMM - I own token positions. GRMN may survive on vertical markets. It's unclear how profitable they will be with only that. RIMM is still in pretty good position due to their email/texting franchise, though long-term they may have problems. Tough to see either of them prosper a lot. |
