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Screen or Smoke-Screen?
Investment Strategy | 3 Comments | Fri 02 Aug 2013
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Valuation-based screening is a pillar of most fund managers' investment approach, highlighting interesting ‘value' stocks worthy of further analysis. The academic research would appear to concur. In this article, we contrast this approach with that of Warren Buffett. His is a very unusual process and, in this information-laden world, is very difficult to follow. Serious investors should give it serious consideration.



Comments

1.
On 06/08/2013 21:53:55, Conor wrote:
Interesting article. I also recall reading recently that Michael Burry was always highly skeptical when using stock screens, due to inaccurate data. I believe he gravitated away from using screen techniques, towards simply reading a huge amount of news for investment ideas. Given that anyone and everyone can screen for ideas, there is no real advantage most of the time in using screening as a primary source of ideas. That said, it can be a useful starting point for research at times.

2.
On 09/08/2013 11:47:49, Anonymous wrote:
In a recent interview, Stanley Druckenmiller made the following observation:

'I believe that good investors are successful not because of their IQ, but because they have an investing discipline. But, what is more disciplined than a machine? A well-researched machine can make many average investors redundant, leaving behind only the really good human investors with exceptional intuition and skill. And what happens when machines really take over investing? Do the markets get really efficient? Or will there be competing systems trying to outdo each other? All of this is depressing because there won’t much left to do for humans once machines start doing more and more.'

Druckenmiller is a seriously smart investor and his interview (link below)is well worth a read:

http://www.zerohedge.com/news/2013-06-14/stanley-druckenmiller-chinas-future-and-investing-new-normal

3.
On 09/08/2013 15:19:47, James East wrote:
Over the years, I take what Buffett says with a little tongue in check. Not that what he says is not fact, but not all the facts are present either. I am sure Buffett did not know the price of PetroChina but he surely knew that the industry was in the pits around 2002 with ample hunting grounds. In other words, he did not need a screen but to just look at the top 30 market cap stocks. This is of course 20/20 hindsight for you and me, but not for Mr. Buffett as he had seen that movie before. Maybe there is a sector out there now with similar attributes for ample hunting?

If you are under the age of 40, I would not abandon screens in total.

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