FA Insights is a daily newsletter from Business Insider that delivers the top news and commentary for financial advisors.
This weekend, the New York Times published a story noting Berkshire Hathaway had underperformed the S&P 500 in four of the past five years. The author, Jeff Sommer, warns Buffett may be entering his Michael-Jordan-on-the-Wizards phase of his career. Barron’s Jeff Kimelman disagrees: “…what the article doesn’t mention is that this isn’t the first time that Buffett has been accused of losing his mojo. During the tech-stock boom of the mid to late 1990s, Buffett appeared out of touch for failing to invest in many tech names that were leading the market. He responded at the time that he didn’t invest in things that he didn’t understand. Of course, the Luddite would get the last laugh when many of those stocks cratered and he began beating his benchmark in the next decade. And who is willing to bet that Buffett might not have at least one more five-year period of successful outperformance left in him?”
Josh Brown links to data compiled by Barron’s Ben Levinsohn showing that in the four weeks ended Thursday, equity funds saw average inflows of $US5.8 billion, and taxable bond funds had $US3.8 billions in inflows. Munis and money market funds, meanwhile, lost $US44 million and $US11.5 billion, respectively. Brown: “It’s not so much a ‘rotation; from bonds to stocks as it is a vote of confidence for the economic recovery. Over the last 30 days investors showed a clear preference for corporate stocks and bonds — and a continued distaste for the safety of treasury-holding money markets and local government-backed muni bonds funds.”
Here’s a chart from Bespoke showing a heatmap for gains and losses in global share of equity market cap since the NASDAQ started retreating March 20. During this period, the U.S. has lost more than 1%. No other country comes even close in the lost column. The biggest gainers? Hong Kong, Brazil, and India.
Data show the client retention rate among advisers declined two percentage points in 2013 to 90%, with largest decrease in annual retention rates occurred among households with $US1 million or more. Patrick Kennedy of PriceMatrix says this shows everyone is shifting advisers at a higher rate than usual. “when markets are sort of significantly or anomalously down or up, it may be driving higher rates of attrition,” he told WSJ’s Daisy Maxey.
86% of firms on the S&P 500 engaged in share buybacks last year, data from Behind The Numbers’ Will Becker show. Becker also found a tendency among firms to do buy-backs when stocks are overvalued. He thus accuses some companies of using buybacks merely looking to meet stock performance goals. He fingers Pfizer in particular: “Looking at PFE‘s annual incentive program, a pool is funded based on the company’s performance on three financial metrics: total revenue, adjusted diluted earnings per share and cash flow from operations … largely with the aid of its record share repurchase activity, PFE managed to exceed the 2013 target goal fro adjusted diluted EPS, while producing slightly below-target performance for its revenue and cash flow metrics.”
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