What Fund Managers Have Learned from the Rally
By Dian Vujovich
Okay, the DJIA is flirting with the number 11,000. As a result, if you’ve been a participator over the last 12 months, you’ve seen prices on many company stocks raise handsomely. If you’ve been a bystander or out of the market over that same time frame, prices have still risen handsomely.
What’s kept me interested in the various markets for so many years are basically three things: One, the more markets change the more they stay the same. Second, nobody calls’em right 100 percent of the time—heck, probably not even 50 percent of the time. And third, watching investor behavior is as fascinating as reading about money manager’s opinions and outlooks.
To that last point, a few well-respected mutual fund portfolio managers were interviewed in a recent Morningstar story titled ” Lessons From the Recent Rally”. Although I don’t know what you’ve learned from the market’s performance over the past couple of years, here’s what some portfolio managers admit to in that Morningstar story.
•First, this was a scary comment to me: “”After the market meltdown of 2008, the most frequently asked question we received was, ‘What have you learned?'” wrote Mason Hawkins and Staley Cates of Longleaf Partners (LLPFX) in a recent shareholder letter. “Interestingly, we have not been asked about the ‘lessons of 2009.’ ”
•This one made a little sense:”Long-term investors shouldn’t upend their investment processes because of one year, good or bad. As Howard Marks of Oaktree Capital notes: “Investment performance in a single year should matter principally only to people who are going to liquidate their portfolios at the end of that year.’ ”
• Forget about a “new normal”:” (John) Rogers has kept his Ariel fund (ARGFX) fully invested and still sees opportunity even after a nearly 95% one-year gain through April 5, 2010. He thinks 2009’s lesson is the same as 2008’s: Don’t put too much credence on the recent past or try to predict the future. “To us, the concept of a ‘new normal’ is another take on the often-stated ‘this time is different’ rationalization.’ ”
• And finally, it’s all about nobody knowing:”Janus Contrarian’s Decker views the world as constantly changing and tries to roll with it. “A year after witnessing a financial crisis so severe that it threatened to send the global economy spiraling into a severe recession (or possibly worse), we find ourselves facing a substantially improved and less chaotic situation. Last year the question was ‘How bad can this get?’ This year the question is ‘How long will the recovery take?’ ”
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