There Are No Stock-Picking Geniuses

June 18, 2010 by  
Filed under Investing

I shake my head when someone writes about managed funds or picking individual stocks as a preferred way of investing. For every lucky home run investor or fund manager genius of the day, there is a genius has-been.

This year’s most prominent ex-genius fund manager is Ken Heebner. He is the manager of the CGM Focus Fund and has been proclaimed by some to be the “top-performing U.S. stock-picker of the new century.”

So what has genius Ken done for his fund investors lately?

The $3 billion CGM Focus Fund, which Heebner runs from Boston, is the only domestic stock fund to trail at least 96 percent of peers in 2008, 2009 and again this year, according to research firm Morningstar Inc. The fund has lost 54 percent since June 30, 2008, compared with the 8.7 percent decline by the Standard & Poor’s 500 Index, a proxy for the U.S. stock market and the fund’s benchmark.

Was Ken ill or evil? No. According to one commenter, Heebner was just in all of the wrong sectors at the wrong times. How could that happen? We thought he was smarter than the rest of us. Now index investors are doing better.

Heebner’s fund has done remarkably well over the past decade, for which he is to be commended. The problem is that ordinary investors tend to look at a hot performer like Heebner’s fund,  buy-in, then expect the upward run to continue. Then things turn south and they become big losers. They sell and move on to the next hot fund. Folks, perceived investing genius doesn’t last. Heck, the stock market doesn’t last, does it?

Here is the link to the full article: Once Americas hottest investor, CMGs Heebner on a cold streak

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2 Responses to “There Are No Stock-Picking Geniuses”
  1. Rob Bennett says:

    I think there are stock-picking geniuses.

    The problem is that it is non-geniuses who decide who is a stock-picking genius for purposes of articles in newspapers and on blogs and all this sort of thing. These phony geniuses always fail to deliver in the end. And then people who don’t believe there are geniuses come out and declare “Do you see? There are no geniuses.”

    The geniuses are the people who know how to evaluate stocks and how to determine when they offer a strong long-term value proposition. What lots of people are trying to do is to ride the coattails of the geniuses. They figure “I will identify the geniuses and then invest with them and get the same returns of the geniuses without being a genius myself.”

    It doesn’t work that way. To identify a true genius, you need to be pretty much of a genius yourself. You cannot identify a genius solely by looking at track record because jumping on fads can provide a good track record for a time. You would need to look at a long track record and there aren’t many fund managers who can afford to invest intelligently for the long term (marketing considerations make this a money-losing proposition — the key to making money from a fund is being popular, not smart).

    If you want to know who the geniuses are, you need to learn what it takes to become a genius yourself. At that point, you might as well just leave out the middle-man.


  2. MasterPo says:

    No one is right 100% of the time.

    What has Elaine Garzelli done for you lately? 😉

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