I came across this old Morningstar interview featuring Pat Dorsey of Sanibel Captiva Trust. He discussed the three sources of alpha, as outlined by Russell Fuller in Behavioral Finance and the Sources of Alpha [pdf].
The first two sources of alpha:
Superior (Private) Information: Most traditional investment managers try to generate a better information set. For example, they may try to generate a superior earnings forecast, or they may try . . .
→ Read More: Dorsey: Three Sources of Alpha
James Montier’s (author of the excellent Value Investing: Tools and Techniques for Intelligent Investment) monthly commentary has been released, courtesy of ZeroHedge: What Goes Up Must Come Down! [pdf]. This month he tackles the sustainability of record high corporate profit margins:
Currently, U.S. proﬁ t margins are at record highs according to the NIPA data (see Exhibit 1). More freakish still is that these record high proﬁt margins are coming during the weakest economic recovery in post-war history.
. . .
→ Read More: Montier: What Goes Up Must Come Down!
James Montier has a whitepaper out in which he describes seven immutable rules for investing. It is a must-read (link below).
Summary list of the rules:
Always insist on a margin of safety This time is never different Be patient and wait for the fat pitch Be contrarian Risk is the permanent loss of capital, never a number Be leery of leverage Never invest in something you don’t understand
Read the full whitepaper here.
Talk to . . .
→ Read More: James Montier: The Seven Immutable Laws of Investing