Some value managers are down 40% plus | stockbee

7/15/2008

Some value managers are down 40% plus

Catastrophic draw-downs are career ending in this field. Look at some of the famous value managers, they are having upwards of 40% draw-downs this year. The investors in those funds will have to wait years for break-even. Many of these managers will never come back. Their career might be over.

If it's any consolation, the elite billionaires as well as we poor investment peasants have been roughed up by this year's cruel and vicious market. We can offer you that solace, thanks to the efforts of crack researcher Teresa Vozzo, who secured the data from an interesting Website dubbed GuruFocus.com

As its fairly repellent name may give you a hint, GuruFocus tracks the stock picking performance of 55 mostly famous (and usually rich) investors including the likes of Warren Buffett, George Soros, Dave Williams, Glenn Greenberg, Carl Icahn, Ron Baron, David Dreman, Edward Lampert, Bill Miller, Marty Whitman and Seth Klarman. We know a number of these fine gents and even like a few of them.

According to GuruFocus, in the first half of this year, only four of the 55 bought stocks that collectively scored a gain. This lucky quartet was headed by T. Boone Pickens, the oil maven, whose stock purchases in the first half of the year were up a nifty 23%; Ken Heebner, whose equity buys averaged a 14.5% rise; Steve Mandel, who enjoyed a 10.1% average gain on the shares he bought in the opening six months, and David Winters, who posted a 3.8% appreciation.

The worst losers were Marty Whitman, whose first-half picks were down 43.9%; Mohnish Pabrai, whose buys were down an average of 41.9%; and Bill Miller, whose purchases, on average, lost 38.5%. No need, we hazard, to pass the collection plate.

Keeping losses small is the key to long term survival in this game. If you remain solvent and manage your nerves and perspective during bearish periods, then during bullish periods there are always more opportunities than you can handle.
Loss of account (%) Gain to recover (%)
5 5.3
10 11.1
15 17.6
20 25.0
25 33.3
30 42.9
35 53.8
40 66.7
45 81.8
50 100.0
55 122.0
60 150.0

A timing model like Market Monitor keeps you on right side of trend. It has correctly signaled every up or down move so far.

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