Hello all. Thanks to those who recommended another investing book similar to the The Little Book that Beats the Market, in that it claims that a fairly simple strategy will beat the market. The book is The Acquirer’s Multiple by Tobias E. Carlisle.
Tobias Carlisle manages Acquirer’s Funds, an investment firm whose fund, The Acquirer’s Fund, which trades on the NYSE with the ticker ZIG, is based on the principles in Carlisle’s book. According to the Acquirer’s Multiple, Carlisle’s strategy will not only outperform the S&P 500, but also Joel Greenblatt’s Magic Formula. As with Greenblatt’s book, the evidence given is back testing data. Regarding this back testing data, Carlisle gives some details on how he calculated the performance of his strategy in the Appendix of The Acquirer’s Multiple, but those details raise more questions than they answer. Carlisle hired Euclidean Technologies, an investment management firm, to do a study of the Acquirer’s Multiple using S&P’s Compustat database. The portfolios were rebalanced monthly. While Greenblatt’s book lacks some detail and direction on certain issues as I’ve pointed out in previous posts, the Acquirer’s Multiple makes no attempt to explain how a retail investor would be able to follow this strategy. To follow the strategy as Euclidean conducted it, the average shmoe would have to rebalance monthly. I assume there’d be a lot of overlap in the stocks from month to month, but you would have to buy or sell shares of nearly every one of your 30 stocks every month to keep this portfolio balanced.
Takeaways
The main thing I learned from this book is: you’ll never go broke re-telling old stories about Warren Buffett. The Acquirer’s Multiple recounts a number of inspirational stories including some about Warren Buffett, which will be familiar to anyone who’s read “The Snowball” by Alice Schroeder or Buffet’s Letters to Shareholders. The stories have nothing to do with the Acquirer’s Multiple, but everybody likes Warren Buffett.
I could write a summary of Carlisle’s investing philosophy, and about the problems with back tests, but it’s much easier to sum up the book with one image that’s worth a thousand words and perhaps many thousands of your dollars:
Yes, if you would’ve invested in The Acquirer’s Fund (NYSE:ZIG) five years ago (shortly after the fund’s inception) your investment would be up just over 50%. But over the same period the S&P 500 (SPY) was up over 86%. In other words, the SPY outperformed ZIG by about 71% over the past five years. I think that’s enough of a review.
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