European Shorting
Number of Stocks: 54
Number of New Stocks: 7
Total Value: $485 Mil
Q/Q Turnover: 8%
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For over a year, we’ve been discussing Europe, China, and U.S. Politics as the major drivers of the markets. On September 7, 2012, we published a Market Commentary, headlined “Threat of European Banking Crisis Recedes.” In it, we discuss the Outright Monetary Transactions (OMT) program, introduced by the European Central Bank (ECB). We think this program makes credible the ECB’s promise to do all it can to keep the Eurozone together. And we believe this action mitigates some of the risk of investing in U.S.-based international banks. As for China, we continue to monitor the country as its leaders turn their economic focus from building infrastructure toward ‘building the consumer.’ We don’t think that China has turned the corner.
What’s driving the markets lately? As near as we can tell, the same three topics that we’ve been talking about for almost a year: Europe, China and the U.S. — with the current emphasis on Europe for debt and equity markets, and China for commodity markets. We’ll start with Europe.
Ron Muhlenkamp’s fund recovered a lot of loss in 2007 and 2008. Now he is worried that the current government policies penalize employers and it is hard for investors to find companies that can thrive despite these penalties. This is the Q4 portfolio update of Muhlenkamp Fund.
Over the past two years in our newsletters and seminars, we’ve discussed three major topics: the recession, bailouts and the credit markets, and changes in the regulations and structure of the financial markets. (GuruFocus, September 11, 2009) As we stated in the previous article on his top holdings, Investment Guru Ronad Muhlenkamp is a very patient investor. His average holding is over 10 years. He developed a formula to evaluate stocks 30 soe years during the 1972 to 1974 financial stock crisis, based on Graham and Dodd formula with a a few tweaks to reflect inflation and interest rate, and he has been using that since then. So said he in the book “Value Investing with Masters” by Kirk Kazanjian. Continue Reading »
(GuruFocus, September 11, 2009) Investment Guru Ronald Muhlenkamp’s mutual fund Muhlenkamp fund took a beating lately. The newly available Guru Fund Performance Data shows he has been lagging the market for 2006, 2007 and 2008. That is three years in a row. Before this down period, Muhlenkamp beat the market typically by a large margin 6 years in a row from 2000 to 2005. | Year | Return (%) | S&P500 (%) | Excess Gain (%) |
|---|---|---|---|
| 2008 | -40.39 | -37 | -3.4 |
| 2007 | -9.66 | 5.61 | -15.3 |
| 2006 | 4.08 | 15.79 | -11.7 |
| 2005 | 7.88 | 4.91 | 3.0 |
| 2004 | 24.51 | 12 | 12.5 |
| 2003 | 48.07 | 28.7 | 19.4 |
| 2002 | -19.92 | -22.1 | 2.2 |
| 2001 | 9.33 | -11.9 | 21.2 |
| 2000 | 25.3 | -9.1 | 34.4 |
| 1999 | 11.4 | 21 | -9.6 |
Ronald Muhlenkamp believes that the crunch is over, but he does not yet have conviction in what the new norm will be. He thinks that with ample capacity in every industry, maybe corporate ROE (return on shareholder equity) averages 11% instead of the historic average of 13 percent. Ron Muhlenkamp is heavy in technologies and healthcare. This is his Q2 portfolio update. Ron Muhlenkamp's review of events that impacted the markets during the past quarter. "Most of the selling should now be completed, but if there is another round, it should occur in Q-1 ’09 as people respond to yearend statements and companies satisfy their auditors. Meanwhile, we think many of the specific fundamentals that drove the forced selling have been alleviated."
We like to invest in good companies when the price is right. We prefer stocks to bonds because we want management working for us as opposed to against us. There's two ways you can put money into a company. You can loan them money, in which case the management's job is to minimize your return. Or you can actually be an owner of the business, in which case their job is to maximize return. We like management working for us. Ron Muhlenkamp shareholder letter: In 2005, the Financial Accounting Standards Board (FASB) issued FASB #157 which states that banks, insurance companies, and brokers must mark the value of the assets to market prices in their quarterly and annual reports. 
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