In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. In this series, they discuss Chapter 07: The Value of Security Analysis.LEARNING: Smart investors, like smart businesspeople, care about results, not efforts. “Smart investors, like smart businesspeople, care about results, not efforts. That is why “smart money” invests in “passively managed,” structured portfolios that invest systematically in a transparent and replicable manner.”Larry Swedroe In this episode of Enrich Your Future, Andrew and Larry Swedroe discuss Larry’s new book, Enrich Your Future: The Keys to Successful Investing. The book is a collection of stories that Larry has developed over the 30 years to help investors as the head of financial and economic research at Buckingham Wealth Partners. You can learn more about Larry’s Worst Investment Ever story on Ep645: Beware of Idiosyncratic Risks.Larry deeply understands the world of academic research and investing, especially risk. Today, Andrew and Larry discuss Chapter 07: The Value of Security Analysis.Chapter 07: The Value of Security AnalysisIn this chapter, Larry explains how to test the efficiency of the market by looking at how good security analysts are at predicting the future. If they can outsmart the markets, then the markets are not efficient.Do investors who follow security analysts's recommendations outperform the market?In business, results are what matters— not effort. The same is true in investing because we cannot spend efforts, only results. The basic premise of active management is that, through their efforts, security analysts can identify and recommend undervalued stocks and avoid overvalued ones. As a result, investors who follow their recommendations will outperform the market. Is this premise myth or reality?To answer this question, Larry relies on the robust findings of academic research in the paper Analysts and Anomalies. The authors meticulously examined the recommendations of U.S. security analysts over the period 1994 through 2017. Their findings debunk the myth of analysts' infallibility and shed light on the surprising ways analysts' predictions conflict with well-documented anomalies. They also found that buy recommendations did not predict returns, though sell recommendations did predict lower returns. Another intriguing finding was that among the group of "market" anomalies (such as momentum and idiosyncratic risk), which are based only on stock returns, price, and volume data, analysts produce more favorable recommendations and forecast higher returns among the stocks that are stronger buys according to market anomalies. This is perhaps surprising, as analysts are supposed to be experts in firms' fundamentals. Yet, they performed best with anomalies not based on accounting data.The evidence in this academic paper suggests that analysts even contribute to mispricing, as their recommendations are systematically biased by favoring overvalued stocks according to anomaly-based composite mispricing scores. The authors concluded: "Analysts today are still overlooking a good deal of valuable, anomaly-related information."Results are what matters not effortIn conclusion, Larry states that if corporate insiders (e.g., boards of directors), with access to far more information than any security analyst is likely to have, have such great difficulty in determining a "correct" valuation, then it is easy to understand why the results of active management are poor and inconsistent.While security analysts and active portfolio managers make great efforts to beat the market, historical evidence shows that those efforts have proven counterproductive most of the time. And savvy investors, like smart businesspeople, care about results, not efforts. That is why "smart money" invests in "passively managed," structured portfolios that invest systematically in a transparent and replicable manner.Further readingJoseph Engelberg, David McLean and Jeffrey Pontiff, “Analysts and Anomalies,” Journal of Accounting and Finance (February 2020).Did you miss out on the previous chapters? Check them out:Enrich Your Future 01: The Determinants of the Risk and Return of Stocks and BondsEnrich Your Future 02: How Markets Set PricesEnrich Your Future 03: Persistence of Performance: Athletes Versus Investment ManagersEnrich Your Future 04: Why Is Persistent Outperformance So Hard to Find?Enrich Your Future 05: Great Companies Do Not Make High-Return InvestmentsEnrich Your Future 06: Market Efficiency and the Case of Pete RoseAbout Larry SwedroeLarry Swedroe was head of financial and economic research at Buckingham Wealth Partners. Since joining the firm in 1996, Larry has spent his time, talent, and energy educating investors on the benefits of evidence-based investing with an enthusiasm few can match.Larry was among the first authors to publish a book that explained the science of investing in layman’s terms, “The Only Guide to a Winning Investment Strategy You’ll Ever Need.” He has authored or co-authored 18 books.Larry’s dedication to helping others has made him a sought-after national speaker. He has made appearances on national television on various outlets.Larry is a prolific writer, regularly contributing to multiple outlets, including AlphaArchitect, Advisor Perspectives, and Wealth Management. [spp-transcript] Connect with Larry SwedroeLinkedInTwitterWebsiteBooksAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

Click here to get the PDF with all charts and graphs Introducing emerging marketsOur FVMR frameworkFundamentals: Emerging markets are about 20% less profitableValuation: Emerging markets are about 41% cheaperAsset class and region/country allocationsIntroducing emerging marketsOur FVMR framework   Fundamentals: Emerging markets are about 20% less profitable Valuation: Emerging markets are about 41% cheaper UK: Cheap and high profitabilityGermany and Korea: Cheap and low profitabilityAustralia and US: Expensive but high profitabilityAsset class and region/country allocationsThis is not a recommendationMy next rebalance is in early SeptemberEverything could change thenThis is not a recommendationMy next rebalance is in early SeptemberEverything could change then Click here to get the PDF with all charts and graphs Andrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramTwitterYouTubeMy Worst Investment Ever Podcast

BIO: Justus Hammer is the Group CEO and Co-founder of Mad Paws. Over the past two years, he has invested in over 45 startups. He has served as an advisor and early investor in Airtasker and a founding investor and advisor to VICE Golf.STORY: Justus developed an idea to make real estate buying easier. He wanted to expand outside of Australia when COVID hit. Justus took a pause, thinking that the market would tank further. Instead, property prices doubled in the next 18 months.LEARNING: What works in one asset class will not necessarily work in another. The real estate market dynamics are very different in each market. Timing matters, but you can never really know whether your timing is right until after. “I don’t think there is a single truth or strategy that works for everyone. Just think about it and ask yourself what you want to achieve and what the most likely scenario is for you to get there.”Justus Hammer Guest profileJustus Hammer is the Group CEO and Co-founder of Mad Paws. He has invested in over 45 startups over the past two years, serving as an advisor and early investor to Airtasker and a founding investor and advisor to VICE Golf. He has not only been involved in starting more than ten companies in the tech space, like Spreets and Mad Paws, but has also developed a growing interest in cash flow businesses over the past ten years.Worst investment everJustus saw a big opportunity in the real estate space to improve and make purchasing a property easier. There’s a whole lot of angst that goes with that, and many people are very scared about the process and sometimes get it wrong. So, Justus and his company wanted to create a better way to get buyers from property A into property B.They spent time building the idea and even had some of Australia’s biggest real estate companies backing them. In the beginning, the company was working and managed to transact around 40 properties.But it was a tough time in Australia’s real estate market, so Justus ran into many issues. One particular issue was timing. The market was going down, so they had to buy properties, try to improve them, and sell them quickly.They also ran into the problem of not being aggressive enough on the buying side, so they couldn’t get many properties. Still, they made money on about 60 or 70% of their properties. But they also had a couple that really killed them.Justus believed the market would improve, so they sat through it. The market kept dropping, and they started looking for other opportunities. They began to look closer into the numbers, the unit economics, and what had been working. They realized the model was working pretty well outside Australia.His company decided to expand into Europe, but before they did, COVID hit. COVID changed the dynamics completely. Debt facility providers pulled back and refused to give them a loan. Their real estate partners decided to figure out the situation first, believing the market value would go down. The market turned out to be the opposite, and property prices doubled in the next 18 months.Lessons learnedWhat works in one asset class will not necessarily work in another.The real estate market dynamics are very different in the US, Europe, and Australia.You can’t have regrets in investing. You’ve got to take the good and the bad.There isn’t a single truth or strategy that works for everyone.Andrew’s takeawaysTiming matters, but you can never really know whether your timing is right until after.Transferring a business model doesn’t always work.Investing is going to be a roller coaster, no matter what. It’s really a matter of holding on through the tough times.Actionable adviceJustus underscores the value of pursuing activities that provide non-monetary benefits. He advises finding a balance between doing what you’re good at and what brings you joy. This advice serves as a guiding light, helping the audience navigate the complex terrain of work-life balance and personal fulfillment.Justus’s recommendationsJustus recommends reading Atomic Habits to find structure and make your life easier. He also recommends The Subtle Art of Not Giving a F*ck if you want to focus on what matters and reducing suffering.No.1 goal for the next 12 monthsJustus’s number one goal for the next 12 months is to get Mad Paws to a better position and to invest in cash-flow businesses.Parting words “You’ve got to take some risk, but ensure you measure it as much as possible.”Justus Hammer [spp-transcript] Connect with Justus HammerLinkedInAndrew’s booksHow to Start Building Your Wealth Investing in the Stock MarketMy Worst Investment Ever9 Valuation Mistakes and How to Avoid ThemTransform Your Business with Dr.Deming’s 14 PointsAndrew’s online programsValuation Master ClassThe Become a Better Investor CommunityHow to Start Building Your Wealth Investing in the Stock MarketFinance Made Ridiculously SimpleFVMR Investing: Quantamental Investing Across the WorldBecome a Great Presenter and Increase Your InfluenceTransform Your Business with Dr. Deming’s 14 PointsAchieve Your GoalsConnect with Andrew Stotz:astotz.comLinkedInFacebookInstagramThreadsTwitterYouTubeMy Worst Investment Ever Podcast

Financial expert Larry Swedroe discusses market efficiency and the case of Pete Rose in investing. He emphasizes not trying to time the market or pick stocks as retail investors often underperform. The podcast explores challenges in generating alpha, the fine line between legal and regulatory boundaries in sports betting, market bubbles, and collective wisdom.

Guest Larry Swedroe talks about why investing in great companies doesn't guarantee high returns. He discusses the concept of risk-adjusted returns, market efficiency, and the importance of understanding valuation. Larry emphasizes the significance of developing a financial plan based on expected returns from stocks and bonds, rather than trying to time the market.

Larry Swedroe, author of 'Enrich Your Future: The Keys to Successful Investing,' discusses why persistent outperformance in investing is challenging. He emphasizes the importance of building a robust asset allocation plan, regularly rebalancing, and sticking with it. Larry shares insights on market bubbles, timing investment decisions, and the complexities of achieving consistent success in investing.

Author Larry Swedroe discusses the challenges faced by active investment managers in outperforming the market due to costs. He draws parallels between athlete performance and investment management, highlighting the difficulties of achieving consistent success in both fields. The episode delves into the concept of persistence in investment performance and the impact of scaling and market competition on managers' ability to generate long-term returns.

Financial author and speaker Larry Swedroe discusses market pricing strategies and the importance of investing in passively managed funds. He emphasizes letting the markets work for investors and highlights the challenges of beating an efficient market. The conversation explores the concept of market efficiency in sports betting and stock trading, overconfidence among individual investors, and the impact of Fama and French's research on active fund managers.

Rizwan Memon, founder of Riz International, shares his $160,000 loss from shorting GameStop due to Elon Musk's tweet. Lessons learned: always have enough liquidity when shorting, control money bets, avoid emotional trading. Emphasizes transparency in trading practices and the importance of due diligence for safer investments.

Larry Swedroe, author of 'Enrich Your Future: The Keys to Successful Investing', discusses key metrics for stock market success. They delve into research revolutionizing investing strategies, including factors like market beta, value companies, smaller companies, and momentum. The conversation highlights the importance of analyzing small companies based on profitability and investor behavior's impact on returns.