Jerry’s Blog–Because Wit Happens

After a 45- or so month run, I have finally been taken off of Marketocracy’s Top Ten list.  (Although I still remain in their Top 100 out of some 50,000-80,000 “fantasy funds” monitored there).

Anyone following my stock picks here has had to have been aware of what a beating we all took through 2008 (although I did beat the market–as measured by the S&P500–by 5 percentage points over the last 12 months).

I’ll continue to post stock picks here (and I had intended to post some today, but I can’t see my computer monitor well enough through the tears)–but you’ll just want to pay less attention to them…

Good luck!

Not quite sure how I qualified this time, but the new Top Ten list at Marketocracy just came out and I am on it again. (Hanging on by my fingernails).

I had my worst year ever in the market (although I’ve still outperformed the S&P 500), and maybe I’m getting some brownie points for a late surge I’ve had after rebalancing and getting rid of some truly atrocious picks I have made during this last year. (A process that involved sitting at my computer monitor weeping as I clicked “Sell” time after time…)

If you want to see the performance for my m10 fund–now with a 5 1/2 year track record–you can see it here (along with the alarming dip over this last year!)

Good Luck and Happy Investing!

I have got to get a better press agent.

Fellow m-10er Randy McDuff–whom I met and did a little carpooling with last October when we both went to our little Marketocracy retreat in San Mateo–has 2 full pages (and a blurb on the cover!) in this week’s FORBES Magazine. I am green with envy–not just for the press he’s getting, but for the incredible returns he has been getting in the market.

Rush out and buy the magazine, but in the meantime the article reads as follows:

Randolph McDuff may be the best stock picker the world has never heard of

“Discipline” and “patience” are probably the two most valuable words in value investing. It stands to reason, then, that few places would serve as better incubators for a value investor than The Pas, in Manitoba. Close to polar bear country, where Hudson Bay winds chill the air to 40 degrees below zero and the wait for spring lasts eight months, The Pas is the hometown of Randolph McDuff, a stock picker with an astounding record.

Since McDuff began running his RMG ValueCatalyst small-company fund eight years ago, he has earned a compound annual return of 36.4%. Not a single diversified stock fund in Lipper Analytical’s universe of 1,555 mutual funds can match that. Ken Heebner’s CGM Focus Fund comes closest at 32.2% a year over the same period. McDuff’s RMG Value Oriented Growth, which buys large companies like Bayer (nyse: BAY - news - people ) and Fresenius Medical, comes in third at 25.5%. Warren Buffett’s Berkshire Hathaway (nyse: BRK - news - people ) has returned a compound annual 11% over that period; the s&p 500, 1.1% (including dividends).

What’s McDuff’s secret? “The [securities] industry rewards analysts for boring, homogenous work and penalizes those who provide truly insightful views,” he says. “I typically own companies the industry doesn’t cover, covers poorly or covers with largely plagiarized reports.”

For anyone who likes McDuff’s perspective, and track record, the bad news is that you can’t hitch a ride directly on RMG ValueCatalyst because it’s a mutual fund on paper only. McDuff set up the simulation on the investing Web site Marketocracy.com, where his results are monitored and he is ranked number one among 70,000 managers. If you want to play along and have at least $50,000 to invest, Marketocracy Capital Management will mimic McDuff’s portfolio for a fee of 1.9% of assets a year.

Now living in Winnipeg with his wife, Bridget, McDuff picks stocks with a desktop computer and online brokerage account–plus the heavy research he learned to do growing up. “Because it’s so damn cold in The Pas, there was nothing to do but read,” says McDuff, 43. “I’d spend hours at the library reading financial periodicals.”

McDuff was always drawn more to the challenge of investing than to the trappings of high finance. After graduating from the University of Manitoba with an economics degree in 1986, he spent 14 years as a stockbroker with Bank of Montreal (nyse: BMO - news - people )’s BMO Nesbitt Burns. By 2000 he’d saved $2 million and decided it was enough. He quit his job at age 37 to try managing money–his own and the virtual kind.

“While my colleagues were living the high life, I was saving,” McDuff says, “still driving my 1991 Toyota (nyse: TM - news - people ) 4Runner and living in my $150,000 house.” [Rest of article]

You’ll recall my post a few days ago regarding the Morningstar upgrade of the Marketocracy Masters 100 Fund. Here is more from Yahoo Finance today:

SAN MATEO, Calif.–(BUSINESS WIRE)–Marketocracy Funds¹ announced that the Marketocracy Masters 100^TM Fund (MOFQX) based on the powerful research tool: the Marketocracy m100, received a 5-Star Morningstar Rating^TM for the three-year period ending April 30, 2008 against 429 funds in the Mid-Cap Blend. For the three-year period ending April 30, 2008, the Fund was up 54.70%, doubling the return of the S&P 500 Index,² which was up 26.78% during the same period. As of April 30, 2008, the Fund now has a 4-Star Overall Morningstar Rating^TM.

“Through our proprietary system, we have vast amounts of trading data on over 100,000 model portfolios and that gives us a distinct research advantage,” explained Mark Taguchi, President of Marketocracy Data Services LLC (MDS) which runs one of the most sophisticated virtual stock market trading systems in the world, tracking the detailed trading activity of over 80,000 people managing model portfolios for the last 8 years. “We oversee an extensive farm system of investing talent and the detailed trading data gives us insight on their skills for particular markets which we use to select the m100 and to change the team when needed.”

Changing the Team so Investors Don’t Have to Change Funds

“Exactly three years ago, we made adjustments to our m100 team,” explained, Ken Kam, CEO of Marketocracy, Inc. and portfolio manager of the Masters 100 Fund. “Unlike most funds that stay stuck in an investment category even when it underperforms, the Masters 100 Fund changes so that our investors don’t have to change. Instead of staying in small-cap, where we would have ranked even higher, our team moved to mid-cap, the best performing category over the last three years and a much tougher place to earn a 5-star rating.”

Very few fund companies run a diversified, go-anywhere fund even though most investors would want that for the core portion of their stock portfolio. “It takes a deep bench of investing talent,” said Kam, “and the willingness to take responsibility for changing the team.” [Rest of article]

***

GO TEAM!!

Cool!

The mutual fund that is run pursuant to the selections of the Marketocracy organization that I have been a part of for the last 5 years has just been upgraded by Morningstar to a 4-star fund (5-stars for the last 3 years!)

This should have happened sooner, except for a bad year a few years back–which was when Marketocracy took another look at how they were going to be making future selections. They had been buying hundreds and hundreds of stocks based on the selections of their Top 100 investors, and after their bad year started limiting their purchases to those recommended by only the Top 10 investors–which group I have belonged to for the last 3 years. Most of the stocks I have recommended here have ended up being holdings of the mutual fund.

While I have been through a less-than-stellar year since late last summer, if you visit the Marketocracy site you are going to see incredible performances by the other members of the “m10″ (what Marketocracy calls their Top Ten). Hopefully, I’m just pausing to catch my breath…

Anyway, it is exciting to see this experiment starting to pay off for the Marketocracy bunch. I’m going to encourage my kids to put some of their Roth IRA money into the fund.

FULL DISCLOSURE: As a member of the m10, I get a tiny percentage of the “Assets Under Management” each quarter–so of course I may be encouraging all of you to invest there out of sheer greed! Take anything I say with a grain of salt. Furthermore, past performance is no guarantee of future results (I think I read that somewhere…) Oh, yeah–and the Marketocracy site and the Marketocracy Masters 100 Fund are two separate and unrelated entities, blah, blah, and anything else I’m supposed to say to keep the SEC at bay.

My “long-term” readers are aware (because I write of it fairly often) of my activities at the Marketocracy site: www.marketocracy.com, and which I highly recommend to anyone interested in investing. It has a lot of tools for running “fantasy” portfolios for those of you interested in testing your theories.

There are somewhere around 80,000 fantasy “funds” monitored there. I have several, including one that has been in their (risk-adjusted) Top Ten for almost 3 years solid.

The Top Ten selections (called the m10 at the site) used to be made monthly–but of late the schedule as become more and more, um, sporadic. Until this week, there had not been a reassessment since mid-August of last year.

After a particularly cruel last six months or so in the market, two of our m10 members dropped off (and actually dropped all the way off the Top One Hundred rankings: the m100).

To my relief (and I’m not particularly proud of my last six months’ performance–and my last pick (HAUP) has been a particular stinker this week), I have been selected again as a Top Ten Fund (rankings as of Dec. 15th).

[Applause]

Thank you. Thank you very much…

   Well, I’m off to a long weekend in San Mateo, California.  (The picture here is San Francisco–San Mateo is a suburb, with not quite as impressive a skyline).

   This is a get-together of a couple of dozen Marketocracy aficianados at the company’s headquarters–including 3 or 4 of my fellow m10-ers that I am particularly looking forward to meeting.  (m10-ers are those ranked in the Top Ten of the “fantasy” mutual funds monitored at the site–I’ve been on the list each month for almost 2 1/2 years, and have had a better than 40% return the last 12 months).

I will continue to have my Blog Bots post each day over the weekend. 

Have fun and be safe!