Strategy

Information asymmetry, climate investing and the active management edge. By Garvin Jabusch The theory of efficient markets says all stock prices are perpetually accurate, because investors always have complete and up-to-date information about their holdings. But as any casual observer knows, information and topical awareness are not evenly distributed, even among professional analysts. Reality is always far more complicated than equity markets can quickly assimilate, meaning information asymmetry is a constant. While usually considered a type of market failure, information asymmetry is frequently used as a “source of competitive advantage.” The person with the most information is best equipped to make the best...

by Tom Konrad, Ph.D., CFA Since my 10 Clean Energy Stocks for 2021 list contains 5 foreign stocks this year, a reader asked about the relative merits of buying a foreign stock compared to a US ADR.  Here is a summary of the relative merits (for US investors) of buying a foreign stock directly compared to buying the American Depository Receipt (ADR). First, let’s look at the tickers for the five foreign stocks in the list.  There are four types of ticker in the list this year: The stock on its home exchange in the local currency.  These have the form...

by Tom Konrad, Ph.D., CFA My friend Jan Schalkwijk, CFA of JPS Global Investments just asked me if I had any thoughts on Kontrol Energy (KNR.CN, KNRLF), a Canadian smart building firm I had never heard of. (I just added it to AltEnergyStocks.com's Energy Efficiency and Smart Grid stock lists.) The stock had just shot up after the client sold and went on a kayaking trip.  It had disclosed a sensor for detecting COVID-19 from the air. While I didn't have anything to say about the company, I did have some thoughts on dealing with the emotions around missing out.  Since it's...

Tom Konrad, Ph.D., CFA I don’t spend much time reading investment company ESG reports, but a friend asked me to take a look at a copy of the TIAA’s 2021 Climate Report.  I was deeply unimpressed.  Here are a few things in the report that triggered my greenwashing radar: TIAA wants to work with companies to improve their behavior.  They call this company engagement.  “e do not expect to account for the majority of our emissions reduction — we are primarily focused on company engagements” page 9. Much of TIAA’s emphasis is on reducing emissions from their own operations,...

Only a couple weeks ago, I quoted the market aphorism, “In the short-run, the market is a voting machine, but in the long-run, it is a weighing machine.” It comes to mind again now that Robinhood types are short squeezing hedge funds with GameStop (GME) and other nostalgia stocks.   It's another example that any strategy that relies on valuation affecting prices in the short run (like stonks betting that GME would go down because it lacks a viable business) is incredibly risky.  It's also incredibly risky to bet that any trend driven by popularity will last.  Eventually, there are going...

Tom Konrad, Ph.D., CFA As usual, I am putting together my Ten Clean Energy Stocks for 2020 model portfolio for publication on January 1st or 2nd next year.  As I wrote in November, expensive valuations for the US clean energy income stocks I specialize in mean that the 2020 model portfolio will contain more than the usual number of foreign stocks, and I am also planning on including a little hedging with options. Why option strategies are now affordable I have never included options in the model portfolio before because the commission structure did not make it cost effective for small investors...