Russ Kinnel shares his Morningstar Investment Conference take-aways including not losing sight of quality when bargain-hunting, being skeptical of hot stocks, and finding value in TIPS.
Russ Kinnel: Hi I'm Russ Kinnel, director of manager research at Morningstar. Our conference is just about wrapped up, I thought I'd share a few take-aways.
We just heard from Bill McNabb, CEO of Vanguard. And he took the industry to task on a couple of things. One, he said some of the ETFs that we've seen launched are not really even investments. They're just so niche and really not serving investors well, he worried about that. He also pointed out that Vanguard's been reluctant to go into the alt space, they do have a little bit, but he took the industry to task for often kind of promising a free lunch, and I agree heartily with that. We often hear from long-short or market-neutral funds which sort of imply that you get all the market's upside and much less downside, and of course it never really works that way. So bring a lot of skepticism to any alts fund, especially one without much of a track record.
We also heard from Vince Montemaggiore, a rising star at Fidelity who runs Fidelity Overseas. He talked about some of his mistakes, and he said one of the key mistakes he's noticed that he's tried to correct for is, when he lowers these quality hurdles because a stock is so cheap. And he says he often finds those are disappointing so he's trying to eliminate that. He's a Warren Buffett fan, so it really makes sense that you put the emphasis on quality and don't reduce those hurdles.
I was also interested in what we heard, some skepticism about some of those favorite, most popular growth stocks. Dan O'Keefe of Artisan said Apple no longer is going to get most of its customer base to replace its iPhones every 18 months, and that's kept him away from Apple. We also heard from Josh Jones of Boston Partners who's actually shorting Netflix--sobering if you own Netflix stock. On the bond side we heard from Rick Rieder and Mihir Worah, who are both fans of TIPS. They say they're trading at a pretty good discount, not that the bond market has a lot of really attractive things to offer, but TIPS might be a good option for your 401(k) or IRA. I'd stay away from a taxable account because of the quirks around taxes and TIPS. And then finally, I thought it was interesting hearing Charles de Vaulx of IVA talk about how he's a big Buffett fan, he owns Berkshire Hathaway, yet in some ways he has to diverge from Buffett and one way he has is he owns gold. He says, I need to preserve capital, I need to protect investors, I can have outflows, Buffett doesn't, so things are a little different for me, so I need to hold onto gold. So kind of an interesting perspective from someone who in other ways is very much like Buffett.
