This week’s readings/links:

Are buybacks good for long-term shareholder value?: Evidence from buybacks around the world.

I have only fuzzy memories of discussing the nature and persistence of buyback anomalies during a finance class back when I was at business school. If I recall correctly, the existing literature at the time was focused only on buybacks in the US market, but this more recent study seems to have expanded the scope to include 31 non-US markets.
The researchers found that, on average, “share buybacks around the world are associated with positive announcement returns and are followed by positive long-run excess returns. Long-term excess returns are an anomaly in an efficient market, and the fact that this anomaly is global makes it more likely that the US findings are not a result of sample bias.” Explaining the anomaly is not that easy, but it’s worth reading the paper and some of the previous literature, if of further interest.
The INSEAD professors actually implemented an investment strategy based on the research findings. That is the PV Buyback USA Fund and a portion of the performance fees are donated to the business school. I haven’t as yet come across an implementation of the strategy in non-US markets, although the research findings suggest that the long-term excess returns outside the US have not declined in recent years (they have become smaller in the US, but have not disappeared).

Jorge Paulo Lemann: Opportunities in times of crisis (at the Brazil conference at Harvard & MIT).

One particularly interesting section of this talk was where Lemann discusses the 3G model and their missteps in recent years. These are covered in more detail on this blog.
Basically, their playbook of acquiring companies with already dominant market shares and then focusing primarily on operating efficiency improvements meant they did not pay as much attention as they should have to what the customer really wanted (and how that evolved over time). As a result, in Lemann’s words, they missed the shift of the world becoming more customer-centric.
Related to the above was the realization that the profile of people they hired also needed to change – so fewer investment bankers, and towards more diverse skillsets, including people who could help them draw customer insights from data, understand new distribution channels, the shift to digital etc. 

Stanley Druckenmiller: The risk-reward for equities is as bad as I’ve seen it in my career.

Druckenmiller is one of the greats, so it is always interesting to hear his perspectives on the economy and markets. His talk has been widely analyzed and discussed, however, so I won’t do that again.
It is perhaps worth noting how his psychology has changed since he stopped running money for clients. For example, he has talked in recent years about not trusting himself as much or even feeling that compelled to put on trades as when he was running money competitively. That makes complete sense. If faced with the current landscape, at his stage of life and relative financial position, why not be conservatively positioned? There seems more to lose than to gain.
I don’t disagree with his views, but I would be interested to see how he would navigate the current environment if he was earlier on in his career. Probably quite well given one of his strengths was his ability to change his mind as the facts changed. That seems a helpful trait these days. 

David Robson: The ingredients for a longer life.

I first came across David Robson’s writings via his article on how the coronavirus is changing our psychology. Highly recommended if you haven’t already read it.
In this article, he attributes exceptional longevity not to a single magic ingredient, but rather to a combination of factors including eating moderately with plenty of fruit and vegetables, exercising plenty, drinking coffee and tea, and finding space for spiritual solace (whether that’s church or a long mountain walk). Common sense uncommonly practiced, which of course makes it worth reading. 

The crisis of a lifetime: Gregor Peter Schmitz interviews George Soros.

I don’t follow European politics, but family and friends who do were highlighting tensions between member countries well before the coronavirus spread to the continent. Some had raised a point similar to the one Soros makes about the EU being an incomplete union. The current crisis seems to have only exacerbated these existing tensions and, as per Stephen Diggle’s recent comments, the chance that this is the beginning of the end for the EU is perhaps higher than it was before.

Other / Miscellaneous:
I had a light-hearted discussion with a friend recently about the value of non-traditional contrarian indicators and the benefit of a “dashboard” approach in thinking about how/when to use them. They all have limitations and you obviously can’t rely on any single one, but when combined with other data (including more traditional financial and technical indicators), they can sometimes lead to useful insights. It is perhaps also helpful to categorize them as Damodaran does into spurious, feel good or hype indicators. A few have been studied in detail, others are more whimsical in nature.
Anyway, some of our favourites, just for fun:

• Ray Soifer’s Harvard MBA indicator (see here and here).
• The cyclicality of CEO turnover (see here).
• Sotheby’s record-setting auction years and stock price prior to delisting (see here and here).
• Korean retail investors betting large on an investment theme (see here).
• The timing of sector/theme ETF launches (also name and strategy changes for existing ETFs; this seems to apply to the junior miners too).
• Andrew Lawrence’s skyscraper index, which has since been studied further (see here).
• Magazine covers (see here).

Any other interesting or fun examples to add to the list? Would be glad to hear them.