Tuesday, June 29, 2010

The Tortoise vs. the Hares - Top adviser over last 30 years is largely in cash right now

This reminded me a little of Nassim Taleb's barbell strategy, although I believe Taleb's barbell strategy recommended 85-90% invested in safe cash/short-term treasuries and the other 10-15% in many high-risk ventures.

Slow and steady wins the race.

And I mean really slow — and really steady.

That is the inescapable conclusion that emerges from the Hulbert Financial Digest's three decades of tracking investment advisers' performance. Believe it or not, the adviser at the top of the rankings over those 30 years has been largely in cash for more than a decade.

The adviser in question is Charles Allmon, whose advisory service is called Growth Stock Outlook. As of the close of trading on Wednesday of this week, the Hulbert Financial Digest will have tracked his performance — along with the industry in general — for exactly 30 years.

To be sure, we won't know for certain Allmon's final place in those rankings until then. But with just two days remaining of the more than 10,000 since mid 1980, he is in first place for risk-adjusted performance among advisers for whom Hulbert Financial Digest data extend back that far. So the odds in his favor look good.

Which is nothing short of remarkable, since for more than 20 years Allmon has allocated the bulk of his model portfolio to cash. It currently owns just four stocks that collectively amount to 20% of total portfolio value, for example; the other 80% is parked in a money-market fund.