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Figuring Out How to Get an Investing Edge

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Jim Chanos, this week’s guest on Masters in Business, has identified — and sold short — many of the best-known corporate disasters of the past few decades. He says the underlying philosophy of his investment strategy came from the debates he used to participate in with the legendary Julian Robertson of investment firm Tiger Management LLC. Chanos used to get invited to Tiger’s lunchs, where he often held investment positions and views at odds with some of Tiger’s fund managers and analysts. The debate over different stocks would rage on.

Robertson was always interested in the advantage anyone held: “What is your edge?” he would ask. Most of those making investment decisions turned out to lack a sustainable edge; they were undone by the powerful force of reversion to mean.

Whatever Chanos’s edge is, he has used it to make some of the most celebrated short-sales, betting against — among others — Enron, Baldwin-United, Commodore International, Coleco, Integrated Resources, Boston Chicken, Sunbeam, Conseco, Tyco International, and, most recently, Valeant Pharmaceuticals.

His latest short: Elon Musk’s electric-car company, Tesla, which he thinks will fail.

His favorite books are cited here; our conversation transcript is published here.

The show is broadcast on Bloomberg radio all weekend; you can stream/download the full conversation, including the podcast extras on iTunesBloomberg and Overcast. Our earlier podcasts can all be found on iTunesSoundcloudOvercast and Bloomberg.

Next week, we speak Ed Yardeni, founder and chief investment strategist of Yardeni Research, and former chief investment strategist at Deutsche Bank.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Barry Ritholtz at britholtz3@bloomberg.net

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    How to Stop Investor's Remorse

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    1. How to Stop Investor’s Remorse  U.S. News & World Report
    2. Full coverage



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    Why the world's wealthy are investing more in companies that care, Aecon's tumble and where Prem Watsa sees …

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    A global investment club for the wealthy whose members aim to bring about social or environmental change as well as making a profit has grown by more than US$1-billion in two years, according to a report.

    Toniic said its members now have a combined US$2.8-billion in what’s considered impact investments – capital placed with companies and organizations that can demonstrate they benefit society or the environment – up from US$1.65-billion in 2016.

    Members, who include families and foundations as well as wealthy individuals, said the industry was becoming more mainstream.

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    “Impact investing is not some minority sport by some hippies on the fringes,” James Perry, chief executive of the Panahpur charitable foundation, which has investments worth 4 million pounds (US$5.34-million).

    Toniic found 82 per cent of members who participated in its study had portfolios that met or exceeded their financial expectations according to the report, released on Thursday.

    A majority said impact investments yielded returns on a par with traditional investments.

    Perry cited Auticon, a British IT consultancy that helps integrate employees with autism into workplaces, as a successful impact investment in the Panahpur portfolio. Auticon’s shares rose in value recently after it expanded into other countries.

    “Clear dissatisfaction in the way the economy is going and emerging data around changing ecosystems have woken people up. People are seeing they can’t carry on like they are,” he told the Thomson Reuters Foundation.

    The amount of money going into impact investing is rising by about 18 per cent a year, according to the Global Impact Investing Network, whose 2017 survey found the market was worth at least US$114-billion.

    However Damian Payiatiakis, head of impact investing at Barclays, said the industry was still in its infancy.

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    “The industry has progressed from the stage of visionary innovators and is now entering one of early adopters, but the majority of investors aren’t yet aware of or being offered this opportunity,” he said.

    — Lee Mannion, Thomson Reuters Foundation

    This is the Globe Investor newsletter, published three times each week. If someone has forwarded this e-mail newsletter to you, you can sign up for Globe Investor and all Globe newsletters here.

    Stocks to ponder

    CI Financial Corp. (CIX-T). The S&P/TSX Composite was more or less flat for the trading week ending with Thursday’s close, easing lower by 0.2 per cent, but the benchmark remains in overbought, technically vulnerable territory according to Relative Strength Index (RSI). The RSI level of 73 is just over the 70 sell signal and miles away from the oversold RSI buy signal of 30. There are four oversold, technically attractive index constituents trading below the RSI buy signal led by Aecon Group Inc. Dorel Industries Class B, CI Financial Corp. and Extendicare Inc. round out the list. Scott Barlow focuses on CI Financial as he was surprised that a company with its fortunes leveraged to market performance was not following the benchmark higher. (For subscribers).

    Quebecor Inc. (QBR.B-T). This stock appears on the positive breakouts list with its share price closing at an all-time high on Thursday. Analysts have positive outlooks on the security with 14 buy recommendations. Earlier this month, the company announced a change to its dividend policy, which is expected to result in meaningful increases to its dividend over the next few years. Quebec-based Quebecor Inc. is a telecommunications and media holding company with an 81.5-per-cent interest in Quebecor Media Inc. Quebecor has three key business segments: telecommunications with its core asset, Videotron Ltd.; the media segment, with the television broadcaster, TVA Group; and its smallest segment, sports and entertainment. Jennifer Dowty reports (for subscribers).

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    Aecon Group Inc. (ARE-T). Aecon Group Inc. didn’t work as a short-term takeover target. Perhaps the stock will look better as a long-term investment. The construction firm had seen its share price soar to a 10-year high of $20 in April, ahead of a proposed $1.5-billion takeover by the financing unit of China Communications Construction Co. Ltd. (CCCC), which is majority-owned by the Chinese government. But on Thursday, the shares tumbled to levels seen 4½ years ago, down 15.4 per cent for the day, after the Canadian government blocked the deal on Wednesday, citing national security. David Berman reports (for subscribers).

    Watsa shuns China as Fairfax looks for investment in India, U.S.

    The Rundown

    Watsa shuns China as Fairfax looks for investment in India, U.S.

    Prem Watsa, the billionaire head of Fairfax Financial Holdings Ltd., sees plenty of opportunities for investment in the U.S. and his native India. He’s less interested in the other Asian powerhouse. “In China, we are less invested,” Watsa said in an interview with BNN Bloomberg Television Friday. “We like democracy. We like business-friendly policies.” Watsa, who emigrated from India 46 years ago, is most excited about the opportunities being created there due to the policies implemented by Prime Minister Narendra Modi.

    Top Links (for subscribers)

    Economist predicts nasty Canadian recession in 2020

    Others (for subscribers)

    Friday’s analyst upgrades and downgrades

    Friday’s Insider Report: Companies insiders are buying and selling

    Friday’s small-cap stocks to watch

    Others (for everyone)

    Oil prices slump as OPEC and Russia consider output boost

    Number Crunchers (for subscribers)

    Nine U.S.-listed small-caps poised to outperform their large-cap rivals

    Ask Globe Investor

    Do you have a question for Globe Investor? Send it our way via this form. Questions and answers will be edited for length.

    What’s up in the days ahead

    Ian McGugan takes a look at rising U.S. interest rates and what that means to emerging markets and the rest of the world.

    Click here to see the Globe Investor earnings and economic news calendar.

    More Globe Investor coverage

    For more Globe Investor stories, follow us on Twitter @globeinvestor

    Click here share your view of our newsletter and give us your suggestions.

    Want to subscribe? Click here to sign up or visit The Globe’s newsletter page and scroll down to the Globe Investor Newsletter.

    Compiled by Gillian Livingston

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    Feds investing $8.1M in Charlottetown Airport runway upgrades

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    The federal government is investing $8.1 million for improvements to the Charlottetown Airport.

    The project will focus on the airport's main runway and connecting taxiways, according to a government news release.

    Major components of the work include grading and drainage improvements, replacement of stormwater collection infrastructure, and repaving.

    The project is expected to create about 180 jobs during construction, the government said.

    "Transportation systems are a vital part of the Prince Edward Island economy and the investment announced here today will foster long-term prosperity in all corners of the province," said Cardigan MP Lawrence MacAulay.

    "These improvements at the Charlottetown Airport will give Islanders more transportation options while helping businesses get more products to market."

    More P.E.I. news

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