Monday, July 11, 2011

The Oracle of Manitoba: "the best stock picker the world has never heard of"

HUGE Caveat below.
Back in June 2008 we linked to a Forbes profile:
"Discipline" and "patience" are probably the two most valuable words in value investing. It stands to reason, then, that few places would serve as better incubators for a value investor than The Pas, in Manitoba. Close to polar bear country, where Hudson Bay winds chill the air to 40 degrees below zero and the wait for spring lasts eight months, The Pas is the hometown of Randolph McDuff, a stock picker with an astounding record.

Since McDuff began running his RMG ValueCatalyst small-company fund eight years ago, he has earned a compound annual return of 36.4%. Not a single diversified stock fund in Lipper Analytical's universe of 1,555 mutual funds can match that. Ken Heebner's CGM Focus Fund comes closest at 32.2% a year over the same period. McDuff's RMG Value Oriented Growth, which buys large companies like Bayer and Fresenius Medical, comes in third at 25.5%. Warren Buffett's Berkshire Hathaway has returned a compound annual 11% over that period; the s&p 500, 1.1% (including dividends).

What's McDuff's secret? "The [securities] industry rewards analysts for boring, homogenous work and penalizes those who provide truly insightful views," he says. "I typically own companies the industry doesn't cover, covers poorly or covers with largely plagiarized reports.">>>MORE
This weekend I received a request for an update. Here's Marketocracy:
On this page we show various Performance charts and tables for Randolph McDuff's RMG1 model fund. The kind you would typically see at other financial websites and publications that track the performance of a fund; but importantly not the track record of the manager managing the fund. The track record of a fund typically has been delivered by several managers and several analysts that are no longer managing the fund. Even though it is the manager that will deliver the future performance your investment is depending upon.
Inception Date: 7/18/2000
RMG1 Cumulative Returns Since Inception (as of 2011-03-25)
graph of fund vs. market indexes
RMG1 m100 S&P 500 NASDAQ
Returns are after all implied fees including 5c/share transaction fees,
SEC fees, management and administration fees of 1.95%
RMG1 Month by Month Returns (2011-07-04) YTD
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec RMG1 S&P500
2011 0.65%   3.59%   1.75%   5.78%   0.55%   1.41%   2.07% *

16.79%   0.00%  
2010 (2.19%)  (0.49%)  5.87%   2.24%   (9.69%)  (0.83%)  5.21%   (4.68%)  10.30%   7.00%   (2.02%)  3.68%  


Mr. McDuff's picks are not passively available but follow the links for some ideas.
Here's more.

HUGE Caveat:
...Interestingly enough, Randolph McDuff used to be referred to as Randy McDuff. This wouldn't seem to be a big deal, but comments on in response to this article showed that a simple Google search under "Randy McDuff" would have brought up a number of investigations and complaints against him during his days as a stockbroker. In the article it was said that Randolph McDuff retired in 2000 to manage his own money, in the investigations it was alleged that he had a difficult time dealing with stress and was unable to properly carry out his functions while allegedly steering clients to inappropriate investments. For more information on these investigations, visit this settlement agreement for BMO Nesbitt Burns and this National Post article....MORE

See also:
Here, McDuff is named in an investigation into 11m worth of fraud. []

Here, the company settles. MSC publishes some details of McDuff's behaviour. []

Here's an opinion by the national post. []