I'm not a believer in "great stocks" I guess; I'm not adverse to buying risk. I'm vaguely interested in value stocks since there's some research into that indicating that they have anomolously higher returns, but I'm not stuck on that either. My primary goal is to gain exposure to as many different asset classes as I can, and in this respect shareowner falls down--their selection method kicks out several important asset classes.
CSA's definition of a great stock is one that has smooth earnings and eps growth over an extended period of time - 10 years. If one is a stock picker, ISTM that's not a bad place to start. It's arguably preferable to a stock that has erratic earnings and eps growth over an extended period of time.
CSA doesn't fall down on asset class diversification. It simply isn't part of their specific orientation - stock picking. They don't reject asset class diversification. They simply don't address it. Their selection method doesn't kick out several important asset classes; it's a stock picking method not an asset class approach.
As an indexer, I can understand why you'd "care rather less for their stock selection methods"; you'd care rather less for any stock selection methods. However, to specifically focus on their stock selection method suggests that you should be able to identify its short comings.
CSA doesn't specifically advocate growth or value. They advocate buying great stocks, as defined above, when they become cheap and they provide a simple methodolgy that allows the investor to define cheap by assigning a PE and a future growth rate.
By their definition of a great stock, one looks at stocks like JNJ
, and TD
Are they value or growth? I don't know unless I want to apply some of the mechanical rules. Can they be identified as cheap, fairly value, or expensive? Definitely. Are they of similar risks? Definitely not. Should that affect the assessment of value? Yes.
If one is going to reject the CSA (and the NAIC) approach to stock picking, I challenge anyone to find a better approach. "To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What's needed is a sound framework for making decisions and the ability to keep emotions from corroding that framework." This is the second paragraph to Warren Buffet's preface to The Intelligent Investor: The Definitive Book On Value Investing, Revised Edition
. The CSA/NAIC approach is that solid framework and the analysis tool they sell (you can execute in a spreadsheet) goes a long, long way to dealing with the emotion problem.