The Combined Power of Macro & Micro

Published on
October 31st, 2019
Duration
38 minutes

The Combined Power of Macro & Micro

Investment Ideas ·
Featuring Sam Burns

Published on: October 31st, 2019 • Duration: 38 minutes

Sam Burns, chief strategist at Mill Street Research, discusses his fluid approach to selecting stocks in his first appearance on "Investment Ideas." Burns' unique process combines traditional bottom-up, fundamental analysis of 6,000 different public companies with top-down, macro analysis to identify optimal equity opportunities. Burns explains which sectors he recommends and why he advises investors position their portfolios overweight in growth and defensives and underweight value equities. Filmed on September 26, 2019 in New York.

Comments

Transcript

  • DH
    Daniel H.
    6 November 2019 @ 04:08
    Sam, thank you for adding the charts to the transcript. I hope you come back often.
  • JF
    Joseph F.
    4 November 2019 @ 05:22
    Excellent.
  • DP
    David P.
    1 November 2019 @ 22:23
    Excellent interview Ed and Sam. Sam gives a very thoughtful description of his process. I really enjoyed it. My only critique is more general. In an environment of passive allocation, central bank perceived omnipotence and algos chasing tweets his whole process seems academic. Effectively about 15 central bankers around the world determine all asset levels. When AAPL adds more in market cap than the total value of about 5 companies (of about 6000 public companies worldwide) in six months on falling sales and earnings, factor modeling still seems really cool...But I wonder to myself what the point is...I suppose fiduciaries at endowments, etc. need to stick to a process. I understand that. But I question whether the process even remotely maps onto the world we live in...
  • KA
    Kevin A.
    1 November 2019 @ 01:49
    Sam, don’t be upset by some of the negative comments. I thought it was a great interview. I appreciated your no-nonsense style.
    • SB
      Sam B. | Contributor
      1 November 2019 @ 11:35
      Thanks Kevin, much appreciated! Sam Burns
    • TE
      Tito E.
      3 November 2019 @ 15:27
      I also thought this was a superb interview Sam. Your framework is very interesting.
    • RS
      R S.
      7 November 2019 @ 02:45
      Awesome to see the interviewee participating here in the comments! Thanks, Sam.
  • JJ
    Jesse J.
    1 November 2019 @ 01:22
    Alright let's get into it. This interview seems to focus around Mr. Burns MAER modeling in the beginning and about half way through switches to why he is seeing his model recommend defensive and growth along with underweight in value. There is a ton of information in this interview and some of it is very dense and complex financial commentary that a seasoned investor would probably understand. I however struggled a bit and had to go back a few times to re-listen and re-read. While Mr. Burns doesn't really get into the heavy specifics of how his model works, it seems he uses it with his clients as double checking system or overall guidance system; not an exact "Do this, buy now/sell now". It is a probability model that gives a probabilistic best choice at the time (monthly). He even points out some shortfalls of his system in that it doesn't pick up current events until it begins to impact data. So a client would need to know that and not use his system specifically to select stocks but more to know a general guideline of allocation. Essentially, it's another tool that a fund manager or stock picker could use to feel more confident about their $ distribution choices. I honestly was very interested in the model and see that it does have value. I appreciate Mr. Harrison pushing Mr. Burns on behalf of RV viewers to get a piece of the action with his question on macro environment from a sector analysis standpoint, what's your weighting? Thanks for that Ed, we appreciate you making someone be as forthcoming as possible. Ty Mr. Burns for responding well and fleshing that viewpoint out. Lastly, I really appreciate Mr. Burns thoughts on the financial sector and it's pressures. Raising capital levels, lower interest rates, and time until this changes. He seems to be a bit more standoff in more volatile, higher beta sectors and cautions a move into defensive companies (lower risk). Overall I get a sense he's uneasy about the market probably more so than many investors. It seems his MAER model is going to get a good workout and be tested real time in an untested environment. I know very little about the model other than what is presented in this interview but I think Mr. Burns has done his homework and I think the model along with a well thought out "if-this-then-that" plan would be valuable for a manager. Ty for the interview guys.
    • SB
      Sam B. | Contributor
      1 November 2019 @ 11:34
      Many thanks for the kind words Jesse, I'm glad you found the interview interesting. We did try to get through a number of topics and couldn't always get into detail on all of them, but I think your description is broadly correct. Hopefully I can do another Real Vision interview in the future and expand further on some of these topics. Thanks, Sam Burns
  • IC
    Ibrahim C.
    1 November 2019 @ 00:50
    Very similar to the Analysis done at Zacks.com. I have not watched the whole interview, but the historical success ratio along with back testing are critical factors to get his thesis validated.
    • SB
      Sam B. | Contributor
      1 November 2019 @ 11:30
      Thanks for the comment Ibrahim. It's certainly true that Zacks also has an earnings estimate based ranking model (among other things), but as I understand it, their ranking model does not incorporate other variables (price momentum, valuation) as MAER does. Also, I believe the Zacks data is US-only, while Mill Street's MAER tool is global, and MAER is aimed at an institutional investor audience. I certainly agree with your comment about testing one's hypothesis: we have done extensive backtesting on the model to validate its usefulness, which we regularly share with clients. Best, Sam Burns
    • IC
      Ibrahim C.
      4 November 2019 @ 12:00
      Thanks Sam for drawing clear lines of distinction between Zacks model and yours. However as a long term Zacks subcriber, I am very well aware of their VGM score, which provides Value, Growth and Momentum scores of each stock. This also gives a clear idea where to invest in the view of your investment priorities. One point is right that their data is US-only. Best, Ibrahim
  • SU
    Shakeel U.
    31 October 2019 @ 22:17
    It would be great if Real Vision interviewed Anton Kreil
    • JG
      Joshua G.
      1 November 2019 @ 07:43
      I would definitely agree. His company also recommends many people to RV, including myself.
  • AB
    AJ B.
    31 October 2019 @ 17:35
    From what I gather the whole model is based on analyst ratings and revisions, and the analysts are mostly sheep, so makes the model worthless.
    • SB
      Sam B. | Contributor
      31 October 2019 @ 22:20
      Thanks for watching and the feedback. I didn't have time to go into great detail on the MAER model in the interview, but to clarify, the MAER stock ranking model is based on a multi-factor combination of earnings estimate revisions, price momentum, and valuation. Analyst ratings (buy/hold/sell) are not used at all. Our work shows that the direction and magnitude of estimate revisions do forecast relative returns on an intermediate-term horizon (whether analysts are sheep or not, their behavior does influence stock prices, and trends in revisions are persistent). We find that using revisions in combination with the other factors improves the performance further. Thanks, Sam Burns
    • JL
      James L.
      2 November 2019 @ 07:17
      Sam, thanks very much for your time. We do appreciate it. Dont mind the neg feedback, not everyone is a sheep here
  • JM
    Jennifer M.
    31 October 2019 @ 14:55
    Sam, thanks for sharing your unique process and approach. Very insightful. Great job on the interview Ed!
  • wj
    wiktor j.
    31 October 2019 @ 14:43
    Japan hmm really? take a look at Japanese banks. Why wasnt he asked this question?
  • CB
    C B.
    31 October 2019 @ 14:41
    Regarding the growth vs value case he makes: it's been know for quite a while that financials are repressed, China's demand for materials is slowing and that the global investment focus has been on US growth. This is discounted in the growth/value spread that is at a multi-decade divergence.
  • TS
    Taranvir S.
    31 October 2019 @ 11:49
    "Garbage in, garbage out"
  • FF
    Farouk F.
    31 October 2019 @ 10:51
    I hate this guys interview style. He talks way too much yet ends up saying absolutely nothing at the same time.
    • dd
      david d.
      31 October 2019 @ 14:16
      had the same feeling
    • tr
      tom r.
      31 October 2019 @ 22:32
      like watching paint dry. Awful
    • JJ
      Jesse J.
      1 November 2019 @ 01:26
      Sometimes I have difficulty following a persons thought pattern when they are answering a question. They bounce around topics, say the wrong word, or don't connect thought patterns fully. RV (ty btw!) transcripts help me tremendously if I'm really trying to understand what someone is trying to get across. Sometimes I just have to read it rather than listen to it. Maybe that would help? I wish you much good luck Farouk.
    • DP
      David P.
      2 November 2019 @ 02:49
      I like his interview style...Very low-key and unpretentious..But I live in flyover country so maybe more my speed...