Features

A list of frequently asked questions (FAQs) from members of The Prudent Speculator community, as well as answers from our staff.

FAQs


Should I buy stocks held in one of the newsletter portfolios or only buy stocks trading below the published buy limit?

We cannot provide specific investment advice, and we encourage our readers to do their own homework or consult with their financial advisor. We understand that it can be a bit confusing, but subscribers use our publication in different ways. Some want an actual portfolio to follow, others want to build their own portfolios by picking and choosing from our Target Price list and/or the stocks we hold in one of the newsletter portfolios, and there are those who simply want one or two stocks to buy at a time. We do our best to provide a quality experience to all, but the important thing to remember is that the goal of The Prudent Speculator is to buy and seek to harvest a broadly diversified portfolio of undervalued stocks. As long as we are willing to hold a stock in a newsletter portfolio, we have to be comfortable with a new reader adding it to his or her portfolio.

How do I find out about any changes made to the portfolios?

We announce new purchases in the newsletter and/or on our electronic Market Commentaries, while we publish any sales via our electronic Sales Alert notifications. Market Commentaries and Sales Alerts are e-mailed to subscribers and are made available on our Web site, www.theprudentspeculator.com.

How do you find the stocks that you purchase and recommend for your portfolios?

We actively follow more than 200 companies, constantly updating our analyses as corporate fundamentals, industry trends and other relevant data change. We utilize Bloomberg as our primary data provider, which allows us to regularly screen a 3000-stock universe for new positions that meet our undervalued criteria.

What is your valuation methodology?

Given our affection for Value-oriented investing, it should come as no surprise that the screens we construct to search for new ideas, as well as the analytics that we run each day to evaluate our existing holdings, center on classic metrics such as Price to Sales, EV to EBITDA, Price to Tangible Book Value, Price to Earnings per Share and Dividend Yield that historically have proved strong indicators of future investment performance. We endeavor to determine a quantitative estimate of the future value of a stock, five years from now—our Target Price. We then determine a buy level that has an acceptable margin of safety given the quantitative and qualitative review of the company. All else equal, we are comfortable buying a dividend paying stock at a higher level because the yield will add to the capital appreciation in order to achieve the desired total return.

What is your sell discipline?

We part with stocks for a variety of reasons: 1. Meets or exceeds its Target Price. 2. Our research finds a candidate with more attractive risk/reward attributes. 3. The stock’s evolved risk/reward profile fails to justify continued ownership. 4. The stock maintains trading characteristics (e.g. sustained or increasingly weak liquidity) not suitable for continued ownership.

How should I combine recommendations in The Prudent Speculator with my other holdings?

We cannot provide specific investment advice, and we encourage our readers to do their own homework or contact us to discuss our financial planning and wealth management options. For more information, please email pedwards@kovitz.com

Do you rebalance your portfolios?

As we are equity investors, we do not rebalance our portfolios into other asset classes. That said, holdings are always under review to ensure we are comfortable with the weighting in our portfolios. If you had $40,000, would you put $1,000 in each stock? That is up to you. Remember, each portfolio typically holds 80+ stocks, and subscriber experience will vary, depending on which of the stocks he/she chooses to invest in his/her own portfolio.

Are all recommended stocks in the 4 portfolios?

While not every stock on the recommended list will be in all 4 portfolios, they will reside in at least one. Remember, our newsletter portfolios are constructed with the same methodology. Yes, there will be some differences in the holdings in each, but the same investment philosophy – buying a broadly diversified basket of undervalued stocks – is utilized for each portfolio.

Why do we have the hypothetical portfolios?

As our real-money portfolios have had significant cash flows over the years, we maintain our hypothetical portfolios to illustrate how various investments might have performed with a fixed amount of money, making no deposits or withdrawals. Each portfolio is managed using our core Prudent Speculator investment philosophy. The size and the inception date of all four portfolios varies, which has resulted in differences in stock selections, while the timing and amount of cash flows has also influenced the two real-money accounts. As a reminder, the activity in the two hypothetical portfolios does not represent actual trading, and does not reflect the impact that economic or market factors would have on our decision-making, if we were indeed making decisions according to The Prudent Speculator strategy.

What if a stock has reached its target price but I haven’t seen a sales alert?

Our Target Prices are simply a guide and not the gospel, while they are under constant scrutiny and subject to change, so we advise those who want to do as we do to await an official Sales Alert before parting with any of our recommendations.

For your Portfolio Gains/Losses Reports, are proceeds after commissions? Do proceeds include income from dividends?

TPS and Buckingham Portfolio are real-money portfolios and, as such, commissions, interest and dividends are included. Our hypothetical portfolios also incorporate income. Of course, a Gain/Loss Report shows only purchase and sale price, and as such does not reflect dividends.

DISCLAIMER
Nothing presented herein is, or is intended to constitute, specific investment advice or marketing material. Information provided reflects the views of Kovitz Investment Group Partners, LLC (Kovitz) as of a particular time. Such views are subject to change at any point and Kovitz shall not be obligated to provide notice of any change. No guarantee of investment performance is being provided and no inference to the contrary should be made. There is a risk of loss from an investment in securities. Past performance is not a guarantee of future performance. For compliance and regulatory purposes, the staff at Kovitz can only answer questions from TPS subscribers that are general in nature. Kovitz does not provide individually tailored investment advice to those who are solely TPS subscribers. For those interested in obtaining individual management services in accordance with our approach, please contact Kovitz. Kovitz is registered with the Securities and Exchange Commission, editor of The Prudent Speculator newsletter and weekly Market Commentary (TPS: ISSN 0743-0809) and serves as investment advisor to individually managed client accounts and certain mutual funds. Investing involves risk. Registration of an investment adviser does not imply any certain level of skill or training. Form ADV and other disclosure documents are available upon request or at Kovitz.com Please contact Phil Edwards (949.540.7307 or pedwards@kovitz.com) for additional information. The Prudent Speculator, A Kovitz Publication 20 Enterprise, Suite 305 Aliso Viejo, California 92656 P: 800.258.7786

Recent Features

Forbes

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Fundamental Principles – NVDA And Other A.I. Stocks

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There are many ways to play A.I. trends, some of which are less expensive than others. At The Prudent Speculator, we like our Value alternatives to Nvidia (NVDA).

Roaring Kitty Not The Only One Who Can Send Stock Prices Gyrating

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The GameStop saga opened another chapter this week as Keith Gill (aka Roaring Kitty) came out of hiding to disclose a $116 million position in the Meme stock.

Kiplinger: Yields to Pounce On

Kiplinger: Yields to Pounce On

John Buckingham was featured in Kiplinger’s Yields to Pounce On article.   Andrew Tanzer writes, “We found enticing yields in nine categories, ranging from 3% to 12%, depending on risk.”        

Mentions from members of the press

Phil Van Doorn
Philip Van Doorn,
In Market Watch
2020

“The Prudent Speculator is published by Kovitz Investment Group of Chicago and remains at the top of the list for 30-year returns among newsletters tracked by the Hulbert Financial Digest. The TPS portfolio’s average annualized 30-year return is 14.5% through June 30, compared with 9.9% for the S&P 500, with dividends reinvested monthly, according to Hulbert.”

Jane Wollman Rusoff
Jane Wollman Russoff,
in Think Advisor
2020

“A long-time value investor whose largest holdings are in technology, John Buckingham is clearly not your typical value portfolio manager. That shows up… in a striking record of picking winning equities for more than 30 years. Principal and portfolio manager of Chicago-based Kovitz, he has been managing the Al Frank Fund (VALUX) from its inception in 1998. Since then, through Jan. 7, 2022, it has realized an annualized return of 10.79%, compared with 7.9% for the Russell 3000 Value Index and 8.75% for the S&P 500.”

Mark Hulbert
Mark Hulbert, Finance Analyst, Journalist & Author, in Barrons
2017

“It pays to have nerves of steel. That’s the most important lesson to emerge from the Prudent Speculator’s position as one of this country’s most successful investment newsletters of the past four decades.

The Prudent Speculator’s model portfolios on average produced a 16,937% gain, versus 4,952% for buying and holding the broad stock market. That’s equivalent to the difference between 15.1% and 11.3%, annualized.”