Needham Funds' Commentary by John Barr

The 2013 Nobel Prize in Economics was awarded to Eugene F. Fama, Lars Peter Hansen and Robert J. Shiller.  The work of Dr. Fama and Dr. Shiller is contradictory.  Dr. Fama, author of the efficient market theory, said in a 2010 New Yorker interview, "I don't even know what a bubble means. These words have become popular. I don't think they have any meaning."   Dr. Shiller is a critic of Fama and the efficient market theory.  His work has centered on irrational 

Cliff Asness, AQR

and inefficient markets.  The Nobel Committee justified the prizes by saying that markets are influenced by a combination of rational efficiency and irrationality.

While at the University of Chicago, Cliff Asness was "Eugene Fama's student and teaching assistant for two years (so he still feels guilty when trying to beat the market)."  AQR states in their profile that "To beat markets that are nearly efficient, we believe investors must apply a disciplined, thoughtful and economically intuitive approach that creates value at every stage of the investment process. AQR believes that a fundamentally-driven, systematic process is an essential tool ..." AQR has an asset management philosophy combining fundamental and quantitative analysis.

Jeffrey Gundlach, DoubleLine Capital

Jeffrey Gundlach was the long-time Chief Investment Officer and head of fixed income for TCW.  In 2011, he launched DoubleLine Capital.  Gundlach is a widely honored fixed-income manager.

On March 11, Gundlach gave a webcast with the same title as his Grant's presentation.  He is concerned about slowing growth in China and believes U.S. equities could face a down year in 2014.  He sees 10-year U.S. government bond yields hitting 2.5% from the current 2.7% and potentially lower given a 30% chance of geopolitical troubles.   He is, after all, a bond guy.

Dr. Joseph Lawler, Merus Capital Management

Dr. Lawler is a Co-Founder of Merus Capital Management, where he focuses on biotech investments.

He is on the advisory board of CLINiiLabs, which is a specialty contract-research organization.  His research at Johns Hopkins University School of Medicine was titled, "DNA-Based Computers."

Independent of Dr. Lawler, Grant's has been skeptical of biotech valuations.  On December 13, 2013, Grant's Interest Rate Observer wrote, "Just say no" about the flurry of investor interest in biotech stocks.  

Marty Fridson is CEO of financial research firm Fridson Vision. He has had a storied career as a fixed income/ high-yield analyst. He has a Fair Value Model, which considers default rates, macroeconomic variables, credit availability and the 5-year Treasury yield, which shows high-yield bonds overvalued.

Martin Fridson, Fridson Vision

Fridson is the author of several books:  

Unwarranted Intrusions, The case against government intervention in the marketplace (2006);   

Financial Statement Analysis, A Practioner's Guide, Fourth Edition with NYU Professor Fernando Alvarez (2011).  This book provides a framework for analyzing financial statements, a great read for individual or institutional investors.

How to Be a Billionaire (1999). Called "A textbook for the really ambitious" by Luke Johnson of The Sunday Telegraph, this book profiles 14 billionaires.

It Was a Very Good Year (1998) is a history of the 10 best years in the market starting with 1908, 1915, 1927, 1928, 1932, 1935, 1954, 1958, 1975 and 1996. And finally, Investment Illusions (1996) tells fifty tales of fools and their money.

I hope that one of Fridson's books is included in the Grant's book goody bag.

Francis Daniels, Africa Opportunity Fund

Francis Daniels was raised and educated in Ghana and earned two masters degrees in law from NYU. He is a self-taught value investor based in Johannesburg managing the Africa Opportunity Fund, a closed-end fund trading on the AIM of the London Stock Exchange. I heard Francis present at Grant's Fall 2010 Conference. He is a compelling speaker and makes a strong case for opportunities in Africa.

As of December 31, his largest holdings were Enterprise Group Ltd., a Ghana-based insurance company, Sonatel, dominant Sengalese mobile carrier and Shoprite Holdings Ltd., the largest South African food retailer also operating in 15 other countries.

Jim's new book is Lessons from the Recovery of 1921, which will be released November 11, 2014, and is available for pre-order.

In 1920, unemployment was 12% and GNP was down 17%. President Harding did not respond with fiscal stimulus and the Federal Reserve was holding to its original mandate of furnishing an elastic currency, to afford means of discounting commercial paper and to establish a more effective supervision of banking in the United States, and for other purposes.