Jacoby says he uses information from the top financial publications, such as The Wall Street Journal, to aid his decision-making. "We spend a lot of time avoiding losses when things go south," he says. "We look at sensitive bits of information and glean bits of information from news reports, such as when a top executive resigns. Our goal is to perform as well as the market with less risk. We really want to protect on the downside."
David Carter, president of Carter Asset Management in Abilene, Texas, doesn't trust any single resource. "We use [investment tools and reports] as corroborative information. It's like eating a watermelon. You have to spit out the seeds."
Carter, whose company has $150 million in assets under management, primarily invests in mutual funds. So like others, he uses Morningstar's mutual fund information. He has a core list of 20 funds and keeps an eye on another 40. He doesn't just go with four-star and five-star-rated funds. Rather, he invests in funds with stable management and good research.
"We can't overemphasize the importance of knowing the managers, research capabilities and corporate cultures," he says. "We like managers, like Wally Weitz and Chris Davis. Their funds many not be doing well over the short term, but have good long-term track records."
Carter also likes the Standard & Poor's Stock Reports and the Standard & Poor's Outlook newsletter because of the spectrum of data and the commentary. He reads Roger Conrad's Utility Forecaster and Lehman Brothers fixed-income research because he likes the quality of the analysis.
Although Carter uses Morningstar's mutual fund research, he does not like the company's stock research. "Their stock work is poor," he argues. "They are inexperienced and too new to the game to do it well."
He also likes the JayWalk Consensus. This online report aggregates opinions from a variety of sources with different research methodologies. He says JayWalk, unlike brokerage firm sell-side reports, is unbiased. The balanced reporting gives him a perspective on investment strategies, portfolio pitfalls and investment opportunities. The metrics give him access to information on more than 5,000 securities and covers a wide range of market sectors.
Since Carter is an accredited investment fiduciary, he also gets valuable inside information from the Center for Fiduciary Standards, which provides information for pension fund fiduciaries. The center's Fiduciary 360 report offers information about fiduciary grades, manager tenure, portfolio manager turnover and fund performance against benchmarks. It also monitors performance with specific guidelines that Morningstar does not.
The research he has gleaned from this report has led him to avoid several investment companies. "Fidelity has a corporate cultural problem with high portfolio manager turnover," he says. "Janus Funds are not the same since Tom Bailey left the firm. American Century is not the same firm, since James Stowers isn't there. But then you have firms like Thornburg, which have a strong corporate culture, stable management and good research."
Carter is also enamored of the Callan Periodic Tables. These help him explain asset allocation to his clients. The tables list relative asset class performance over the last 20 years. One of them depicts annual returns for eight asset classes, ranked from best to worst. He uses the chart to help clients understand diversification and how asset classes perform in different years. Clients can get a picture of how investing in different asset classes can reduce risk and improve performance.
"I have a copy on my desk, on my colleagues' desks and in our meeting room," Carter says. "We are able to show our clients we need to be in all areas of the market because investment cycles are not predictable."
Unlike other money managers, Richard Ferri, CFA, president of Portfolio Solutions, Troy, Mich., uses his own asset-allocation software and generates his own equity and bond reports using financial data from various sources. Ferri manages $800 million for clients in index mutual funds and exchange-traded funds. He strips out data from Morningstar Principia to help himself make asset-allocation index fund decisions. He also uses data from Standard & Poor's, Lehman Brothers and Dimensional Fund Advisors to generate his own financial analysis reports. He uses correlations and expected rates of return developed in house to make changes in asset-allocation mixes.
"I run internal stuff and don't rely on off-the-shelf programs," he says. "What is the point? I would rather use raw data and come to my own conclusions about investments and asset-allocation decisions."