"Jackass Investing: Don't do it, profit from it" has worked better than the original title ("Exploiting the Myths") for veteran West Chester-area investor and Internet entrepeneur Mike Dever's book on stock-picking.
Since adding the Jackass title last year and going on Pimm Fox's Bloomberg TV show this past spring, Dever, who's operated Brandywine Asset Management (not the Philadelphia Brandywine, formerly of the same name, which Legg Mason owns) in a 250-year-old stone milllhouse since the 1980s, says he's boosted Kindle sales to 1,000 a month -- "ahead of John Bogle's book, which gives me pleasure."
(Compare Amazon.com rankings for "mutual fund" books, including Dever's Jackass and the 2010 edition of Bogle's Common Sense on Mutual Funds, here. Vanguard founder Bogle's most recent book, Do Not Count On It!, dates to November 2010.)
I asked if Dever knows his neighbor Bam Margera, known for the Jackass reality-daredevil-TV show and movies. "Never met him, but his Mom lives around the corner," Dever told me. "I was inspired by the Jackass guys in that their whole concept was to take unnecessary risks. They got rewarded for doing that," while investors mostly don't, and that's the point, Dever said.
Dever makes bold claims in his promotional videos: "I make my money by betting against the people who believe in the myths. You can make more money with less risk."
What's he talking about, really? "Imagining," as many investors do, "that there's a magic 'risk premium' for owning stocks doesn't do you any good determining if you should be long or short," Dever told me. Reviewing the last couple of decades of stock prices, "there are two dominant return drivers: earnings growth; and the premiums people are willing to pay" which vary over time. So "the price-to-earnings ratio is determined by the enthusiasm people have for owning stocks, or not. For example, there are periods when GE earnings rose -- and the stock dropped."
So you have to balance corporate fundamentals -- and behavioral finance? "A big chunk of it," Dever agreed. Look at where you're headed, look at how you're most likely to get there, and, at any given time, the best solution might not be to own stocks, Dever concluded.
In his book Dever cites a comparison of Eagles and Giants fans in which each group overwhlemingly believed their team would win. He compared this to a review of pro investors, which, in the US, Europe and Canada, each "invest in their home markets." He concludes that "institutional investors make the same emotional decisions" as sports fans. "If they were rational, they would have similar-looking portfolios. They would be picking the same stocks."
I met Dever in the 1990s when he ran a commodities-trading shop, in the creektop former mill and restaurant in Thornbury. The site was beautifully converted to a trading floor and offices by Dever's architect brother, Tom. His venture-development firm built Spree.com, an early e-commerce site, and later sold InterenetSeer.com Corp. for a figure in "the high single million dollar range" to Landmark Communications in 2007. After raising $10 million from James River Capital and other investors last year, Dever is back in the futures business, claiming 7% returns and $7 million in additional capital since inception.
Why get back in now? "I like markets! The behavior, the trading. The entrepreneurial edge."