Pettit Funds

Ms. Singletary has a column on personal finance in the WASHINGTON POST that is reprinted on Sundays in our local OMAHA WORLD HERALD. She is also a featured contributor to NPR Radio and, of course, has her own website.

And she’s driving me crazy!

Matter of fact, I just had an extended discussion at Friday lunch about her and how her last week’s column encouraging us all to hurry and pay off our mortgages was just dead wrong. (Full disclosure: I don’t have a nickel of equity in my house, and likely never will. I’ll take those 6% fully-deductible loans all day long and put them into the stock market, which historically returns 10% or more per annum–23% per annum for me the last 5 1/2 years, even taking into account the loss this last year. Further full disclosure: My parents and both of my siblings have paid off their mortgages early and are very pleased with themselves, despite my futile ranting about it. But they are all drooling mouth-breathers when it comes to finance, so…)

Nevertheless, I usually read Singletary’s column every Sunday morning just to get my adrenaline going–probably for the same reason I always seem to read the “Love is…” panel on the comics page, which never fails to make me want to go out and strangle someone (perhaps the cartoonist who draws it).

Anyway, today she is talking about getting those school loans paid off early, or not even taking them out in the first place! But my position is that school loans are the second best kind of debt (if you must have debt) after mortgages. Take ‘em on, kids! (My own kids will vouch that I have always told them to get as much school debt as they can, meanwhile putting any extra funds they thus have into Roth IRAs). Ms. Singletary would faint at that advice.

In this morning’s column, a reader who has $25,000 in savings asks if he should cover the up-coming $75,000 graduate school bill entirely with loans and hold on to the savings. (Yes! Yes! I want to scream). Her advice: “I recommend you work awhile and save up the money to go to grad school.” This is idiocy to the point of evil. How long will it take to save up what Singletary thinks is an appropriate amount–especially at pre-grad-school rates of pay? My friend: Go to school, get the loans, and pay them off on easy monthly terms at your higher rate of pay. Wait too long to go to grad school and you just might end up not going. Things come up: marriage, babies, career challenges, health issues…

Anticipating some readers’ outcry: Yes, I understand that some people are drowning in school debt and don’t have suitable jobs yet. Waah, waah! So do you plan your life around the fear of the possibility of failure? If so, maybe college or grad school isn’t for you anyway. I also understand that many people just feel so very, very snuggly having that mortgage or school debt finally paid off.

Fine, and I feel snuggly having my big mortgage, but also having, well, quite a comfortable bit of money in the market that allowed me to retire a decade early. And a nice education that I borrowed for back when I was teaching school for $7500 per year (early 70s), and that otherwise would have taken quite a number of years to have “saved up” for.

Now, Ms. Singletary does have an audience–the financially inept, those that are unable to manage their money and manage their debt. They don’t get the education, or if they do they never learn how to manage their credit cards and other consumer debt. But those folks are losers. They are going to have problems whether they pay off their school and mortgage debt early or not.

For my readers, the advice is: Feel free to borrow if you can get a better “return” (investment earnings, education) elsewhere. Manage your debt wisely. Get rich.

If I didn’t still have some garbage holdings that I need to replace, I might have sat out a turn and not even made a pick.

Nothing very exciting showed up on my screen, but I am going to take a position in Centene Corporation (CNC), a health insurance company.

Like the rest of you, I’m really getting anxious for the market to start heading upward again. I’ve been taking a beating ever since I retired last October. That was really bad timing for someone who was, is, and always will be 100% invested in stocks.

Nevertheless, I still believe in this quote (which, I think, comes from John Bogle) as to what to do when the market goes down from time to time–as it always has and always will: “Don’t just do something; stand there!”

Not quite sure how I qualified this time, but the new Top Ten list at Marketocracy just came out and I am on it again. (Hanging on by my fingernails).

I had my worst year ever in the market (although I’ve still outperformed the S&P 500), and maybe I’m getting some brownie points for a late surge I’ve had after rebalancing and getting rid of some truly atrocious picks I have made during this last year. (A process that involved sitting at my screen weeping as I clicked “Sell” time after time…)

If you want to see the performance for my m10 fund–now with a 5 1/2 year track record–you can see it here (along with the alarming dip over this last year!

Good Luck and Happy Investing!

I have got to get a better press agent.

Fellow m-10er Randy McDuff–whom I met and did a little carpooling with last October when we both went to our little Marketocracy retreat in San Mateo–has 2 full pages (and a blurb on the cover!) in this week’s FORBES Magazine. I am green with envy–not just for the press he’s getting, but for the incredible returns he has been getting in the market.

Rush out and buy the magazine, but in the meantime the article reads as follows:

Randolph McDuff may be the best stock picker the world has never heard of

“Discipline” and “patience” are probably the two most valuable words in value investing. It stands to reason, then, that few places would serve as better incubators for a value investor than The Pas, in Manitoba. Close to polar bear country, where Hudson Bay winds chill the air to 40 degrees below zero and the wait for spring lasts eight months, The Pas is the hometown of Randolph McDuff, a stock picker with an astounding record.

Since McDuff began running his RMG ValueCatalyst small-company fund eight years ago, he has earned a compound annual return of 36.4%. Not a single diversified stock fund in Lipper Analytical’s universe of 1,555 mutual funds can match that. Ken Heebner’s CGM Focus Fund comes closest at 32.2% a year over the same period. McDuff’s RMG Value Oriented Growth, which buys large companies like Bayer (nyse: BAY - news - people ) and Fresenius Medical, comes in third at 25.5%. Warren Buffett’s Berkshire Hathaway (nyse: BRK - news - people ) has returned a compound annual 11% over that period; the s&p 500, 1.1% (including dividends).

What’s McDuff’s secret? “The [securities] industry rewards analysts for boring, homogenous work and penalizes those who provide truly insightful views,” he says. “I typically own companies the industry doesn’t cover, covers poorly or covers with largely plagiarized reports.”

For anyone who likes McDuff’s perspective, and track record, the bad news is that you can’t hitch a ride directly on RMG ValueCatalyst because it’s a mutual fund on paper only. McDuff set up the simulation on the investing Web site Marketocracy.com, where his results are monitored and he is ranked number one among 70,000 managers. If you want to play along and have at least $50,000 to invest, Marketocracy Capital Management will mimic McDuff’s portfolio for a fee of 1.9% of assets a year.

Now living in Winnipeg with his wife, Bridget, McDuff picks stocks with a desktop computer and online brokerage account–plus the heavy research he learned to do growing up. “Because it’s so damn cold in The Pas, there was nothing to do but read,” says McDuff, 43. “I’d spend hours at the library reading financial periodicals.”

McDuff was always drawn more to the challenge of investing than to the trappings of high finance. After graduating from the University of Manitoba with an economics degree in 1986, he spent 14 years as a stockbroker with Bank of Montreal (nyse: BMO - news - people )’s BMO Nesbitt Burns. By 2000 he’d saved $2 million and decided it was enough. He quit his job at age 37 to try managing money–his own and the virtual kind.

“While my colleagues were living the high life, I was saving,” McDuff says, “still driving my 1991 Toyota (nyse: TM - news - people ) 4Runner and living in my $150,000 house.” [Rest of article]

Still doing a lot of house-cleaning and weeding out the losers I’ve picked over this last year.

That means I’ve got not one but three new selections to replace the clinkers I’ve picked here before.

Firstly, I’ll be buying AmeriGas Partners, LP (APU)–a propane retailer.

I’ll also be buying one of my almost-selected from the last time around: LSB Industries (LXU)–makers of heat pumps and chemicals.

Lastly, I’ll be taking a position in Brasil Telecom Participacoes S.A (BRP)–a Brazilian telecom company.

Good Luck and Happy Investing!