Update: KLIC and MU make me look like a doofus, round 1 goes to James Montier

MU starting price: $7.90 (on 12/30/10)
MU current price: $11.70
Percentage change: 48.1%

KLIC starting price: $7.46 (on 12/17/10)
KLIC current price: $10.04
Percentage change: 34.58%

In an earlier post, I referenced a James Montier article about how people frequently underperform simple quantitative models through overconfidence and a variety of other mental biases. I’ve been too busy working to actually test that as thoroughly as I’d planned, but this makes for a decent first attempt. Both of these companies had qualitative bugaboos on their financial statements that turned me off despite their sound fundamentals and low valuation but, thinking of Montier’s admonition, I decided to keep an eye on both. Lo and behold, both performed spectacularly over the course of two months. This is way too small a sample size to form any real conclusions yet but it made for an eye-opening first experiment and definitely piqued my interest for testing the “quantitative under-confidence” idea further.

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