4th Quarter 2015 Commentary

Conference Call Replay

Why does one invest in an index? Surely one goal is diversified exposure to the market. It might come as a surprise, then, that without the 10 top contributors, the S&P 500’s return in 2015 would have been negative instead of positive. Those 10 stocks, out of the 500, which together amount to a 10% weight in the Index, had an average return (weighted by index position size) of 44%. What does that mean for Horizon Kinetics? Well, those stocks are not found in our strategies, as they trade at extremely high valuations. Meanwhile, the ETF providers are facing fee compression, which is forcing them to market new, differentiated, higher fee products. While the ETF providers move on to new products, we continue to position our strategies for the long-term.

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3rd Quarter 2015 Commentary

Conference Call Replay

After years of writing about the flow of assets out of actively managed funds and into index funds, there are signs that the inevitable reversal may be near. This quarter witnessed the highest ETF trading volume on record, and the pricing anomalies resulting from flows into index products, both in equity and in fixed income ETFs, are ever more numerous and obvious. How else can one explain that, for several years, a biotechnology ETF had a beta well below that of the S&P 500, or that the Republic of Lebanon’s bonds trade at lower yields than bonds issued by Wendy’s?

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2nd Quarter 2015 Commentary

This quarter, we return to our previous inflammatory statement that the standard macroeconomic variables considered critical to the portfolio management process – GDP growth expectations, interest rates, etc. – probably detract from performance more than they help. Also, why, even if we gave you today’s World Bank results for the last decade of GDP growth for all the major emerging market nations, as well as for the U.S., – but gave them to you 10 years ago, a private crystal ball –and gave you the pick of which emerging markets ETFs to buy, you would still probably have made the wrong decision.

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1st Quarter 2015 Commentary

This quarter, we question what it means to take a long term view, discuss the holding periods for some of the Core Value strategy’s holdings, and compare valuation characteristics, both descriptive and predictive, for selected Horizon Kinetics holdings as compared to well-known major index constituents.

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4th Quarter 2014 Commentary

This quarter’s commentary discusses the anomalies we observe in the current market, and the risks we see for investors following the current prevailing trends. In particular, we discuss the continued and growing prevalence of indexation, and the risks to sectors such as real estate investment trusts, which have been sought out for their high dividends in a low interest rate environment. Finally, on the occasion of the new year, profiles of the larger holdings in a number of our strategies are available on our website.

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3rd Quarter 2014 Commentary

This quarter, we continue to examine the fallacies embedded in some widely held assumptions regarding asset allocation. We discuss the surprising correlations among what one might assume are unrelated asset classes and the impact of indexation on stock prices, factors impacting the utilities sector, and the benefit of idiosyncratic, diversifying securities. In addition, we review a new position in the Core Value strategy: Royal Gold, Inc.

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2nd Quarter 2014 Commentary

Understanding the basic presumptions of asset allocation can hardly be more critical, since we all invest based on these foundational assumptions. This quarter, we examine the historical returns from investing in private equity, revisit the topic of slowing revenue expansion at the largest companies, identify some common attributes of companies that do not appear to be suffering from a lack of growth opportunities, and discuss the potential diversification and inflation hedge benefits of land.

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1st Quarter 2014 Commentary

This quarter, we question some widely held views on investing, focusing on the nearly universally accepted assumption that emerging markets investing provides higher returns than investing in the developed markets. In addition, we review two positions in the Core Value strategy: The Wendy’s Company and Platform Specialty Products Corp.

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4th Quarter 2013 Commentary

As we enter the 20th year since the founding of Horizon Kinetics, we take a look back at recent commentary themes, revisit the sway of the media on investment decisions, and discuss selected current positions.

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3rd Quarter 2013 Commentary

This quarter, we review the important and often surprising ways in which indexation is impacting security valuations, risk, and returns, and point out the merits of the antithesis of indexation: active management and individual security selection.

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2nd Quarter 2013 Commentary

While the S&P 500 Index level has appreciated significantly over the past year, revenues at the 20 largest constituents of the Index have increased only modestly. This quarter’s commentary considers the impact of indexation methodology on the representation of entrepreneurial companies that are likely to generate expanding revenues, many of which have significant insider ownership, by looking at the historical insider holdings and performance of two famous owner-operators: Wal-Mart and Microsoft.

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1st Quarter 2013 Commentary

This quarter’s commentary addresses some tax reduction techniques utilized by owner-operators, continues our review of owner-operator actions, and discusses master limited partnerships as part of our series on the challenges faced by investors seeking yield in the current low-interest rate environment.

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4th Quarter 2012 Commentary

This quarter, we examine the pitfalls of using standard valuation metrics as a substitute for thorough analysis. We consider a different valuation metric: management actions, which we believe is more predictive of future performance than most standard metrics.

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3rd Quarter 2012 Commentary

Following strong performance by several of our larger holdings, we take this opportunity to highlight some of the companies that contributed little to performance for the year. We also address the many challenges facing equity investors, including the prevailing low interest rate environment.

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2nd Quarter 2012 Commentary

We review the current bond market environment and discuss the implications of an extended low-interest rate environment. We also offer a discussion of the predictive qualitative and quantitative attributes we consider in assessing investment opportunities.

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