Sure there might be but we cannot know them or study them to see if they are generating alpha or not. If no public records to study it's meaningless, and certainly meaningless if you cannot invest with them
I agree with pretty much all your points Larry, but I also do see examples of 'Warren Buffet like investing' occurring in many small businesses not traded. Could small business be a source of 'alpha,' if able to be tapped by markets?
I take my question from observing high margins, but low 'sales price' valuations for many family run businesses I have been close to. I wonder if opportunities exist in this sub-small cap area that could be unlocked by technology change.
It will be interesting if, with a globally networked world, if there becomes a way for investors to tap this under explored frontier of investing, a small local farm, business, or even individual labor rate arbitrage, etc. Emerging websites like Kickstarter and other new business models (10EQS) point to interesting possibilities. You correctly point out that this area is unavailable to 'wall street' type investment managers, but that does not mean it is not possible and it is a substantial part if our economy.
My other inspiration are the micro-loan initiatives in some third world countries. Founded as development efforts, my friend who ran one mentioned that the very poor who get small loans are actually very profitable and good investments on a return basis, if you didn't have the administration overhead. People borrowing $200 for a milk cow, pay back and pay well, especially when their future depends on it. It brings to mind a study I read in 1984 on the psychology of lotteries. In the study, the focus of the buyer was on whether the payment of a winning return was able to change their life in terms of a higher social class. That is why the poor buy scratchers and the wealthier lean towards powerball. It seems small scale business run by highly motivated people can really deliver above average results, if not commoditized by being larger scale.
Anyway, just some random thoughts.
On a side note, I have held Janus Balanced fund for many years in one of my taxable accounts as a conservative part of the account (basically a lazy place to stash extra cash I never bothered with, since no load fees). Now I am reforming towards full indexing. I didn't want to take the capital gains, but I took another look and noticed what I used to think were competitive fees are not what I thought. At its higher expense ratio, would it be advisable to sell even if in a high tax bracket (AMT). How many years are generally needed for the tax hit too be worth switching funds or should I just suck it up and hold, paying my higher fees?
Sorry for the rambling thoughts, but I like to do that sometimes..I realize perhaps my post is a bit infested by thinking about the Enron Corporations overall business strategy. That is another long post, but in summary Enron was trying to create liquidity in markets because they believed in the commoditization of assets over time and that they could speed this up by taking positions and making markets. What they thought they knew how to do was to create that scale, make trading revenue on fees as a market maker, and while at it create trades with alpha the old fashioned way (having insider info by holding assets so they can arbitrate the less price sensitive). What was required was to get scale, so they targeted large markets with large transactions (energy, steel, water, bandwidth). I always thought that another model was to aggregate many smaller transactions to help capital find users. With good, cheap tech (like the Internet) this is possible (bogle heads a prime example). We aggregate ideas very rapidly, creating value. The financial markets, as mature markets, do both. They serve large volumes and large transactions, so alpha shrinks to almost zero. So for me, those seeking alpha need to target new markets outside of traditional equities.