There’s a fantastic exchange between President Andrew Shepherd and his aide Lewis Rothschild from 1995’s The American President written by Aaron Sorkin:

Lewis Rothschild: “People want leadership…and in the absence of genuine leadership they’ll listen to anyone who steps up to the microphone…They’re so thirsty for it they’ll crawl through the desert toward a mirage and when they discover there’s no water they’ll drink the sand.”

President Shepherd: “People don’t drink the sand because they’re thirsty. They drink the sand because they don’t know the difference.”

Across the investment landscape we’re wont to do the same. We’ll listen to any talking head on CNBC because we’re desperate for someone who “knows” to tell us what to do. We don’t know the difference between “the water and the sand” because it’s been drilled into our heads that performance (or, better yet, performance relative to an index) is the truest and only important measure.

PURE, WEAPONS-GRADE BS!!!

Owning an investment means understanding what you’re buying. You’re buying a process – one that is intelligent, logical, rational, sustainable and repeatable. It’s an unsexy truth that what wins in the end is just plain ol’ boring. Along the way can be a few bumps and in those bumps smart managers can look like poor performers (but we assure you these smart people didn’t just “wake up stupid”) while, similarly, any dope falling ass-backward into a run of luck or being in the right place at the right time can look smart.

Today (as always!) we face uncertainty – Greece, energy prices, interest rates – you name it. We’re thirsty for leadership so we cling to CNBC, we click every link promoting “hot stocks” and we scour performance data. We drink the sand because we don’t know what to do.

Fund data to the rescue! That’s right – in the absence of understanding what truly makes for successful investing we turn to performance. We chase “winners” while selling “losers” without understanding why an investment “won” or “lost.” As a result we end up with lousy results. Then we make excuses.

Exaggeration? No way. History is littered with retail investors who bought high and sold low.

Below is performance data for some of the best and worst performing funds (whether on an absolute or relative basis) from the first half of 2015. Some names are obvious. Some are surprises. There are smart people getting good and bad outcomes just like there are some, well, let’s call them “C students outperforming the A students.”

Here’s what worked:

FUND: T. Rowe Price Health Sciences (+20%)
FUND: Vanguard Health Care (+14%)
FUND: Fidelity Select Health Care (+13%)
SURPRISE: No. (1) Obamacare has made this an attractive sector and (2) shops like T. Rowe Price and Vanguard use a disciplined process.
MESSAGE: Smart people can look good – even better when contrarian bets placed years ago (it’s been 5 years since the passage of Obamacare and the prediction of the death of the health care sector) come to fruition. It’s why looking at short-term performance is a loser’s game.

FUND: Century Small Cap Select (+14%)
SURPRISE: Yes. This expensive and highly-volatile fund has since the turn of the century (delicious pun, eh?) consistently failed to provide adequate return relative to the excessive risk assumed by its owners. For you folks who love to benchmark you’ll want to note this fund has consistently underperformed but for a two year stretch. In particular it badly lagged its peers in 2013 and 2014.
MESSAGE: Dumb people can look good over short periods of time. Still think looking at performance data (and short-term at that) is a good idea?

FUND: CGM Focus (+6%)
SURPRISE: No. Ken Heebner is a fantastic manager. His concentrated portfolios (Buffett-heads will appreciate the “diversification is protection against ignorance” approach) produce excellent long-term results.
MESSAGE: It’s that same concentration that can cause wild, short-term swings. Yet another reason to ignore performance data – particularly over short periods of time.

FUND: Sequoia (+11%)
SURPRISE: Maybe. For the first half of 2015 the fund’s large stake (26% of the fund!) in Valeant Pharmaceuticals (+67% YTD) is the driver.
MESSAGE: A fantastic long-term approach flooded the fund with cash so it is closed to new investors. Putting cash to work takes time.

Here’s what didn’t work:

FUND: Vanguard REIT Index (-6%)
SURPRISE: Instincts say it should be. The fund name contains two of the sweetest words in the investment dictionary, right? How could “Vanguard” and “index” result in a loss of 6%? Has hell frozen over?
MESSAGE: In an expected environment of rising rates sectors such as real estate that are sensitive to financing costs are going to suffer. It can make smart people look stupid.

FUND: Franklin Utilities (-10%)
SURPRISE: No. Utilities are sensitive to interest rates just like real estate.
MESSAGE: This fund from an excellent family uses a sustainable and repeatable process consistently delivering “alpha” while minimizing “beta” (that’s delivering outperformance while minimizing risk for those who want to sound smart) across the utilities landscape.

FUND: Janus Contrarian (-7%)
SURPRISE: Maybe. The fund has been around only a few years. Early performance was lousy. It’s looked better lately. The problem is the high turnover at Janus. A shaky corporate culture doesn’t bode well in the search for firms that follow the “sustainable and repeatable process” approach.
MESSAGE: Betting against the herd for the sake of doing so is as foolish as following the herd.