Hielko

Nice job on the scraper, and too be honest I'm not surprised that the best ideas have few replies. The stocks with the most replies are almost always large cap names such as Apple, Microsoft: hard to have a significant edge in those names. They get a lot of replies because everybody knows those companies.

Creating an underperforming portfolio is extremely easy. Just go long everything with a double digit borrow rate.

I'd like to make a distinction between lazy smart people and industrious smart people instead. To be extremely succesful (at least in business, games) I think you need both. Kurt von Hammerstein (Google the name) prefers clever and lazy:

In theory yes, but you would need to take a look at their return assumptions and discount rates to see if you agree with the size of the accounting liability.

Guess I'm connected to the wrong people on twitter, because it's a new name for me, but interesting story :)

Right.... only an American citizen could write the above Only demonstrates that the current rules are stupid and slowing down economic development in the USA. Using the current rules as an argument against reform isn't good logic imo.

They get paid after the work is done (see note 11.4 in annual report), and I think you correctly identify the biggest risk that Conduril has. But they do their work for the government and with a BB- rating Angola isn't too bad. So far they haven't had troubles collecting the reveivables. They actually generated ~22E/share in FCF this year vs a 33E share price. FCF is very erratic though since they are active in big multi-year projects, and it was around zero the previous years.

How could a company have no incentive to mine it if mining and selling the coal is economical? I obviously don't know the specifics of the situation, but hard for me to see how there can be no incentive.

Seems I'm almost the only one that voted no. Not that I'am very diversified (in my mind): ~30% in top 3 and ~60% in top 10 or so.

I'm going to disagree with both of you. ERICOPOLY: If you throw a die in a completely dark room you don't know what side is up, but just one answer is right and someone with perfect knowledge about everything would be able to give you the right number. Investing in a company that is unpredictable can be similar: you don't know what the IV is, you see a possible range of outcomes, but just one of them is going to materialize. But if you want to bet on what side is up on the die you can only treat it as a random number between one and six, and similarly for the company you should consider a full range of possible outcomes of IV. Now someone might feel one pip on one side of the die and shout it around in the dark room, and you can reduce the probability that number one (and six) are up and increase the probability for the other numbers. Did the IV of the die change? It still have the same side up, but the knowledge about the probabilities has changed. And for a company you might also discover that some possible outcomes should be removed from the probability distribution. The value of the bet has changed even though the (unknowable) true underlying value has stayed the same. It's not perception that is changing here, it's knowledge about the IV estimate. Palantir: sure Rimm’s IV is likely dropping. But is it dropping faster than what the market price implies? Is it dropping slower than what the market price implies? I don’t know, and neither does someone who is using a stop loss order. But if you are long something you presumably think that the market is currently wrong about the value of the business, but then when it’s drops the market is suddenly right (or wrong in the other direction)? Doesn’t make sense.

I can only agree with Nate on Conduril: it's currently by far my biggest position (although it's not really a low EV company, enough debt to offset most of the cash).

This assumes you know everything there is to know about the company. While we strive to know as much as we can - that's a strong assumption! I can recall numerous instances where the stock price started marching steadily down before some bad news, then Boom! - gap down 20%. The hard part is discerning whether the "price action" is telling you that you don't know something, or whether the "price action" is wrong, and you should buy more. I can certainly see the justification behind putting in at least a mental stop loss order as risk management. Blithely buying more sometimes works, but information asymetry needs to be in your favor. I'am not saying you need to buy more. Maybe the stock does deserve to trade lower: but selling something because it just went lower is the opposite option, and doesn't make a lot of sense from a fundamental investing perspective*. And risk management is imo also a poor excuse. If you have so much exposure that you need a stop loss you should reduce your exposure right now! Not when it's too late. * As part of a momentum trading strategy I can see the rationale for stop loss orders.

The idea of stop loss orders is imo ridiculous to begin with: why would you want to sell when something just became cheaper?

The fun thing about investing is that in most if not all cases you can't be certain about the uncertainty.

I have no position. No, it was not written in legalese. You are incorrect. Words such as "non-binding" and "subject to completion" are clear on their face. I agree and thought that it was pretty clear as a non native English speaker. No position in the stock either.

Google Rule 10b-18

Terrible idea. You need to play almost the highest stakes available to be able to put 100K to work, and the odds that you are able to play at that level are close to zero.

In graphical form: http://tweakers.net/ext/f/wWrt0zzpY719rQwjxgAoAThw/full.png

Yeah, I fully expect to score the worst on the ethics questions... It's not that finding the most ethical/safest course of action is hard, but often the less ethical option is also allowed.

I don't buy these companies either, but to play devils advocate: shouldn't this be a reason why this group of companies will be underpriced and should be expected to outperform? If there is an asset that no-one likes to own I smell a potential opportunity. Mechanical net-net strategies might outperform because they don't care about this and just buy an ugly cheap stock. Or they might outperform despite this... I agree, but I don't think this mixes well with a mechanical approach: that implies that you have little knowledge on what it's intrinsically worth, and it would be my guess that selling low and holding for a fixed period is a better approach than buying low and selling at some arbitrary value like 1x NCAV because you are not only selling companies that are maybe worth 1x NCAV, but also the successful turnaround that might be worth 10x NCAV after a few years. I don't know if someone has backtested this, but I think the outperformance of mechanical net-net strategies is often the result of a few stocks that produce great returns. Selling them early could be quite bad for the end result.

Good point, and imo a big question is: does great culture create a great business, or does a great business great a great culture? Probably a bit of both, while most people like to attribute all the success to the culture that they created.

Yes, but there is a wide gap between taking historical variance as your risk measure, what I think birdman was implying, or recognizing that risk is determined by a general form of return volatility. I'd say risk is determined by a distribution that is not directly observable ex-ante. Hard to argue with that, but also hard to do anything practical with it.

I read the shipping man last weekend: quick and entertaining story with some nuggets of insight in the industry.

It's certainly a measure of risk, it's hard to argue that volatility is irrelevant, but don't think the body of knowledge suggest that it is the only measure of risk.

Pretty good article imo. People often look at companies that have certain characteristics and are quick to see a connection between those characteristics and the success or failure of the company. More often than not the real explanation is way deeper under the surface.