mcliu

If your upside is large, like 20x, a 1% position can generate significant returns.

I guess that makes sense since the loyal customers obviously have higher marginal utility through their subscription.

Isn't Company A a no-brainer given the much higher ROE?

Poker

If you're an American and you've invested most of your assets in the U.S. any currency movement should have little impact on you unless the majority of your consumption is imported, so really, no currency diversification is needed in that case. However, say you're an American and you have most of your portfolio invested in an international portfolio, to take advantage of the growth available in those countries, you should probably hedge the currency, no? So, assuming you do need to hedge, what would you do?

I was wondering the same thing and noticed that there was no reply. Just wanted to bump this thread. For example, I would like to invest in European/Japanese businesses with profits denominated in their respective currencies, but I'm worried about currency devaluation in the future. What's the best/cheapest way for the retail investor to hedge their currency exposure?

How do you have time to track operating performance at all these companies?

When you say volatility, are you talking about price volatility, or cash flow (or value) volatility? If you're referring to historical price volatility as the risk of a stock, I would disagree unless the price perfectly reflects the value of the business.

Does Morningstar have anything equivalent to an "initiating coverage" report with very comprehensive information about the businesses? Most of the Morningstar reports that I've seen seem to be summarized notes on the company without any detailed information.

How do you tell if it's a structural change vs. a cyclical change? Can one not argue that telecoms and defense is going through structural changes as well?

Well society seem to value credentials over knowledge. From a strictly knowledge perspective, there's really no need to pay over 5 figures a year to learn in a classroom, when information is broadly available over the internet. Most professors (there are some very good ones that enhance your understanding, but those are few are far in between) merely regurgitate information anyways.

My university experience has been going to the first class, getting a course syllabus, and then spending the rest of the course at home reading textbooks and going to exams once in a while. Classes have added minimal value. In this day and age, if you really want to learn, all the resources are easily available online/offline. Wikipedia should save the day. The only thing missing, as most of you mentioned, is the willingness to learn.

Shares have been up 90% YTD. Is this a sign? Company seems to have ratified a new shareholders' rights plan lately.

PetHealth Inc

Inspiring. +1

That's an interesting question. I would like to see some data for that as well.. Or maybe we're just in unprecedented territory..

So you're saying large caps are overvalued and are dragging down the average yield? Not sure I buy that..

How does it work when yields are high on a company by company level, but when you average them, it's low in aggregate?

Is there an archived version of this board? Would be interesting to see what topics people were debating about in 2006/2007. :)

Anyone have any insights on how community banks compete with the large national banks? You would think the large banks like, ex. WFC, have a significant advantage given the cheaper cost of funding, large network and broader array of products, etc..?

I think ap1234 meant that, a lot of these bonds were marked on the books at above-par since yield would likely have dropped below the coupon rates of the bonds. (I think that's the case in IFRS where you mark most securities to fair value, right?) As these bonds mature, FFH would be receiving par for the bonds and taking an accounting loss. ex. Buy bonds at $50, bonds get marked up to $120 (+$70), bonds mature at $100 (-$20).

It's probably better to look at these hedges within the context of their insurance business, rather than just as a standalone investment portfolio. Rather than just value increases, these hedges can add significant amounts of value to the insurance business should the hedged events occur.

That's not a fair comparison since the management team cannot control the price that investors pay for the business. If you bought it in 1997 at an overvalued 5x book, when you should have only paid 1.5x book, and you lost money, that would be the investor's own fault. That has nothing to do with the performance of the business. The underlying intrinsic value of the business has increased 4.3x since then.

You typically use an EV/EBITDA multiple to compare valuations across companies since it adjusts for the differences in the capital structure. That way you're comparing the valuation on an asset level instead of just on the equity.

The shareholder that sells when a company buys back shares at above intrinsic value is better off since in most jurisdictions capital gains tax is less than income/dividend tax. (Not in all cases, for example, in Canada, "eligible" dividend tax rates are lower than capital gains tax rates for certain tax brackets.) However, the value destruction applies to the shareholder's that are not selling to the company. There's a trade-off point where, at a certain amount above intrinsic value, it may be still accretive to the shareholder on an after-tax basis, but above that point, it would not be. Time value also plays a role especially if it's a long-term holding.