blainehodder

Bought OGZPY and RSX calls. Crazy dumping on ALSK and GNCMA. Lather, rinse, repeat seems like a reasonable idea.

This is Hussman's biggest mistake in my opinion. The obvious solution is moving your money to markets that offer attractive long term returns. Not to hold cash.

Hard landing, or smooth line? Regardless, I will continue to ignore Chinese macroeconomics when it comes to my stock purchases.

"Shady" is a hard thing to define. Be careful of hindsight bias. Look at the following: 1) Guns 2) For Profit Ed 3) Cigarettes 4) Pharma 5) MLMs 6) Gov. Contractors Notice what these candidates have in common? They are all found on the magic formula due to high returns on cap and being generally out of favour. Be very careful shorting companies with low EV/EBIT, and high ROTC (particularly baskets of them). This could take you into negative academic alpha land. Some might say the big banks are shady... What would have happened had you been short banks recent years? Of course this demonstrates hindsight bias as well, but it is generally agreed upon that cheap + high returns on cap = good performance.

is that you Joe, or do you just like the name/site (fwallstreet)?

The poll asked: "Choose the companies you believe will have the best total return." I don't think anyone honestly thinks cash will have the best return. You would be insane to believe that. Cash might beat the market in general, but it absolutely will not beat the returns of every company on that list. This poll basically asks you to wing it for the best 1 yr returns, not to select a nicely positioned portfolio you think will provide opportunity for the long term. These are pretty different questions.

Anyone done a deep dive into Turkish banks? Quickly glancing at some ratios gives me an impression there could be bargains. Under tangible book for banks with a history of profits.

bahaha. I thought I was the only one who did this!

I'm curious JEast, why AZO? Financials are amazing. Not even a blip in the recession. What do you see in AZO as a short candidate? http://www.gurufocus.com/financials/AZO

http://philosophicaleconomics.wordpress.com/2013/12/23/valuation-and-returns-adventures-in-curve-fitting/ Another great article by @jesse_livermore. Who is this guy anyway?

Pretty much every study on the matter disagrees with your hypothesis. Net net investing still very much works. I agree many net nets are hideous companies with poor management, but the strategy still works. Simple strategies based on valuation almost always outperform the broad market over time, even if they are widely know and followed.

I hate to sound like a macro investor... but the forward P/E argument isn't great. Hussman has demonstrated that simple forward P/Es for the market are not very predicative of returns...not to mention the "normal" historical forward P/E is closer to 12 (including the dot-com bubble). It is important to note the shift in use from trailing to forward P/Es. http://www.hussmanfunds.com/wmc/wmc070820.htm I agree on his assessment of TSLA and the banks though!

What is EBIT/Tev? Earnings Before Interest and Tax/Total Enterprise Value. You could go further up the income statement to EBITDA yield, but I prefer EBIT when running loose screens (uses depreciation as a proxy for capital deterioration, which as we know isn't true). Papers that I have seen seem to show it is roughly a wash on performance between the 2 stats. Enterprise level metrics show superior correlation to results as they normalize for leverage. P/E and for that matter book/market screens give an "unfair advantage" to levered up firms. Finally book screens don't seem to work well on mid-large cap stocks in practice. Return on Capital seems to add some juice, as Greenblatt claims in the Little Book. The Magic formula ranks stocks on a 50/50 factor of ROC and EBIT/EV... but, you should know that Tobias Carlisle contends that the cheapest value decile stocks, ranked by ROC, should outperform the seemingly random 50/50 factor that Greenblatt has chosen. At some point of course, over fitting may be an issue, but I suspect Tobias is closer to the truth, hence my comment on XOM. Perhaps we should move this discussion to another thread. I do think it would be valuable to discuss apples/apples metrics though. I have noticed quite a bit of confusing ratios that cross compare firm, value, and equity level metrics. Each metric can of course be useful, but only as long as you are comparing apples to apples, if you follow what I mean. EDIT: Oops...I realize you may just be looking for the XOM EBIT/ev yield?

Gio, If the market is going nowhere for ten years where should capital flow to? Knowing that capital has to flow somewhere where would you recommend? Much like how not all stocks in the US are expensive, not every country's broad index is expensive.

A BRK takeout seems unlikely precisely because Weschler and his family own for their own accounts. If you want a sign of impending takeout.... Look for them selling out, not buying in. It doesn't make sense that Buffett or Weschler would be seen front running Berk since the Sokol incident. I'm a little surprised Buffett has allowed these positions at all. As it is, don't these positions open up BRK or Ted to lawsuits? A buyout could be seen as a direct transfer of BRK wealth to the Weschlers.

Interesting take on Burlington. I'm not sure I agree about it being a hedge due to the capital intensity. What do you see in it that works as an inflation hedge? Pricing power? Traditional Buffett inflation hedges are closer to sees Sees/KO like businesses. What are your thoughts on BNSF?

Sold some RGR today. I may load it into some SWHC. Unwound some BAC 2015 calls today into this rally and went into the common.

EBIT/Tev (one of the best if not the best predictors of returns in general) had it in the cheapest decile of >10B US equities when Buffett was buying. Add to that the fact that they are the low cost producer, a history of strong capital allocation, a history of strong returns on capital, and a rock solid balance sheet. Bonus points for oil as a bit of an inflation hedge if CPI picks up. That is a recipe for success. Pretty consistent with Wesley Gray/Greenblatt research.

Stumbled on this interesting blog post. What would you bid? http://www.ecommercefuel.com/selling-an-ecommerce-store/

Yes I agree. This does relate back to the dual mandate though ---> Acting as lender of last resort avoids disastrous employment ad monetary stability effects.

Yes but the fact that things are never equal is really really important! In addition, context matters a lot! I doubt that you ever use such a generalized approach when you look at stocks All true. But ask yourself, has the fed been acting more like BRK (almost never issuing stock, only on a rare occasion to make a large accreditive acquisition) or more like some penny stock company run by a scam artist? I'd argue that they've acted as expected. BRK's job is to increase economic earnings power on a per share basis. The fed's job is the dual mandate, and they use CPI (targeted around 2%) and unemployment (targeted at 5%). It is your job to trade accordingly. If you wish to buy gold and ammo, or stocks and housing, or long or short the USD, that is a personal choice... but the fed has been pretty crystal clear about what they will do. It hardly seems like a scam to me.

If you don't believe in CPI as a measure of inflation, you might like to take a look at the MIT Billion Prices Project, where they gather pricing data from hundreds of online retailers to track real time prices. Of course this data has its own flaws, but it is a good double check against CPI. Spolier: It pretty much tracks CPI. http://www.pricestats.com/us-series

These numbers are mainly due to flow. They are making a brokerage fee. It isn't prop spec.

Interesting that Burry and Loeb both used to post on SI. Take a look at Loeb's posts: http://www.siliconinvestor.com/profile.aspx?userid=1397374

Not sure if anyone has access to this article, but the abstract is interesting: http://journals.cambridge.org/action/displayAbstract;jsessionid=4D05E6D707AF949FADDA67B8C2C0B4E1.journals?fromPage=online&aid=4106568 Buying all deleted DJIA stocks is obviously a poor strategy as is buying all 52 week low stocks. This has to do with the fact that many deletions like 52 week lows have an obvious declining trajectory and some are on the way to bankruptcy... This is hardly the case for BAC, therefore it wll not likely be effected in any way. Corellation doesn't equal causation.