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Bagehot

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Everything posted by Bagehot

  1. I continuously water and feed my diary herd, yet they never produce any offspring or even increase in size. I now think the guy that sold me the herd may have been less than forthcoming in the negotiation. Looking forward to some knowledgeable responses in this thread!
  2. CSU is different from most rollups in that the underlying business is quite good. You don't generally see sustained organic growth in the high single digits for most rollups. Ask yourself this: what would I pay for a business with CSU's margins and returns on capital as a standalone entity, if they never did another deal? Then ask: is Mark Leonard more likely to increase or decrease my estimate of standalone intrinsic value over time via smart capital deployment?
  3. A bit of a threadjack, but Jim Craigie is close to qualifying as an Outsider CEO in my opinion. His run at CHD has been truly phenomenal. Here are the slides from their recent CAGNY presentation for those interested: http://media.corporate-ir.net/media_files/IROL/11/110737/cagny.pdf
  4. Good post. I agree. The key is to know thyself. Graham talks about this. He doesn't say that his method is the only way. I'm paraphrasing, but he says something to the effect that if you can invest because you are good at predicting the future, do that. If technical indicators lead you to the promised land, more power to you. He just says that it doesn't work for him and his way does. Mike Burry also talks about this. He said that as much as everyone wants to be Buffett they have to do what works for them. He also says for all the time spent on attempting to copy Buffett that there aren't any mini Buffetts running around, but there are many successful Grahamites. What I find interesting is the dichotomy if you will between the Graham/Schloss crowd and the Buffett crowd. The former usually seem to say people should do whatever works for them while the latter are highly critical of anyone not beating the bushes for moats. My main concern with Graham/Schloss in the modern day is the advent of cheap computing and the quantitative firepower it unleashes. By definition, there will always be a cheapest decile of the market unless we are in Lake Wobegon where all of the kids are above average. But that doesn't mean that the cheapest decile is underpriced! I can pretty easily concoct a scenario in which the rise of value ETFs and fairly naive quantitative strategies such as those employed by DFA, LSV, and even AQR and a host of other quant funds, systematically buy the cheapest stuff in the market to the point where any excess return to value no longer exists. That wasn't an issue for Graham. Stated more succinctly, the ability to fairly easily arbitrage the historical value premium is much greater now than it was in Graham's day or even 20 years ago. Now its true that this isn't as much of a problem in the microcaps where a lot of board members play, due primarily to liquidity constraints. But it is an issue for larger funds that practice value investing and I think its shown up in a big way for firms like Longleaf over the past 10 years or so. If you buy this argument, then how does one confront the rise of the machines? My view is that bargains now require greater 'judgment,' the special asset which quant strategies completely lack. The judgment stocks are in the quality businesses. And that means being able to distinguish between fundamentals and expectations for stocks that are priced closer to the market. Look at a stock like Ecolab. You could have purchased Ecolab for about 20x earnings towards the end of the tech bubble in 2000. Anyone on this board could spend half a day with Ecolab's financials, conference calls, and an investor day presentation or two, and know that it is a great business with a very long growth runway. Even though you paid 20x earnings, you would have compounded at 16.5% annually over the last 13 years in a very tax-efficient manner (this is the other huge advantage of quality v value, the tax benefit of lower turnover) while the S&P returned 2%. But it isn't so easy for a computer to distinguish between, say, an Ecolab and something else that was selling at 20x in mid 2000, say pets.com or whatever. Now you could rightly say that it's harder or requires more work to become good at developing such judgment v just buying 'cheap' stocks, and I wouldn't argue. But after having a strong value bent for many years, I now believe that it isn't heretical to question whether Graham's strategies are as effective today due to the explosion of data and computational efficiency we've seen over the past 10-15 years. And if that's true, then those who manage institutional capital don't have a choice but to 'adapt or die' as the saying goes.
  5. As long as you withhold 110% of your prior year tax paid, you won't get hit with a penalty regardless of how much your tax liability increases. I think if your AGI is under $150k, you only have to withhold 100%, but anyway 110% is safe regardless of your income level.
  6. Notes linked below, courtesy of the always excellent Market Folly. Speakers aren't identified, but it makes for a fun game to guess who said what. I think I've got them all figured out... http://www.marketfolly.com/2013/02/notes-from-csima-2013-columbia.html
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