no_free_lunch

When you have a company that has a long-term (10 years) track record of successfully acquiring and integrating complementary companies, what value do you give to the historical growth? Is it even a factor or do you value the company based purely on the current set of companies? Or would you use a hybrid approach? The company has essentially flat to slow-growth organic revenues but has grown at 20%+ via acquisitions for the past decade or so. If it was a fast-food company, it would probably have a PE of 40-50 but perhaps the scaling is more reliable with a franchise. Any suggestions?

I had a similar experience with real estate. Prices went up 6-7% a year for 5 or 6 years, well ahead of inflation. I thought, well that can't continue. The next year prices went up 70%, in 1 single year. At that point, there were 2 camps of people, those who said real estate is the greatest investment ever and those who were adamant that it was over-extended and would crash back. Practically everyone was in the bullish camp. I am at that point a seasoned value investor so I think, that's it, look at the sentiment, that's the top. Wrong. 5 years later, prices are up still another 33%. It's important to have downside protection but trying to predict tops is a very dangerous game.

Well done sir.

Follow the money.

Ben, Do you care to share your results over this period? It is quite useful as far as correlating performance to growth rate. If not, it's all good and thanks for sharing your AUM figures.

Brooklyn investor just put out a piece on XOM. Your research might already be at a level beyond this but probably worth a read. http://brooklyninvestor.blogspot.ca/2013/11/exxon-mobil-xom.html

Anyone else having problems opening the pdf? I get a message that it is corrupted.

Barbell, There is a phosphate play (fos) which meets the basic criteria you are looking for. Essentially you have a company sitting on a phosphate claim waiting for prices to pick up. The company is selling for below net cash. Management seems patient and is just waiting it out and reducing costs. I started a thread on this board about it if you are interested.

I just read the original post. A PE of 1? I am not sure, I just checked the first few companies and they are nowhere near 1. Is there some company with a 1 time payout that is skewing the numbers? Just off the bat, look at coca cola HBC. According to bloomberg it has a forward PE of 29. http://www.bloomberg.com/quote/CCH:US Next up, hellenic telecommunications. PE of 9.9 http://www.bloomberg.com/quote/HTO:GA Next, OPAP. PE of 9.6. http://www.bloomberg.com/quote/OPAP:GA

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/fnma-and-fmcc-preferreds-in-search-of-the-elusive-10-bagger/

Definitely look at the individual companies. I did a bit of work on this earlier this year and it didn't appear to me to be that promising. The higher quality companies looked to have 15-20 PEs. There has also been dilution in some companies. I couldn't figure out where the 8-9 came from.

I would buy an ETF.

It is certainly cheap if the growth can be maintained. Any thoughts on the ultimate market size, e.g. how long can they grow?

If you don't mind me asking, what is the thesis on writing ITM AIG leaps? Calls or puts?

10% in SPE today. Thanks to whopper investments for this one. http://www.whopperinvestments.com/incentives-edges-and-closed-end-funds The basic thesis is that the manager should be able to exceed the S&P full-cycle while providing downside protection.

+1 A great book, a great read, but hardly scientific. I wonder how many CEOs there were over the period who also went against the grain but still got burned.

Great subject. Thanks for the input. For financials related, I would add: http://seekingalpha.com/author/ashleigh-rogers/articles

20% yesterday, 10% cash as of today (bought some Markel).

Is the market's crashes really that much about market sentiment? I mean the 08/09 crash was the result of a financial meltdown. In retrospect it was clearly exaggerated but the crash was based on the financial problems, not that we had run out of buyers for equities. In 11 it was fear of a european depression as well as continued problems in the US. Again overblown but there was a real world trigger. The only period I have witnessed where the market pulled back significantly on it's own was in 2000 and 2001 (before september 11). There the market had just gotten so overbought that there was a significant pullback on what I thought was fairly mild economic issues. That was the only time I have really anything like it and the market was just crazy expensive, companies like IBM and INTC were going for 40-50 PE. So basically, I guess I am just saying not to base your opinion on how many people are bullish, or bearish, or contrarian, or contrarian-contrarian, etc. As Cardboard said, just buy when the risk reward makes sense.

The one comforting thing about value investing is it's actually good for people to write articles like this. If there weren't people listening to cramer, timing the market, following the momentum, buying into the hyped investments, etc then value investing wouldn't work. It's good for (other) people to be less than rational and long term when it comes to investing.

Oddball, The example I gave was the basis of a star-schema. Think about it, it's at the lowest level of granularity, the individual measures. Just replace companyid, date, metricname with integer id fields and create dimensions for companyid, date, metricname. Voila! Build some indexes on companyid, possibly metricname / date too and you're good to go.

Agree with mbharadwaj, use a key value system. Just to flesh it out a bit more, and there are a million ways to do this, but one example: columns: CompanyID, Date, MetricName, MetricValue So you would have something like (with numbers totally made up): IBM,2009-03-01,GrossOperProfit,5000 IBM,2009-03-01,GrossOperProfitPercentage,23.3 IBM,2009-06-01,GrossOperProfit,5500 IBM,2009-06-01,GrossOperProfitPercentage,24.1 You get the idea.. I would probably have another table with the company attributes. Just make sure you standardize on the metricname values.

There should be no doubt, Kurt Cobain was the greatest song writer of all time.

Jay21, Most mortgages in Canada are recourse, you are paying that money or it is messing with your credit. I think you would need to declare bankruptcy to get out of an underwater mortgage (don't quote me on that though, never been there). Also renting depends on your situation. Very hard to do if you have family. Just a few things off the top of my head: - The people who rent your place can trash the place. I know people who own rental properties, it happens, this is maybe not super common but it does happen. Feel like spending your free time replacing dry-wall and flooring? Where I live this stuff is super-expensive to get someone to fix. - Tenants might not pay their rent and just disappear. Again, too many stories. - Your landlord can refuse to fix things. There are numerous things that can happen here but the worst one is mold. Landlords never do anything about mold. - Landlords can invade your privacy. There are rules around this but these guys are slimy and they will find ways around it. (You: Were you at my place today? Landlord: You were complaining last month about the furnace so I just popped in to have a look at it.) - Landlords are well within their rights to sell the place, given the constraints of the lease. - Yes, you can deal with some of the landlording issues by just moving until you get a good one but I just cannot stress enough what a big deal that is if you have a family. Just completely not an option.

Personally, I would buy the house and have no debt. You will still have significant investments. I know it makes no sense financially, but only if you can make certain assumptions regarding your future employment and the performance of your investments. I personally have seen people go through severe financial hardship and without getting into the particulars it occurred to me that having a house free and clear puts you in a very good spot. We are living in a world with zero interest rates and quantitative easing, unprecedented monetary policy. You have financial gurus like watsa with huge equity hedges. Equity markets are at all time highs. Maybe it's not a bad time to be a little conservative?