no_free_lunch

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?

I basically do nothing but copycat investing, in the sense that I try not to source any of my own ideas. I mean really, nobody cares where you got your ideas from it's just a matter of your returns. Not that I follow a particular manager, I include VIC, blogs, this board in my list of sources but that's where I get everything from. So much easier to just scan through other's ideas looking for something that stands out than starting from a screener. Once I find something I definitely do my DD but only if what I see has merit. In the past I would try to build my own thesis from scratch and I find the process flawed. When you invest time learning about a stock you become somewhat attached and it is just harder to walk away from it. When it's not your idea, very easy to walk. Ultimately, I think it is somewhat of a numbers game, in that the more mental models of different equities you can build and rank the more likely you are to build a higher performing portfolio.

My worst mistake, hands down, was buying tech stocks in summer of 2000. That was the start of my investment career! I remember thinking that the nasdaq was down about 30% so stocks must be cheap, right? I didn't know what value investing was, I was just dumb, young, over confident, and ignorant all mixed together. I borrowed a sum which subsequently took me 2 years to pay down. It ended up being a total disaster. The stock market went down for another 2 years, just insane, merciless, unending declines. You catch a bit of an updraft and then it would sink to even lower lows. I think at one point I was down 75%. Quite the learning experience. I was done and I think if I hadn't discovered value investing I probably would have just stuck with ETFs for the rest of my investing career. The one lesson from all of that was to know what you are holding, so you can be comfortable if it goes down temporarily (as in for several years). At the time I had about 5 stocks and only 1 did I really understand. When it was down 70%, it was no big deal as I knew it would come back eventually. The others I sweated the whole time.

longinvestor, I am always curious to hear how people navigated the GFC. Care to provide any details?

Thanks .. ThanksAndYouAreWelcome I will have a look at these. Any suggestions on the best metrics to use?

What do you see as the one foot bars?

Sure, but keep in mind that I just invest as a hobby. Basically it is a story stock. You have a CEO who is very aggressive and yet very disciplined from a capital allocation perspective. When he first came in he got rid of all businesses where he did not see a competitive advantage or room to build scale. He started acquiring companies and lopping operational expenses down aggressively. He merged with biovail (while maintaining his role as CEO) and as a result now has a 5% tax rate. With the Bausch & Lomb transaction he bought a company with $700M EBITDA and has plans to "bump" that up to $1.5B with cost-cutting over the next year and a half. There is also decentralized operations, a focus on avoiding competitive areas, geographical diversity, focus on businesses not subject to government regulations (e.g. the bausch purchase), non-traditional accounting (you need to focus on cash EPS), willingness to walk from deals (they walked from a huge one earlier this year), his compensation agreement, more that I just can't think of right now. If you read the outsiders and then start to study this company, it's like you're reading another chapter in the book. The CEO is not that old either, there could be quite a future ahead. As for the pesky details of what you are paying, I go out on a limb and trust the cash eps forecasts that management puts out. You guys are probably trying to figure it out from the traditional statements and I commend you, but I didn't do that. With their cash EPS they add back amortizations, stock-expenses and one-time costs. It is a similar concept to owner earnings but probably a bit more aggressive than buffet would like. Anyways, they are forecasting ~$2.05 for Q4 of this year. However, the cost-cutting for bausch and lomb, plus other acquisitions will not be done by q4 of this year. I crudely estimated that with their total announced cost-cuts they will probably be looking at $2.3-$2.4 per quarter by Q4 of next year, that will be their rough run-rate. So around $9.5 per share cash earnings run rate in 15 months. So you are getting them for around 11x cash earnings once the cost-cuts are in effect. That is assuming that they stand still for 2014 and just cost-cut/pay down debt. I doubt they will do that. There will be more acquisitions / stock repurchases / a merger but something else will happen. IV is a tough one. I think it's more than you are paying now but probably not that much. Some of the other major pharma companies are around 13-14 times earnings. I think valeant deserves a bit more, maybe 14x. I actually think my 14 multiplier is probably too low, should be more like 16-18 given what he has done and the businesses he is in but you also have to consider how lean they run R&D and that their are concerns about organic growth. For that reason I pull it back to 14 as they will always need acquisitions. So if they get to $9.5 that is only $133 and that's not for 15 months or so. So I am buying a dollar a year from now for $.75. Not a great bargain but not overly expensive either. My view is that in a year they will be talking about 2015 earnings at $11-12 and the stock could be at $150. You really need to get comfortable with the CEO to buy into it. It's not a huge bargain unless you believe he can continue to work his magic.

There is some value to using meta-critic to evaluate games (and possibly movies). It is going to be rare that you find a disconnect between a metacritic score and a publisher's stock but I have had it happen. http://www.metacritic.com/

Bought VRX today, 7% position. My timing is no doubt horrible on this one, with it being up double over past year and 10-fold since 09. Nevertheless, the more I read on the company the more I feel like I'm reading a case study from "the outsiders". Their execution has been just incredible and in spite of the huge runup in price, they are still cheap based on next years forecasted earnings. EDIT: I should also add, thanks to Gio for all the posts on this one.

IBM?