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valueinvestingideas

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Posts posted by valueinvestingideas

    The importance of cash....

    in General Discussion

    Posted

    This thread is especially interesting to me since I own a position in DirectCash, an ATM operator.

     

    I do some hard money lending. Most people pay me back in cash, some do post-dated cheques. A select few will to electronic transfers, but let's face it. If you're borrowing money from a guy rather than a bank, you're not very financially savvy. These people deal in cash. They barely have bank accounts.

     

     

    Would be interested to hear more about your business, if you don't mind sharing. Where do you find clients etc?

    EV/EBIT:The most underrated price ratio

    in General Discussion

    Posted

    I have a question about that. Why are all the modern ratios using income statement type metrics when what they are really trying to measure cash flow. Why not just use something from the cash flow statement like for instance operating cash flow?

     

    I would use FCF over OCF as its important not to forget capex.

     

    A measure like EV/EBIT or EPS provides a more normalized figure that can sometimes be more useful for valuation. 1 year of FCF can be misleading, for some companies, due to abnormal working cap, capex etc.

    How to Buy Berkshire for Half Price...

    in Berkshire Hathaway

    Posted

    my notes on BIF:

     

    $700mm closed end fund trading at a 24% discount to NAV. Portfolio is 25% BRK and various other blue-chip stocks including JPMorgan, Wells Fargo, Yum Brands, and Chevron. Pays a 5.7% monthly dividend. ~1.7% management fee. Trades at a wide discount for what may in fact be a good reason – BIF is ran by Stewart Horejsi (Boulder Investment Advisors) and he owns roughly ~40% of the shares, which creates a serious issue of conflicted interest. Mr. Horejsi can repeatedly buy more of his fund at a 24% discount, doesn’t have to pay the management fee and for the assets he doesnt own – he collects a steady management fee. In a sense, this is a great investment vehicle to build wealth… for… wait for it… Mr. Horejsi. He can easily close the discount himself through buybacks or a liquidation, if he ever chose to sell however he has zero incentive to do so. An activist is unlikely to succeed given Mr. Horejsi’s massive ownership stake.

     

    Conclusion: The current discount to NAV is a bit larger than it has historically been, and may narrow slightly. However, in all likelihood, some discount to NAV is likely to persist for years. At a 20% discount to NAV, current fair value is ~$8.00. At the current price, I’m not that interested. I would revist if the discount widened further to 30-40%. As a side note, the dividend is partially self-liquidating – and should, hypothetically, cause the discount to NAV to slowly decrease however shares are likely to just trade down upon distributions.

    Excellent Interview. 5 minute read.

    in General Discussion

    Posted

    great read. Great answer below, couldn't write it any better.

     

    SumZero: What advice would you give to someone interested in pursuing investing?

    Torin Eastburn, Monte Sol Capital: Read The Intelligent Investor. Then read every word Warren Buffett has ever written, starting with his partnership letters. If you lack a business education, take Level 1 of the CFA exam to learn the basics of accounting, valuation, and corporate finance.

     

    Start investing as soon as possible. Lose money quickly so that you can experience first-hand the humiliation of being wrong and paying a monetary penalty for your stupidity. Never, ever forget that feeling.

     

    Keep reading and investing. Read everything. Each moment you spend not reading, you lose ground to your competitors who are reading. Undertake a lot of deliberate practice by making actual investments and putting your theses down in writing, even if you’re the only person who ends up reading them. You can’t just buy XYZ because you think to yourself, “this seems cheap”. That is not investing. You must have concrete reasons for believing that your differentiated view is the correct view. You must be able to explain those reasons clearly to yourself and to others. You must have a strong understanding of the unit economics of the business, and a well-reasoned opinion about how they will change in the future. You must know how the private market values businesses in the industry where you’re investing.

     

    Nobody will be good right off the bat. Investing is hard. By definition you are unlikely to beat the market. You stand no chance at all without thousands of hours of practice. But personally I believe it is possible to consistently outperform provided that you have a contrarian temperament and you are eager to put in the work.

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