james22

BRK

Energy vs Tech could be the monster mean reversion of a lifetime https://thereformedbroker.com/2020/02/05/energy-vs-tech-could-be-the-monster-mean-reversion-of-a-lifetime/ Energy Stocks Might Finally Have Hit Bottom. It’s Time for Investors to Get In. https://www.barrons.com/articles/energy-stocks-might-finally-have-hit-bottom-51581114825

Still don't understand why Buffett's name doesn't come up in discussion. Great cover for the administration (can announce with picture of Buffett receiving Presidential Medal of Freedom from Obama), perfect legacy solution/career capstone to Buffet's cash problem.

Ditto. 1.3x book is not a bad price for Berk esp. as it's a partially "defensive" stock with the cash and traditional businesses, and also exposed to market upside thru Apple Indeed, on a relative basis its a lot more exciting to me here at 228 than it was at 21x.xx prior to the market going apeshit. I've held cash to buy the P/B dips myself, but would have done better buying as soon as I could. 21X.XX < 228

Bought a little VGELX today.

"They're Done": CNBC's Jim Cramer Says Fossil Fuel Industry "In the Death Knell Phase" "You can tell that the world's turned on them, and it's actually kind of happening very quickly," said Cramer. Climate campaigners drew attention to CNBC's Jim Cramer's comments Friday that he's "done with fossil fuels" because they're "in the death knell phase." Cramer added that "the world's turned on" the industry as they did with tobacco. "They're done," Cramer said of fossil fuels on the network's "Squawk Box." "We're starting to see divestment all over the world. We're starting to see... big pension funds saying, 'We not going to own them anymore." "The world's changed," Cramer continued. While companies like BP still mark profits, "nobody cares," because "new money managers want to appease younger people who believe that you can't ever make a fossil fuel company sustainable." "You can tell that the world's turned on them, and it's actually kind of happening very quickly," said Cramer. "You're seeing divestiture by a lot of different funds. It's going to be a parade... that says look, 'These are tobacco, and we're not going to own them.'" https://www.commondreams.org/news/2020/01/31/theyre-done-cnbcs-jim-cramer-says-fossil-fuel-industry-death-knell-phase https://www.cnbc.com/video/2020/01/31/jim-cramer-fossil-fuels-oil-energy-squawk-box.html

Focuses on position sizing rather than time diversification, but good: https://www.dropbox.com/s/m2nu1ymugzi48vi/Non-Ergodicity%20and%20its%20Implications%20for%20Businesses%20and%20Investors.pdf?dl=0 Taleb speaks of dynamic hedging leading to higher returns: https://www.fool.com/investing/2018/04/03/motley-fool-interview-nassim-nicholas-taleb.aspx

For later.

...economic theory suggests the share prices of “sin” businesses will become depressed if a large enough proportion of investors choose to avoid them. Such stocks would have a higher cost of capital because they would trade at a lower price-to-earnings (P/E) ratio, thus providing investors with higher expected returns. ...as more investors express their personal beliefs through their investments, shunning sin stocks, it seems likely their prices would be further depressed, further raising their forward-looking return expectations. Thus, it is possible the sin stock premium (relative to the market) could not only persist, it could increase... https://www.etf.com/sections/index-investor-corner/swedroe-sin-stocks-are-profitable?nopaging=1

With the rise of SRI/ESG funds, we might begin to see a greater sin stock premium?

VGELX

At the Robin Hood conference last week, I enjoyed the presentation by author and entrepreneur Tony Seba, which he posted here (31 minutes – an earlier, longer version is here). He discussed “S” curves and how we tend to underestimate the rate of adoption of new technology. Here are two examples: One, Google estimated that its Lidar system, which cost $150,000 to build, would cost $70,000 by 2012. Analysts mocked and scoffed at the estimate – but Google was right: that’s exactly what it cost in 2012. But what’s more impressive is that by 2013, that same equipment cost $10,000… only a year later, a mere $1,000… and then three years later, $250! And two, in 2000, a top computer used for nuclear warfare simulations had a capacity of 1 teraflop (1 trillion floating point operations per second), cost $46 million, used 850 kilowatts of energy, and took up 1,600 square feet. By 2017, Nvidia had developed a 2.3 teraflop computer that cost $59, used 15 watts, and was small enough to fit in your hand. The lesson here is that humans think in a linear fashion – yet certain systems, including tech disruptions, are non-linear. Seba’s conclusion regarding electric vehicles is that they will account for the majority of new cars sold within six years. https://empirefinancialresearch.com/articles/observations-from-the-consumer-electronics-show-electric-and-autonomous-vehicles-whos-buying-tesla-japan-vs-china-business-cultures-thoughts-on-the-12-questions-to-ask-before-you-marry-someone

Reason number one to be bullish on energy stocks is their relative cheapness. The sector looks extremely undervalued as institutional investors have abandoned their positions in energy stocks and systematic funds are shorting oil. https://www.investopedia.com/5-reasons-energy-stocks-could-surge-4772280 Craig Johnson, senior technical research analyst and managing director at Piper Jaffray, said Thursday he had “no question” that now was the time to do a “bottom-fishing exercise.” “Talking to all these institutional accounts, they do not like energy. They don’t want to touch energy. They’ve been burnt in energy for so long. And fundamentally, they’re going to point out all the problems with it,” Johnson said on CNBC’s “Trading Nation.” “But, as a guy that likes to look at charts, these stocks tend to lead the market six to nine months ahead of time.” https://www.cnbc.com/2019/11/22/energy-stocks-to-invest-in-as-worst-performing-sp-500-sector-turns-up.html

Morningstar: The energy sector is the most undervalued heading into the new year: The median stock in our coverage universe trades at a 10% discount to fair value, says director David Meats in his quarterly wrap-up. Oilfield-services stocks look particularly attractive, trading at a 16% discount to fair value. But we see buying opportunities among all industries. https://www.morningstar.com/articles/961514/33-undervalued-stocks-for-2020 https://www.morningstar.com/articles/961161/energy-most-undervalued-sector-heading-into-the-quarter They like Cheniere, Unbridle, and Schlumberger.

You've recently been writing some very bullish thoughts on the oil and energy sector. What's your case there? When people get excited about this ongoing cyclical trade, they should look at oil as the ultimate distressed value asset out there. To me, oil stocks are incredibly cheap. There are technical reasons for that, because of the large passive investment flows, and oil is a smaller and smaller part of the index. Also, there are more and more institutional investors who can’t buy oil stocks anymore because of ESG limitations. On the other side, there is no sign that oil demand is weakening. Consumption in emerging markets continues to grow, while conventional oil investments have been reduced significantly, precisely because of all this talk that the fossil fuel era is ending. So in your view, energy the one remaining cheap sector out there? Yes, without a doubt. But I will freely admit that there are all sorts of technical issues because as I said many investors can’t buy oil stocks anymore. We have this bizarre situation where people can’t buy oil stocks, but people continue to consume oil. https://themarket.ch/interview/oil-stocks-are-incredibly-cheap-ld.1384 Anyone else see an opportunity? I'm thinking of making Energy (VGELX) a 5% position.

https://www.valuewalk.com/2020/01/sp-500-revenue-and-margin-growth/

And car guys get more value from their cars than not-car guys, whatever the relative cost. If you're not a car guy, buy a used Toyota Camry. But however inexpensive it'll be, it'll be a cost. If you're a car guy, invest in whatever you love. It'll pay dividends in entertainment.

I value invest so I can drive a car I like?

Court Rules Federal Government Flooding of Homes During Hurricane Harvey is a Taking The decision is significant in itself and has important implications for other cases where the government deliberately damages private property in the process of coping with natural disasters. https://reason.com/2019/12/17/federal-court-rules-that-federal-government-flooding-of-homes-during-hurricane-harvey-is-a-taking/ Encouraging.

Margins and return on invested capital is not the same. A grocer can earn high returns (plus 20 pct) with low margins, high volume. Thanks, but how does that differ from market investing using leverage? Was the grocery business thought so stable that one could use greater leverage? (I assume it is not thought so anymore.) Totally unrelated. Borrowing to invest in the market expecting to earn a rate higher than your cost of debt is not the same as a business with low margins and high turnover. It doesn't necessarily require debt. A 3% profit margin that is achieved six times a year is a roughly 18% return on capital. Retail (Grocery and Food) Margin 1.86% ROC 8.77% http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/mgnroc.html Seems a lot of work v buying an index fund.

Margins and return on invested capital is not the same. A grocer can earn high returns (plus 20 pct) with low margins, high volume. Thanks, but how does that differ from market investing using leverage? Was the grocery business thought so stable that one could use greater leverage? (I assume it is not thought so anymore.)

Why would a low-margin business (a grocer earning 3%, for example) invest in expansion rather than the market (earning 7%)?

Any of you who believe Buffett has "lost it" believe the share price will jump when he passes or steps down? Why not?

1. At the end of a long bull market, 15% seems unlikely. 2. Some factor (SV), international (EM), sector, or strategy funds might have expected returns (if you believe in mean reversion) close enough to 15% that leverage could get you there? (Margin risk offsetting the uncompensated individual stock risk?) 3. Best bet might be cash and hoping for a chance for something obvious later?

2) After 300% run-ups earlier this year, the stocks of the government-sponsored entities ("GSEs"), Fannie Mae (FNMA) and Freddie Mac (FMCC), have taken it on the chin over the past two months. I've just finished writing up a full analysis of the latest developments for this month's issue of the Empire Investment Report, but I still think their stocks are the most interesting mispriced options in the market. 3) Here's my friend Michael Kao of Akanthos Capital Management with some breaking news: Of the myriad lawsuits against the Treasury/FHFA by different classes of GSE investors, one very important hearing regarding the government's motion to dismiss in the Court of Federal Claims (COFC) was held yesterday. While I don't have the full transcript yet, I've heard several key soundbites from the presiding Judge, Margaret Sweeney, that appear quite positive for plaintiffs (shareholders): - She was concerned that the current terms of the Net Worth Sweep would never allow the GSEs to become solvent and exit conservatorship, and she questioned how the government could justify never allowing repayment of the liquidation preference so that the companies can get back on their feet - She opined that Treasury/FHFA placed the GSE's in a "death grip" and used them as a "piggybank," comparing government's actions to "the mob" - She opined that a "reasonable investor" would not have expected all profits to be swept to Treasury forever While these soundbites appear way more constructive than I expected, I caution that the wheels of justice have moved very slowly in these GSE cases. Nevertheless, if the COFC strikes down the government's motion to dismiss, it will add to the political cover that Mnuchin/Calabria need to do the right thing for shareholders. Stay tuned... - Whitney Tilson