frommi

Senvest Capital and Intralot

Whats your current pick?

I am always open to learn something new, so what is the stock that matches your criteria for that at the moment?

And it has to have long term options! That requirement alone would kill 90% of my ideas.

Academic studies have shown that there is no benefit of owning more than 20 stocks and you get the most benefits of diversification already with 5-8 stocks. I think Pabrai and Mecham do it this way,so thats probably not a bad idea. Mecham had at one point 50% in BRK, but he argued that BRK in itself is already diversified so that makes sense to me. Everybody talks about Schloss as the most diversified investor of the past, but i found no evidence that he was not concentrated in some stocks. In one interview he mentioned: "Generally, we are happy with a 5% holding but we can go up to 10-12% if we really like it.". Yes he told the interviewer that he is in 100 stocks, but does it really matter when most of the positions are just to follow the stocks and get annual reports? In current times i don`t see a reason for these toehold positions anymore. Putting 100% in one stock and securing it with a put option at 50% loss looks like a smart idea, but when you look at it its just a barbell strategy of holding 50% cash and 50% in a LEAP call option. Any way you turn it, you have to pay the cost of leverage which is bad when the stock goes sideways for a long time. So you have to have a pretty sick confidence that your catalyst will play out. @jmp8822 You wrote that you had more than one stock going into 2008 and you averaged down into one stock, but have you realized that that was only possible because you were diversified before? Imagine your only 5$ position would have gone down from 5$ to 0.5$, you networth would have tanked by 90%. I can`t imagine how depressed i would have been at that point, losing savings of more than 15 years of hard work. From what i learned from other investors is that a maximum limit of 10-15% for normal businesses and 25-40% for diversified businesses or funds is a good compromise between diversification and outperformance and that is what i am using for the future. But i don`t regret being very diversified when i started because that has given me a lot of opportunities to learn and at the same time reduced the magnitude of my mistakes.

NWH.AX trades at an estimated forward P/E of 3-7 and at 33% of net asset value with high uncertainty. But i wouldn`t say that the mining service industry in australia is stable at the moment. ;D Whats interesting is that they were kicked out of the ASX100 and ASX200 in the last quarter, so there was a lot of forced selling pressure. They traded at net asset value before that started.

Ok, thanks. Was that in the annual/quarterly reports before the announcement or could someone just act on the publication of the information and still get a similar result?

What were the catalysts in these cases?

I am happy when i find that 1 out of 10 stocks in my portfolio does >60% in any given year. How can i know which one will do it next year?

Merry christmas. Thanks Sanjeev for this forum and thanks Gio for posting here. I learned a lot from you about the importance of management and FFH! :) Thanks Packer for answering my questions about equity stubs/internal leverage and free cashflow yields, and Eric for your ideas about (external) leverage. Thanks Nate and west for your japanese ideas and yadayada for your comments about OUTR. Puh there were possibly thousand more helpful posts in here, so thanks all. Happy new year!

Around 15% after costs, but a lot of that has come from currency effects. I could have done a lot better, my mistakes sum up to around 8% and my summer hedges made me lose around 2%. 2% were transaction costs. So i could have made around 23-25% without valuation mistakes and stupid gambles. (like buying 2 week call options on BP or valuing NWH.AX on earnings when it was clear that there was no competitive advantage.) My goals for next year are lower turnover and no more stupid short term bets. I had turnover of 200% which is stupid, but comes from the fact that i just started value investing 1.5 years ago. I owned more than 50 stocks this year but the stocks i sold have performed on average by -1.5% after the decision to sell, so that was mainly not the mistake. My buy decisions were wrong in the first place and i have to get a lot better there, while working on my patience. I will concentrate more next year on small/mid cap stocks that are clearly mispriced (and where i have a clear reason why that is the case) and have at least 50% of my portfolio in long term compounders. (more tax-efficient and lower transaction costs.) I already swapped more money to IB from other accounts to have lower transaction costs going forward. Btw. thanks all for your contributions to this outstanding forum. It is a pleasure to learn from the best.

Short form of the presentation: blablabla Inflation blablabla Inflation blabla .... ;D He has positioned his portfolios into this direction with goldminers etc. Looks more like macro bets than like value bets and i think he is much to early for that. In his presentations its clearly visible that problems arise in the stock market when inflation goes above 3-4%, so he should probably ask himself if we are already at that point. The current numbers have a deflationary trend and are far from that terrain, so what is going on in his mind? (Perhaps its because he has publicy expressed that we get inflation and now has to defend his position while losing money.)

I don`t think its impossible that japan will see hyperinflation, but my point is that this will not come out of the blue sky. You will see a long time of "normal" inflation first, where it looks like everything is working like intended. Then slowly the BoJ will lose control and panicky money will flow out of the country like now in russia. Only that the BoJ is not able to raise rates at that point. (But that scenario is at least 3-10 years away) The interest rate the government is paying is under full control of the BoJ, so i don`t see how this can be a problem in the short term. And the japanese public has enough savings to spend, its just that they had two decades of deflation now, they are sitting on big piles of cash/bonds. They didn`t even start to realize that its worthless in the very long run. So as soon as inflation comes back they will start spending more with the result that the government gets more through taxes back. They don`t even know how it feels when everything gets more expensive every year, because that is not their reality since a long time. And commodity prices (oil,gas) denominated in Yen have gone down this year, only adding to this problem. Btw. the FTSE 100 will dive down below 5000 points and create lots of value opportunities in the UK in 2015.

Getting inflation is the target of Abenomics, without inflation they can`t inflate their debt away in the long run. Its called financial repression and was done by the UK in the past century. They are not forced to borrow their money long term, when rates go up they can just finance this with short term debt. And short term rates are under full control of the BoJ.

The BoJ just buys the debt, problem solved. Every foreigner selling stuff in japan will just shy away and leave marketshare for the japanese companies. The Japanese economy is getting back on track and finally they get GDP growth. (In a weaker Yen, but who cares?) At that point the Yen stabilizes and everybody is happy. I didn`t want to post in this thread, but i am bored so here are my predictions: (But i don`t put my money where my mouth is here, so who cares?) S&P500 -> up to 2200 and then back to 1800 and up again to the end of the year. Oil -> down to <40$ where it bounces around and at the end of the year it will go up again to around 65$. Gold -> down, up and down again, will end the year below 1100$. 10y Bond Yields -> Up to 2.6-2.8% and then down again, will end the year around 2.5% Deflation will come to europe until Super Mario starts the biggest QE europe has ever seen. As a consequence the €/$ will fall to parity.

http://www.valuewalk.com/2014/12/jim-chanos-says-2014-better-year-short-sellers/ Chanos has an interesting bet running, he is short oil majors and long oil, because one of those is mispriced. Makes sense in my view.

Thats a dangerous comparison in my view. I am pretty sure that banks looked very cheap in the middle of 2008, too. But when you bought back then, it took a lot of time to get back to even (and in some cases you lost everything). WFC at half of bookvalue was a real bargain, but that would compare to buying XOM near 0.6-0.7 x bookvalue. So wake me up when we are there. (Probably never, but who knows.)

While studying Mecham i noticed that you should ask yourself why something is mispriced in the first place or what can change in a business that makes it a mispriced stock at the current price. Often a business that looks expensive is not expensive when you factor in a mean reversion of margins, price increases or something else. Its very often that these things are mentioned in the annual report, so just reading can give you an edge. Kraven made fun of it, but i think one of the safest ways to learn is to make a watchlist with BRK, FFH and MKL and just buy when bookvalue is near 1.1 and sell when it is above 1.7 or whatever number you think is appropriate. Then take the other half of your money and try to find mispriced bets and learn by doing. When you buy something you have to have the conviction to not sell for at least a year. When you can`t get to that point you probably don`t know enough about that business and have to read more.

I found a nice CPI adjusted long term oil price chart and an article from 1986 which covers the story of the saudies going into price war with the britain oil industry, so there are some analogies to today. http://www.larouchepub.com/eiw/public/1986/eirv13n06-19860207/eirv13n06-19860207_004-saudis_price_war_could_mean_5_10.pdf http://www.macrotrends.net/1369/crude-oil-price-history-chart So if history is any guide, below 30$ is a good price to pick up some oil exposure for the long term.

Why don`t you just buy calls or futures on oil when you want to speculate on that to pop? :) Why not buy oil stocks if you want to speculate on oil prices? When oil prices stay where they are for a longer period of time you will probably lose money in oil stocks, because they act like call options on oil. When you then buy call options on these call options you will not make money if oil moves only up a bit, only when it goes back up to above 90$. I don`t know how high implied volatility on oil is, but i suspect its a lot lower than on oil stocks. But that is not my main point. My main point is why speculate? I don`t see this as value investing, because most stocks are now more expensive than 3 month ago at oil prices of 90$. Some o&g stocks are worthless now but still trade at market prices above 0$. And i doubt that oil prices will rebound meaningfull without a big supply contraction first.

9628.JP is my japanese demographic pick, its the biggest funeral service company in japan in a very fragmented industry with an EV/EBITDA of just 3 and stable FCF generation over the last 5 years. http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/9628-jp-san-holdings/msg196526/#msg196526 But it looks like nobody is interested. :)

Why don`t you just buy calls or futures on oil when you want to speculate on that to pop? :)

Do nothing.

NOV, DNOW, HP earnings are dependend on rig count when recall it correctly, so their earnings will be impacted in the short term but its unreasonable to assume that will last forever. Perhaps a good idea to wait for their earnings misses and buy after that.

Well… that’s much easier said than done!! ;) Gio FFH, Intralot, OUTR, 9628.JP, EDHN.CH are stocks in my portfolio that shouldn`t be impacted by a recession, thats already more than 55% of my portfolio. Cable companies, utilities are probably not a bad choice either. Has anybody more ideas?