randomep

I hold 2 stocks in S Africa. That may not be what OP had in mind. I would call S Africa a developing country and all others frontier countries. I like the corp governance. They have a news service like edgar call SENS. So you get pretty prompt notice of things like earnings warnings, change of directors etc. But I got blindsided by the drop in in the rand. It dropped some 30% due to the commodities slump. I regret ever opening a position in S Africa but now I just have to stick it out...... I trade this in the US with fidelity. It is completely online.

Gonna try to answer this as best I can, I use to work in the industry - I believe any capital gains in the LLC flows through to the inc like you said. The inc pays the tax on 50% of the capital gain at the corporate level. That non-taxable capital gain (the other 50%) is placed in a separate non-taxable pool. If the inc pays out a dividend to shareholders it designates the non-taxable portion as a return of capital so the shareholder who receives this dividend does not pay tax on it. The other 50% is paid out as a regular dividend and a shareholder would get taxed on this portion. If this was a private inc, I am pretty confident that would be the tax treatment. The only reason I am having doubts is because this is a public inc and the rules might be slightly different - although i don't think it should be because the tax laws/logic should be the same in both cases. dyow, so I assume you worked in a Canadian firm. Based on what you said then senvest pays 1/2 corporate tax rate, that makes sense, I remember seeing rates about 12% some years.

Maybe its not just COBF. ?? I don't get you... are you saying Giverney is a contrarian indicator?

Folks, I did imply that it is futile to figure out whether poster's greatest convictions is a contrarian indicator for a stock. But trying to figure out whether there is a correlation between stock returns and number of posts is a worthwhile exercise. I mean if someone can figure out any correlation between number of posts and relative market returns, and that correlation holds for the future, that person will be rich. But the results seem to be inconclusive now after I corrected the list. At least for the most talked about stocks. But I think I am going to try to figure out what is the correlation at the bottom end of the list; ie. for the least posted stocks. thanks

I have so many, a lot of them I think I know but I just need conformation: a company like SENVEST Capital (the traded stock) is a inc, but it invests in the senvest international hedge fund which is a LLC, there is no tax on capital gains at the hedge fund level but there is at the inc level? And of course any capital gains on the stock is taxable to the stockholder? So there is double taxation? why did they setup such a structure?

He probably meant ADV.to Alderon Iron Ore which Altius owns a lot of. I don't think he did mean ADV given that the thread has largely been about Altius and Alderon's development of the Kami mine was only a portion of the original thesis. Altius has underperformed over the past few years, but anyone who has been following the stock would tell you that there has been a fundamental transformation from a company with 3 million in revenues and $200M in cash to a company that pulls in $30M a year and has been putting that money to work investing in new assets while the commodity bear market rages on. It seems odd to call that a permanent loss of capital just because the stock is down from its highs while its industry is in a recession. Sorry I know nothing about Altius, I must've typed the wrong ticker. Now I see it is flat for the last five years and it is in CDN, which means it is definitely underperforming against the SP500? correct me if I am wrong plz. I corrected the OP

i know nothing about LVLT but I do see the thread started oct 24, 2010 at which time the poster said the stock is below $1. If all that's happened is a 15 to 1 reverse split then it means the stock has gone from $15 to $55 today. Pretty good by me.

Hell ya! Why didn't I think of that! That's my next after work project!

My judgment of a stock (or a basket such as these stocks) is whether it (or they) beat the market. So if I make a equal weighted basket of these stocks, how would I do? I am guessing here but holding basket of these stocks for the last 5yrs would lag the S&P 500 which returned 80% cumulative.

I've thought about this topic but didn't dare to post till now. Are the most talked about stocks on CoBF below average performers? I looked at the investment ideas and sorted by replies and get the following, and I've commented on their performance over the duration of the threads: SHLD - a laggard BAC-WT - good buy, I guess VRX - permanent loss of capital (PL) AAPL - great pick ALS.TO - PL laggard BBRY - PL BH - laggard FCAU - ?? AIG - good buy SD - PL GOOGL - great pick ZINC - PL LVLT - great pick Now I admit the number of replies does not indicate popularity. A lot of the bad stocks on that list got a lot of replies because they were in such deep trouble that there is a lot of unknowns and controversy. But there are both sides to every argument and most cases someone is fiercely defending the stock. The list does show that the top most talked about stocks are not very good performers. Just a thought to improve our collective stock picking skills.

Thanks all for the replies for my cry for help. Yes, I think I agree with the Grreen King that on an individual stock basis I am just on my own, even Berkowitz can't help me. However, I wished posters would share more about their own experiences with more obscure stocks instead of digging in on their opinions on SHLD, or VRX or ZINC. Back to the OP topic, maybe my mistake is going to HK and Japan. Or maybe not hedging my currency exposure in S Africa. But 3 years is too short to conclude anything. That is one problem with learning from your mistakes. The feedback loop is too long. It could take a decade or more to realize a mistake.I believe that Pabrai and Bill Miller are case in point. They had great runs before 2007 then got hammered at the worst possible time. Those who follow them now are realizing that their strategy is bad but it took 15 years, depending on one's age, that may be too late. For me, I am definitely not backing from my foregin exposure considering how undervalued foreign markets are compared to the US. This needs another 2-3yrs at least to play out. Foreign stocks report only twice a year. Psychologically it is tough investing in those markets and so I expect a larger MOS. And I get it plenty. Just now I got 2 reports. My HK real estate stock broke even for the year, but said they booked more than HK$1B in revenue which hasn't been recognized. My S Africa car retailer reported $2.50 EPS and the stock jumped but still only trades at $14.90, go figure.

This is not rhetorical, I am reaching for help here! Any past experience or advice is appreciated. But please note that my companies are not run by a**hole management and none are money losers. If it has been 3 years and the stocks have not budged, you may want to reconsider. Although you haven't lost money, holding on to these stocks is still an opportunity cost. As for PE/BV, BAC and C have both been trading at less than 10 PE and below TBV for several years so cheap can stay cheap for long. And these are big caps which should trade more efficiently than small caps which have the added element of just getting ignored. Are you waiting for any company specific catalysts in these investments? ok when I think again, what I said isn't true. These stocks do move. A typical one is a japanese distributor, PE now is about 6, its a netnet, no debt..... but of course it has sh*ty ROE. On paper the stock has doubled in 3yrs. But in reality I factor in currency changes and the fact that you never get in 100% from day one. You build up a position. And it really frustrates me that the return is not where it should be. My question to all is when do the business metrics normalize. Or is this japanese company destined to trade at a 6x multiple? So I am waiting for no catalyst, except multiple expansion. I own a Greek insurer trading at 4x earnings. a Hong Kong real estate companies trading at 1/6 book. Looking at Hong Kong, its market is at 2007 levels, but last year it was 40% higher. So there is potential to break out, and to carry my stocks with it. If it doesn't happen then that's my mistake for waiting. sorry for the confusion post but my frustrations are clear.....

Sure, I can oblige.... but I don't know if a lot of my investments are failures therefore I don't know if there is any mistake at all! I originally am a bigcap cloner type. Mostly buying whatever Buffett, Berkowitz and Lampert buys. 3yrs ago, I started doing small cap investing. Stocks I bought since then I still hold because I am disciplined in doing 25% turnover (or maybe even 20%). So here I am, with a bunch what I feel are uncorrelated cheap stocks. Most of my stocks have no debt, are trading less than book and trading at less than 10x earnings. But their stock price just won't budge. They are fine companies but how do companies like this typically turn out, in the past? This is not rhetorical, I am reaching for help here! Any past experience or advice is appreciated. But please note that my companies are not run by a**hole management and none are money losers.

Good question. I start to think we need a CoBF bar raiser program to improve the quality of the threads here. :) The quality of the threads are getting lower and more posts filled with "Oh Bruce added 100000 shares today". Or "Oh Prem Watsa said he expected a huge upside" Sensational news sells, that' the bottom line. When I started onboard CoBF I tried to recommend my microcap picks, most times I got zero replies, nada! I soon found that any discussion about manager fails, interest rates, inflation or a handful of stocks like VRX, ZINC, BAC with invoke a strong reaction. It is what it is.....

Jurgis, what your saying is so wrong I don't know where to begin. There is risk and unknowns for all of us. We have to act with very incomplete information. As a result we can say much of what happens is luck. Suppose you get AA in texas holdem. You go in knowing your 80% fav against any hand preflop. Going in is the right thing to do and no matter what happens in the hand. Nobody says oh man I should've known better that my AA would get sucked out. Same as investing. My hero Walter Schloss typically had a hundred cigar butts in his portfolio. I am sure every year one or two goes bankrupt. Does he go I had a good 15% year but damn it I make a mistake with so and so bankrupt company. I am going to change my strategy? His success as well as his flops are the result of his strategy, if it works to get 15% he should keep it up! Now someone like Pabrai, he fundmentally takes too many risks trying to hit them out of the ball park. If he is wise I would think he would tone it down a bit and be less risky. If so, then there you have it! Someone can learn to invest with more MOS. It's a simple thing MOS is an actionable goal.

I hear lots of specific cases of what went wrong, but a person cannot beat himself up over each facet of his decisions in hindsight. Everything has risks and virtually every bad scenario is possible. I think we should ask what is the common theme in the mistakes, and I continually come back to one thing: excessive risk-taking.Ben Graham harps on margin of safety and I don't see any MOS in many investments. Pabrai touts Graham and yet he is looking for a 3 to 4 bagger in very investment. In doing so he leaves himself very exposed to 100% loss. There are several of those besides Horsehead. Ackman, Bill Miller are others who take very concentrated bets on large caps. They impose tremendous pressure on those companies to achieve unrealistic gains, and it is no surprise that Valeant, Enron, Nortel happen. And these bigwigs pressure themselves to achieve outstanding returns consistently. It is one thing like Seth Klarman to jump on CDS on mortgages when the opportunity arises, it is another to try to achieve 20% returns like Ackman or sequoia with billions AUM and at a time of global deflation and the S&P trading at 20x multiple.

It's not clear that's true. Would have depended on CDS pricing and he might have made losses permanent. But I see that potentially by selling let's say 1/3 at a loss, he still might have survived 1-3 years and still made something like 2/3 of the gain. I'll go with that since I don't think I want to spend time evaluating possible CDS pricing and various outcomes. :) Ok Jurgus, I see your line of thinking more now. We really don't know the data except from a chapter in a book. However I did just reread the book and he just bought $1B in mortgage protection in mid 2015, by Nov Lipperman (Ryan Gossling in the movie) managed to buy back $50M from him and he (Burry) made a small profit. So the CDS market was more liquid than the movie would lead us to think.

Well, LOL if I have cognitive bias I want to know and to correct it. If you are saying that the bet M Burry made is a bad bet and he just got lucky, then you are that all those people that made that bed got lucky. We are talking about Kyle Bass, Seth Klarman, Paulson, Jamie Mai, etc etc that are mentioned in the Big Short and the Greatest Trade ever. M Burry was paying tens of millions in premiums per year so you can say the made a huge bet. His investors freaked out because he was better the fund on this trade. Paulson had a dedicated fund for it so he too bet big. I am sure the others made significant bets also. If that is the case then these guys all got lucky on huge bets. And if that is the case I would deem them not great investors. All of them! If they are not great investors we will quietly see them disappear into the sunset because they will either blow up or at least not do well in the future. Time will tell but nothing indicates that these guys are doing badly. In summary, the bet wasn't just M Burry, there were many on this trade. And I cannot imagine all these guys did something dumb. Another key point is that Burry said his bet was a certainty. And people critique it as if he is betting on something that has never happened: millions defaulting. But I think that is the wrong way to look at it. Median house prices were 6x median income, that is unprecedented. And the more it rises the more unprecedented it is. He is betting against something that is unprecedented. If only that ratio stayed flat, he would win his bet. I think the subprime bond trade is something very different from investing in say Valeant or Horsehead (sorry to kick the horse when it is down). But Horsehead must do something something unprecedented (for them): build a cheap Zinc plant. They may lack experience and all engineering has inherent risks that you just can't get away from. And a little tangent. I remember that Ackman's Pershing sq returns are something like 600% (after fees) 3 yrs ago over the last 10yrs. But he was down 20% in 2015 and another 20% in 2016. So that means he is up about 400% or 12%/yr. That is phenomenal but it shows he is a human who makes monster bets. Time will tell if guys are Burry are really like investing gods or if they are human too.

The problem wasn't just the overvaluation, it was the whole structure of the market; classifying crap as triple A, creating derivatives on these to compound the risk, nobody holding on to what they underwrote, so standards went down a lot because everybody just dumped the risk on someone else, high leverage everywhere making everything more brittle, implicit government support, socially acepted liar's loans, etc Ya to reiterate what Liberty wrote. Burry didn't directly look at housing prices. He looked at the quality of the mortgages. They were defaulting at 4% and if it went to 8% the CDS would payout. And it was expected in mid 2007. The only way for his trade to fail is if housing prices went to the moon by then.

I went to their website (http://steelexcel.com/) and under investors and under the "investors section" there is only the 2013 (!) Annual Meeting. This also appears to be a company losing money (FY2015 and FY2014). Do you have more information? They had some impairments. Check the cashflows. (I don't know much else - just took a quick glimpse at financials) Ya, it is clear that operating income was $(14)M but they also had $(85)M of imparements for 2015. Now at the risk of mouthing off before I have read enough of the company....... the incentive structure seems unfair. Management owns a company which owns Steel Excel and Steel Excel pays that company management fees. I'd be afraid those managers are milking the netnet position. Can anyone else comment?

If I could answer that I'd have a mansion and a turkey farm instead of a 1BR and a day job :) How are you handicapping the idea that: I mean, I suppose you don't need an exact percentage, but you would need a range, right? Like a rough range? Otherwise, how do you know if it's more probable than the next one? Ok you think that the S&P 500 will LIKELY drop by 1/2. Ok why don't you act on it? S&P 500 futures puts for 1700 strike is 50. if it goes to just 1200 (just 40% drop) you will make 10x your premium. Just think 10:1 odds if you are right!

I agree with you, but don't dismiss WW3 as a possibility. I don't think we have ever been closer since the end of of the previous world war. (This doesn't affect my investment decisions at all though). shhughes1116's comment makes me glad I read CoBF, because it gives me ideas I never thought of or heard of.......that "things can only get better"?????? huh? Who agrees with that kind of statement? Like I say it is too new for me to absorb right now. The general news theme is that if things are really messed up (which I am not saying I agree with) then the economy will blow up as a result and we are in for a lot more pain. shhuges want to turn that idea on its head......

Only god knows....

I think you are being waaaaay to rational about this. The vast majority of investors don't know anything about stock valuations or any such. They simply invest in their retirement accounts and track their account balance. When a $500,000 401k balance drops by $150,000, they simply think oh my god, I've lost 8yrs of savings or something like that. If they lose anther $100,000 or so they might just throw in the towel and sell no matter what logic you apply to them. I have had many talks in the company break room explaining to people, don't think about your account balance, think of what you own. You own a piece of MSFT or KO or whatever. This is especially true in the last few months.

Or you can say that in 1978 WEB would not buy companies like IBM, Burlington Northern (Southern?). He has to today to deploy his free cash. But it also implies that he has resigned himself to performing like an index. I feel his strategy now is to build an empire for his legacy. I feel deep down he is not comparing the Brk book value to the S&P500. He is just doing his thing. He will perform somewhat better, but I don't think we can expect too much.