[FRFHF vs HD in the last 10 years]

My 2 cents:

1) not sure why you chose HD to compare to FFH...

2) while practically every stock suffered price loss due to RE/Financial crisis, drops in prices for real estate related companies was much worse

3) HD in 2009 was at generational lows in terms of normalized valuation, some even saying business was at risk of never looking the same...so, of course rebound was much, much more pronounced

4) Here's another example, which also wouldn't make much sense to me: AXP - AXP went from <$10 to now $111

[How much attention do you pay to sell-side research reports & recommendations?]

Thank you all for your responses.

 

After giving this topic quite a bit of thought over the past few weeks, I have settled on a "new" routine: ignore all analyst reports, at least until I have exhausted my mental capacity thinking about companies using my own reading of primary materials, COBF discussions, etc. In the spirit of "dinner before desert", I wish to take this even further and ignore even the quoted price / market cap and just determine my own estimates of fair value before even looking at what the company is trading for (which is Buffett's approach, from what I have read). I guess that's the last, and toughest step.

 

In the meantime, a fun anecdote about TSLA, if you are interested. I think this is a real-life illustration of the limitations of sell-side research, and how seemingly tough it is to be an original thinker on Wall Street:

 

Until July 2015, BofA was the most bearish of the big investment banks in their views on TSLA. Analyst John Lovallo routinely issued target prices of around $60-80 for TSLA. His last report from June 2015 had a target price for TSLA of $65. This is whilst the rest of Wall Street was bullish. Well, it appears that John Lovallo has been "pushed" from covering Tesla. He's been replaced as a TSLA analyst by John Murphy, and BofA promptly moved the target price to $180, from Lovallo's $65. In fact, Lovallo may have been not just reassigned from TSLA, he may have been fired: his name is off BofA's coverage universe since June.

 

My take on this: BofA got tired of being left off TSLA investment banking / underwriting business (e.g. Goldman and Morgan are apparently running the recently announced top-up equity underwriting, and unsurprisingly, both of these houses are generally issuing bullish research reports on TSLA), so they let Lovallo go.

 

That is sad for Lovallo...yet, the type of institutional imperative investors should take advantage of...

[How much attention do you pay to sell-side research reports & recommendations?]

As a former research analyst, I'd like to reinforce that research reports should be ignored except to learn cold facts such as numbers in a financial statement.

 

Analysts are very smart, hard working, decent people. But there is a major restraint to the quality of their work and that is the short term bias that is pervasive in the industry for a multitude of reasons.

 

I'm sure everyone is aware of this, but just wanted it to be heard from someone who's been in the industry.

 

I second Meph's opinion. I'm a buy-side analyst, but know a good deal of sell-side friends. Their problem is structural, not personal...

That being said, one sometime useful bit of information is when the sell-side discussion or chatter focuses on some particular issue that is causes short-term fear, but has little impact on the long-term value creation of the business.

Cheers!

[What companies have the best management teams?]

LBTYA - Mike Fries

CHTR - Thomas Rutledge

LMCA - Greg Maffei

 

Beat me to it Merkhet! ;) Those guys are the cream of the crop in media distribution and capital allocation in the sector...

 

[What companies have the best management teams?]

I assume we're trying to move past the obvious ones, like BRK, FFH, MKL, QSR, etc...

 

Here are some of my favorites:

Charter Communications (CHTR): I believe Tom Rutledge is the best cable (media distribution) CEO in the U.S.

Liberty Global (LBTYA): Mike Fries is the Tom Rutledge of Europe

Liberty Complex (LMCA, LVNTA, QVCA, LBRDA, LTRPA): Greg Maffei. Excellent capital allocator.

[Tale of 2 companies]

* 2 companies have roughly the same market cap ~$20 bn

* Company A reported $1.8 bn in revenue over the last 12 months (2Q15) and a hefty loss on all metrics (yes, even EBITDA), so the best we can say is it trades at a very lofty >10x revenues, in the hopes it will someday make some money...

* Company B reported $8.8 bn in revenue over the last 12 months, of which $3.6 bn was eCommerce driven, with $1.7 bn of that mobile commerce driven (yes, almost as much as total for company A). This company, however, earned $1.9 bn in OIBDA and nearly $1.3 bn in EBIT over the same period, and owns a majority stake in another company valued at $1.3 bn...

* Company A is Twitter, which trades on a multiple of forward hopes and dreams...

* Company B is QVC, which sports one of the highest OIBDA margins of any retail company, yet, unfortunately trades as an "old economy" company

...maybe they'll rebrand as a high-flying mobile eCommerce enterprise? ;)