ukvalueinvestment

Thanks all. Just to get back to my original post, it was about second/third effects of this virus and best strategies to make money - basket of levered small cap seems popular so far. Any more thoughts - maybe not single stock ideas but themes. For example, I remember that banks - the industry closest to the crisis stayed very cheap for years after. Do you think strategy is to go to levered small caps first, and then airlines? Let's please assume that this coronavirus will end in months and that the underlying productivity and demand in the world has not fundamentally changed. Some things will change. I think once all this is over a lot more people will have tried food delivery and will have decided they like it (or not). What are the second/third order effects and what is the sector to buy. My thoughts: - Sovereign debt crisis as countries are forced to borrow on a massive scale - This leads to further bid for quality names - "if you made money in two crises you are unbreakable" - General further shift to online/digital as people who had never previously used online became aware of ease of setting up accounts/payments etc. - Defined benefit pension plans are further hit by lower discount rates - this could be offset by lower life expectancies and mortalities (unlikely to be material) - Further shift away from physical entertainment as people realise they like staying in and playing playstation etc. - Shift away from gyms as people realise they like jogging/their peloton. My current thought on the sectors to buy are: Highest quality airlines as soon as I am convinced they are past raising capital, hopefully in a closed end fund that is trading at a discount. Demand for air travel will continue rising in long term. Levered airline industry names that have to recapitalise - eg Sydney Airport, Aercap. Levered small cap in a fund that is trading at a discount as soon as it's clear economy is recovering. Capital allocators like Berkshire, Markel and Exor at point of maximum dislocation and uncertainty.

Anyone who thinks a bail out will protect equity holders is delusional. The government's role is to keep the company going and keep people employed.

No. In 2008 I was genuinely scared the financial system was broken and I would lose everything. Does anyone else have thoughts on 2nd/3rd order effects? How will the world change after CV?

It's a good idea, and it seems likely after a few weeks of semi-lockdown and more data about how dangerous this virus really is (or isn't), it'll come to something like that. I believe the idea of a society going in lockdown for monts and months over this is absurd and will never happen; at some point the cure really does become a bigger threat than the disease itself. Yes I think society will quickly arrange itself into a semi permanent containment strategy. eg at my work (US investment bank in London), most staff were sent home this week, when earlier than day the plan had been for split teams working one week in the office, one week off. I think having the whole team work from home is not sustainable and we will move back to that split strategy. It makes sense to have stringent restrictions for older population. This will go on for many months and "isolation shaming" will become the norm. ie at some point it will become "uncool" for people to go to bars and their peers will shame them for doing so. Already supermarkets are opening at certain times just for older people Society will come up with all sorts of solutions like this. Aim is just to slow the virus down, work out what drugs have some sort of dampening effect, work hard for vaccine, not overwhelm health services.

I would like to discuss how the most money was made from the depths of the last crisis. There are different approaches. eg. "Now is the time to buy quality names as they are on sale" "Buy the strongest companies is beaten up sectors" "Buy net/nets trading below cash" Let's please assume that this coronavirus will end in months and that the underlying productivity and demand in the world has not fundamentally changed. Some things will change. I think once all this is over a lot more people will have tried food delivery and will have decided they like it (or not). What are the second/third order effects and what is the sector to buy. My thoughts: - Sovereign debt crisis as countries are forced to borrow on a massive scale - This leads to further bid for quality names - "if you made money in two crises you are unbreakable" - General further shift to online/digital as people who had never previously used online became aware of ease of setting up accounts/payments etc. - Defined benefit pension plans are further hit by lower discount rates - this could be offset by lower life expectancies and mortalities (unlikely to be material) - Further shift away from physical entertainment as people realise they like staying in and playing playstation etc. - Shift away from gyms as people realise they like jogging/their peloton. My current thought on the sectors to buy are: Highest quality airlines as soon as I am convinced they are past raising capital, hopefully in a closed end fund that is trading at a discount. Demand for air travel will continue rising in long term. Levered airline industry names that have to recapitalise - eg Sydney Airport, Aercap. Levered small cap in a fund that is trading at a discount as soon as it's clear economy is recovering. Capital allocators like Berkshire, Markel and Exor at point of maximum dislocation and uncertainty.

Enjoyed that. Warren seems to talk a lot faster and be a little more opinionated than these days. You see more of the "genius" and a bit less of the "nice sensible guy from the mid west". I wonder if that is a function of age or a function of fame.

I agree that there are bubbles in pockets, including VC, certain cloud stocks and other Tech. But other markets, especially outside the US, do not seem obviously expensive. In 1999, I and my college housemates maxed out our student loans to try and invest in an IPO of a UK company, lastminute.com - a sort of booking.com of its time that has since fallen by the wayside. We were disappointed when we didn't get an allocation, but of course it was actually for the best. I'm not seeing this sort of behaviour at the moment ... in the UK at least. Think this current "bubble" is more US centric...

Great post, thanks for sharing. Echoing these thoughts - thanks for taking the time to share these stories I loved that post. Where's part 2 ...?

You lost me there :) I'm from the UK also. We have a great tax free wrapper here called an ISA, which enables you and your spouse to save £40k tax free (no capital gains or income). You can also save £4400 per year for each of your kids. If I can live to or near to my life expectancy (85) and make 6% over inflation per year, I will leave this world with them as multi millionaires, able to choose whatever career they want with the knowledge they will be able to live well and do the same for their kids. Writing that makes me happy.

Independence. And the ability to pass that option onto my kids.

First, I think that Buffett genuinely meant 50%. Alice Schroeder has said in the past that he is a very literal person and I don't think he would just make up a "large number". $1mln implies 5-6 positions of $200k each. Therefore he is investing in nano caps and I think there is a lot of opportunity out there. Look at this: https://www.londonstockexchange.com/exchange/prices-and-markets/stocks/summary/company-summary/KYG541351279GBGBXASX1.html I got lucky and piggy backed off the tweets of an activist investor called Richard Bernstein (Crystal Amber) to get into a wonderful risk/reward situation. But imagine if you had the intensity and brain power of Buffett. You could definitely find 2-3 totally asymmetric investments every year globally. Throw a little leverage into the mix and there you go. When he talked about arbitrage situations, I thought he might mean situations where the spread is wide in a takeover, you can leverage into it, and you like the underlying company, so in the few examples where the takeover fails, you are left with a good company. Kind of what he did recently with Monsanto...

Lol, I read your blog every now and then and if I'm not mistaken you have posted an 1.5% annual return over the past six years, lagging your benchmark by 11.8% p.a. And you live in the UK, i.e. in dollar terms your portfolio is actually down over the past six years, despite allocating a significant percentage of your portfolio to US securities, and despite being more or less fully invested during six years of a huge bull market. Your journey to financial independence has been an absolute dumpster fire so far (e.g. riding a 15% position in Flybe down all the way to zero) - yet you wish us good luck getting long term wealthy? If you actually enjoy making money you should probably leave this forum, close down your blog, focus on your day job, pay off your mortgage, and put excess money in an index fund, instead of preaching here to others who are trying to have an rational discussion. At the very least you could maybe act a little bit less pedantic and try to actually contribute something to this forum. You've got me on my personal returns, they have been awful and that Flybe investment was pathetic in terms of process. That said, I've had a great piece of luck in the last week with Lean Clean, which has helped recoup a good portion of those losses. In addition, Leaf Clean was in my tax free ISA account, while Flybe was not. That said, I totally agree, my investing has been very poor. I've been too keen to buy value trips with optically low P/Es and have spent the last decade anticipating the next downturn. I still think my comparative record will look less awful after we've been through the US recession and stock market decline, which will come at some point. However, that will be small consolation. I still think that a visitor to a value investing form should not be reading about how to secure an IPO stock to benefit from a pop. You wouldn't go to a motorbike website, and expect to read about cars, would you?

You sound like a Jehovah's Witness spreading the Value Investing word, with the caps and all. Such dogmatic thinking won't do you any good. I'd advise you to get off your high horse. And if you don't approve making money one way or another, how about you leave this thread alone instead of bitching about us being sinners? I enjoy making money very much and approve of it. Good luck with your strategy of getting long term wealthy, by speculatively participating in "hot ipos" at the top of a ten year bull market. What could possibly go wrong :)

Is this Value Investing? Who cares if it is "Value Investing". Value investing is just a means to an end. The correct question is: is it profitable? And I wouldn't be surprised if subscribing and selling at the open is +EV. FWIW has anybody ever tried this at IB? They do have an "IPO Subscriptions" page in account management but I've never actually seen an IPO there. Looks like the Uber IPO was available at TDAmeritrade. But I don't even know if it is possible for non-residents of the US at all actually. Something to look into maybe. I thought this was a forum for Value Investors where we meet and share ideas about companies trading below their intrinsic value. It seems that is not the case for some people, who think of it as a forum for short term punting.

Is this Value Investing? I can't see that Uber will ever be profitable. The taxi business is one of the most political there is, full of vested interests in terms of taxi drivers and Unions, and the line that the drivers are "self employed" just won't fly with many politicians in Europe in particular. Take London, for example, where Uber tried for a few years to bully the elected Mayor of a city of 9 million! Also, I don't think the network effect and moat is as big as people think. Take where I live - Cambridge, UK. There is a local taxi company that has been in Cambridge forever, they don't tactically break local laws and they pay more than Uber. Cambridge is a prosperous city, one where cab rides are occasional or for business people. Cost isn't such a factor. And the local company has an app, so I can call them just as easily as an Uber.

This isn't meant to be a thread on the merits or otherwise of Bitcoin. It is meant to be a discussion on how best to express a short view. It seems to me there are many ways to short what is, in my opinion, the Bitcoin bubble. Via spread betting, by shorting investment trusts, shorting the futures. What is the best way to short bitcoin, given it may yet go a lot higher.

Can anyone in the UK (or Europe) recommend a good replacement for Google Finance? I am worried that if I use one of the US alternatives, like Yahoo Finance, I might not be able to get good data for some of the smaller and more esoteric UK securities.

Congratulations. How did you find it?

I wouldn't lose any sleep worrying about the NOLs. In my history with Emergent, only the secured creditors charging 18% interest will have to worry about paying taxes. The high interest debt disappeared with the recapitalisation

How much does the bookie take. The "bid/offer" will be appalling.

That's why it's trading at a massive discount. My thesis is that all of those issues are more than priced in - the policies are discounted at 16%, and a lot of the write downs have occurred.

Would be great if people could not use tickers and just state the name of the stock. Mine is Emergent Capital. Formerly Imperial Holdings, it owns a large portfolio of secondary life settlements - face value over $3bln. Having gone through a recapitalisation, it's liquidity issues are behind it and it is trading at a fraction of a book value which is guaranteed to grow over the long term. I think we have a base case double or triple if management messes up and does stupid thing or ten bagger or more over the long term if management is sensible. Only problem is, it's OTC micro cap and might be hard to pick up.

Fair point. I guess you are reducing the demand for the thing to be put back into print.

I'm not advocating for anything illegal, but I think the world would benefit if *someone* photocopied this and shared this with the world, a la Klarman's Margin of Safety :) Wow - a purported value investor that doesn't understand what theft is.

The only ones so far that fit into the criteria I described are Amber and possibly Embraer.