SpecOps
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Posts posted by SpecOps
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My biggest mistake is on position sizing. I've frequently gone over 20% in a single stock and although I haven't lost money because of it I now think it's far too risky, given how many companies I've invested in didn't turn out exactly as I expected. Luckily these were smaller positions, but I realised I don't know enough to have that much confidence in a stock so I diversify far more now.
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Interesting thanks. It reminds me of a presentation I saw from David Einhorn about oil companies, that advertise how cheap their stock price is compared to cash flows while totally ignoring that the huge investment has been made to get the oil out of the ground and the return on capital is a pittance. Analyzing unadjusted earnings is definitely a rarity now I agree.
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AIUI you cant usually use asset impairments to offset tax, otherwise everyone would be writing down all their assets just to avoid tax. So if they are profitable excluding asset impairment that will be why they record an income tax liability.
If they have an intangible asset with indefinite life but are amortizing it, then that could be why they are getting taxed yet on paper are unprofitable.
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Small caps also attract a lot of investors that don't think twice about value, and are more into momentum trading. This is especially true on the AIM of LSE. When a small cap's shares move up on decent news it is always a big move as momentum traders jump in. Conversely when stocks have no news for a while they just go unloved and often undervalued.
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Value investors are wrong when they think they can be capable value investors when they don't have the appropriate tools. As Buffett and Munger have pointed out numerous times there is a patience and control of emotions required to arbitrage price and value that maybe only a small subsection of humans are actually capable of doing.
This board is a self reported 68.0% INTJ/P (http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/myersbriggs-type-indicator/) versus an expected occurrence in the population of 2 to 7%. Assuming this board also has a higher weighting of successful value investors than the general public I think this suggests personality traits may play a significant factor in value investing success.
I don't know what the exact number would be, but I think value investing is a mistake for a majority of the population. The Superinvestors of Graham and Doddsville proves that value investing can work, but it does not prove that there will be no Loserinvestors of Graham and Doddsville.
I'd never seen that poll before, just did the test and I'm an INTJ as well. It's crazy how concentrated this forum is in that category!
I would question how many big fund managers are INTJ though, not a lot I imagine. Perhaps that's why they underperform :p
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All you need to be a successful hedge fund manager is be able to convince people to give you their money. Track record helps but you need to be a bit of a salesman as well. You could start with friends and family, or start a blog and get a following.
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It has what's called the Regulatory News Service, you get the filings from the London Stock Exchange website for the relevant ticker. Here's an example, it's just under the share price chart
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I want an app that can take what I already like, for instance TV shows and books, and suggest new things for me that I will actually like.
I've seen a few services try this but never been impressed.
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Gurufocus uses Morningstar. I had similar experiences to Nate with their data in that it had some issues, which is to be expected when you're manually entering data, no data provider is perfect, but had more than competitors like Factset and CapitalIQ.
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Back in my day lecturers didn't use powerpoint, they used chalk and a blackboard. If you didnt take notes you didn't pass!
(This was only 10 years ago, my lectures were pretty old school)
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My attention span can be a real problem, if I constantly check things online throughout the day then I can't do anything meaningful in terms of work because my attention just cannot focus.
I have at times in the past stop reading things online and on my phone completely for weeks and its amazing how much more productive you become. For some reason though I can never keep it up and the interweb drags me back into procastination eventually.
I think people dont realise what a detrimental affect it has on them until they give it up, I didnt either until I gave it up for lent one year and suddenly I found myself far less irritable, I was sleeping better, and overall felt better.
I dont think multi-tasking is the solution to lack of attention span at all, it may help in the short run but is actually the opposite of what you should be doing to address the problem. You need to get used to focusing on one task and in the start it pretty much means forcing yourself to do just one task, even if focusing on it is a real struggle.
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Ebay is worth checking too, you can get frames in all sorts of sizes pretty cheap
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You will need to switch to a margin account and apply for options trading permissions if you haven't already done so. They will send you a booklet describing the 'characteristics and risks of standardized options.' Not all brokers require a margin account to purchase long positions in options, but it appears that TD Waterhouse does. Similar to the other thread on this board describing margin approval at Merrill Lynch, you will probably need to indicate you are experienced in trading any securities you want approval for.
Be careful buying options, even for hedging. Make sure you know what you are doing.
This has been my experience as well, to get a 'trading account' you have to be an experienced investor, so you have to fill in a questionnaire attesting to it.
They don't check very thoroughly though, but obviously you should understand the risks you are taking with access to leverage and trading on margin.
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I was quoted $1,000 a month for access to their datasets, most other data providers will quote a similar amount.
If you are only interested in company level data rather than the raw huge datasets then you can access it in Excel through my site for much cheaper, from $10 a month, link below V
Edit: If you are interested in using some raw datasets then send me a pm, I have access to the raw Mergent datafeed and we might be able to work something out.
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One quote interested me
Temperamentally, he wouldn’t dare to own a concentrated portfolio, because he was “too worried that it
could just blow up” and was “too skeptical about my own skills.” Few professional investors so frequently utter the words “I don’t know.”
Never thought of it like this, but is diversification the ultimate sign of modesty?
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Makes sense for companies to issue these kind of bonds with interest rates here. The UK Treasury flirted with the idea of 100 year bonds a couple of years ago but in the end they did not go through with it, I think investor appetite wasn't too great. I guess people aren't that stupid after all :)
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If I didn't have a lot of money I'd consider one position. Otherwise I dont think I would, there is always more than 1 good investment around and I like the diversity.
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I can't speak much of other countries, but here in the UK I know that in my profession there is a specific university that delivers Masters courses and most people go for them, even though they are not highly ranked in league tables or even well known. They do it by interacting with our professional body, which is an organisation of professionals and I'm sure there will be ones like this in your industry.
I would identify some of these professional bodies in other countries and engage with them, and even talk with them about tailoring courses specifically for their members. The first point of contact might be a government department responsible for that industry and skills within it, as they will probably know the relevant professional bodies.
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20 years minimum is pretty harsh, but I wonder how else he thought this would end? The US has always come down hard on things like this, and he must have known, long before it reached the sort of scale that it did, that it was being used primarily for illegal activities and would invite the wrath of the law at some point.
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It depends whether the manager is objective enough. What I mean is that every CEO and senior manager has a direct incentive to fund growth, as it increases company earnings and hence their remuneration. So a manager will not always act in the shareholders best interests.
But if they were objective then imo it comes down to what will be the intrinsic value per share after each option is completed. For example a share buyback might reduce share count and hence increase IV per share by 5% say. This can usually be calculated without explicitly knowing what IV per share is.
Calculating the IV added by organic growth is more difficult, if not impossible. If it was as simple as spend $x now to increase earnings by 5% permanently then it's straight forward to say IV has increased by 5%. But sometimes that 5% will be compounded year after year before reducing back to nothing. For example you may acquire new customers, who then generate more sales through word of mouth, but eventually the advertising push is a distant memory and sales will revert back to a new equilibrium. Some may look at a company's ROIC to judge how much each $ invested earns, but its not always so straightforward. For example Apple has huge ROIC, but if they invested $100bn into their business in a year, they wouldn't earn their ROIC on it.
So I think my conclusion is that in most cases its impossible to know which is going to be better long term, but for the most part the managers will choose growth because it benefits them the most. I think it's rare that managers are accosted by shareholders for spending too little on organic growth, more often they are accosted for wasting money on unprofitable growth or expensive acquisitions.
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Operating income is after the depreciation and amortization charge, so it doesn't really make sense to subtract cap ex from this. I am thinking you are probably talking about operating cash flows, in which case yes, Operating cash flow - cap ex (and software costs) is free cash flow which is the true measure of the cash earnings of a company. Operating cash flow is after taxes, but make sure to check 'deferred taxes' that can build up, as this is tax owed but not yet paid, so can make a company's cash flow seem higher than it really is.
Some like FCF because the income statement is easily massaged by boards, but be careful, while cash flow is harder to falsify than the income statement, it is still possible, as was shown by Enron. I did a blog post about how Enron fabricated cash flows a couple of years ago https://investingsidekick.com/enron-fraud/
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Perhaps the problem is that with record low interest rates, the pension managers are forecasting much lower returns on the pension funds in the future which has given rise to these 'unfunded' liabilities. They may hold lots of bonds that have risen in value nicely over the years, but given that most pension funds will invest for the long term, this increase in 'value' wont actually benefit them much. If they buy a $100 bond with a 5% coupon and maturing in 10 years, does it really benefit them if after 5 years that bond is worth $130 marked to market? They will still hold it until maturity and get back their $100. Only then if interest rates are still low they can only buy a $100 with a $3 coupon. That has implications on them meeting their long term obligations.
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I've just started the book. I hope I like the second half better than you do... :)
I really have to buy this book, I wonder how many of us could honestly say that with $100m we would invest so heavily into an innovative company and risk losing it all. I guess us value investors are risk averse anyway, most of us would be content to simply invest it in a portfolio or even a tracker and live off the dividends.
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Just want to say thanks to all the beta testers for their feedback, testing has now finished. It was all very useful and I think has enabled me to get a good product out. The spreadsheet is now available to everyone at https://investingsidekick.com/
Speaking of mistakes: Mr. Money Mustache’s Big Mistake
in General Discussion
Posted
Very interesting thanks