KCLarkin

The complaint isn't about how long it takes an order to get filled (though the big banks are very slow). It is the price that it gets filled at. It probably doesn't matter if you are buying 100 or 200 shares. But if you are trying to buy slightly larger positions, it becomes a big issue. I don't use market orders but here is a hypothetical example: Place a market buy order on IB. You might execute at the mid-point between bid-ask. Place a market buy order on TD. You might execute at $0.05 above the ask. Most investors don't notice this invisible cost. The practical result is that for larger orders, you need to think a lot more about execution risk on the Big Bank platforms. My limited experience with IBKR is that execution is night and day. Granted, my experience so far on IBKR is limited mostly to illiquid call options with large spreads. But with BMO, execution was so poor and commissions were so high that the trades weren't practical. Same trade on IBKR was delightful. In fact, the whole reason that I opened the IB account was just to do this options trade. But after seeing the quality of the executions, I plan to move over a big chunk of my stock portfolio. This is theoretically correct. And if you are willing to risk a market order, it might be even be practically correct (though you need to factor in spreads and execution cost). But if you use limit orders, there is an asymmetry. If the stock moves in your favour, your order will get executed. But if the stock moves away from you, then you can get big losses. And then you have a dilemma. Do you take a big loss on your clever arbitrage? Or hope the stock moves back in your favour? And while you ponder this dilemma, the stock continues to move against you. That's how you end up with a $1000 loss. The irony is that this is a concern if you are using a broker that has poor executions. The same trade on IB probably wouldn't have gotten away from me. But I don't need to worry about this hassle on IB since it offers fair ForEx.

For trades of any size, the cost of poor executions at big Canadian Banks will swamp the trading commission. I just tried a trade at TDW yesterday. The cost of market impact (versus the price I would have gotten at IB) was at least $150 versus the $10 commission. Re: Norbert's Gambit. This is usually better than retail FX. But I have had cases where stocks moved against me before I could finish the second leg of the arbitrage. I think one time I lost $1000 on this arbitrage. I know that some people use a money market fund for this arbitrage but it isn't available at BMO. The other issue is settlement. Not a big issue in margin accounts. But I have been hit with big interest charges in registered accounts when attempting Norbert's Gambit. And of course Norbert's Gambit doesn't help with dividends. There are many CAD companies that pay USD dividends. And you have to pay commissions and worry about spreads and market impact. Better to just go to a broker that offers reasonable ForEx. -- I didn't mention the global platform b/c I assumed it wasn't relevant for smaller accounts. But if you are planning to invest outside NA, IB is the only viable option. -- Re: Too Big Too Fail. IB is very conservatively capitalized so I don't know that it is really less safe than Big Banks. One concern would be if IB let it's Canadian subsidiary fail. But if you have multi-million dollar accounts you are probably best to divide it amongst several insured brokerages anyway. Disclosure: I still have most of my assets at BMO/TD/Scotia but my experience with IB has been so good that I plan to transfer more assets over to IB. I also own IBKR shares.

Interactive Brokers I haven't tried any of the other non-bank discount brokers. But I do have accounts at BMO, TD, and ScotiaItrade. The executions at the big banks are very poor. I don't know if a $200k account would notice but it is night and day versus interactive brokers. The other big advantage for Canadian investors is that ForEx is done at wholesale rates. At other brokers, you are going to lose 2-3% on a round-trip trade for U.S. stocks. I wouldn't recommend margin on a $200k account but if they do use it, the margin rates at the big banks are horrible. -- The main drawback, especially for a small account is that IBKR charges for market data. I just use my BMO account for market data and trade in IB. But this wouldn't work for your example. The user interface takes some time to get used to. But it is actually pretty good. -- For larger accounts (over $1M) you might feel safer at the big banks. But smaller accounts at the smaller brokers should have sufficient insurance.

Brilliant. And for those who aren't aware. You can "ignore" the new politics board under "profile".

I've invested in one idea out of VII. It was a very quick double (and would have been better had I held longer). Someone mentioned the Columbia Graham and Doddsville. It is also very good but the formatting and interviewing in VII is much better. Though G&D seems to get better access to more famous investors. Whether it is worth a subscription depends on your AUM. It's somewhat like Munger's subscription to Barron's. You read a lot waiting for that one idea that justifies the subscription.

Too lazy too look it up but I'm pretty sure he explicitly mentions his small army of analysts as the reason he didn't jump to a hedge fund.

UK stocks trade in pence not pounds. Perhaps something similar here?

A couple of weeks ago, my family rented a cottage. On the day we arrived, my son came down with a fever and sore throat. My wife had recently had strep throat, so she assumed that was what my son had. It was the weekend, so all walk-in clinics were closed. Our only option was to go to an ER in a town 30 minutes away. Since I had read Sanjeev's post, I decided to give goevisit a try. It saved us from spending most of the day at the ER. Instead, we enjoyed swimming and canoeing while we waited for the doctor to call. He then called into a prescription into a nearby pharmacy. Our vacation was rescued. So, this service worked very well for us. But I also noticed some drawbacks: - The name is not great. It doesn't tell you what the business is. And the vowel combination of "go" and "evisit" makes it difficult to pronounce, spell, and remember. - Diagnosis is limited. The doctor tried to look into my son's throat to see if he had strep. This was difficult using FaceTime. - When my wife was diagnosed with strep, they took a swab. This prevents un-necessary antibiotics. Goevisit couldn't take a swab from my son. Given the limits of Goeevist, I suspect it will increase unnecessary antibiotic prescriptions. - For most things, this is probably best as a screening service. Do I need to go to the ER or see a "real doctor"? This is great for patients (saving hours versus sitting in ER). But it would also result in double billing to OHIP. - The number of "conditions" this service would be useful for is relatively limited. You can't get stitches over the phone. - This isn't really a problem but the technology is really primitive. You install an app on your phone but all that is used for is to request a doctor. The doctor just phones you over FaceTime. Your case report is sent over email as a word attachment. - I feel like this would be susceptible to insurance fraud. - In Ontario, we have Telehealth Ontario. It serves a similar "screening" function. But they only provide advice. This wouldn't have worked for our case, since we needed a prescription. - In Toronto, we have doctors who do house calls. For most cases, I think this is better than Goevist. You usually have to wait several hours for the doctor to arrive though. - Seems like it relies on "provincial health insurance arbitrage". Anyway. This is an interesting and valuable service.

I think you are way off. The psychological content was taken from Tversky and Kahnemann. Of course. They invented the field. But that isn't the story in this book. It is really the biography of Tversky and Kahnemann. And their relationship. That story is very interesting. But I agree that the book was less engaging than previous Lewis books. Perhaps because Kahnemann is so private and Tversky is dead, Lewis struggled to get more interesting anecdotes.

Thanks all. This thread was actually quite helpful to me. Here is a potential pattern of what a successful response to the Amazon threat might look like: - impact will take longer than initially expected as consumer's habits change - but once the Amazon impact is obvious, the business will deteriorate rapidly - if management is talented, they will recognize the threat, and respond aggressively. This will have a dramatic short-term impact on earnings and margins. Mr. Market will pay a very low multiple for the "melting ice cube". The result will be a dramatic drop in the stock price (say -60% to -80%). - if the response is successful, revenue and profitability will stabilize. Mr. Market will be willing to assign a normal multiple. - This results in a j-curve investment opportunity. The rewards for a successful turnaround can be enormous (say 4x) since increasing earnings are combined with a large multiple increase. - But, the stock will also initially drop further and longer than expected in the down leg of the j-curve, so don't try to catch the falling knife. Of course, this pattern only works for the successful turnarounds. Another company going through this process is IBM. Time will tell if IBMs turnaround will be successful though.

At least you can bet that these problems are in the mind of Bezos. Nationwide partnerships. Order through Amazon and delivered by the local branch. This seems to be what they are doing in industrial distribution. There are lot's of local distributors that don't have the technology to compete with Fastenal, MSC, or Grainger. They might be willing to partner with Amazon.

Both the "last man standing" and "market over-reaction theories" are too simplistic. I used 1999 as the starting point only because that is when Amazon launched the electronics category. But the real case study is the 2012-2014 period, when Best Buy recognized the dire threat and instituted a strategy to counter-act the threat. Here is how Newsweek described Best Buy's predicament: A few things that seemed key: - Strong balance sheet - Brought in turnaround CEO who confronted the "brutal facts" - Price match guarantee with Amazon - Lowered prices to be more competitive with Amazon (~2% higher from one) - Invested in customer service and product lines that needed service (e.g. cellular) - Strong integration between online and offline - Extended warranties and services? - Extensive cost cuts - A willingness to take a short-term hit to earnings and margins A company that might be going through a similar turnaround now is Grainger. They are systematically lowering their list prices to make them more competitive. They are also streamlining their branch network.

IIRC, Best Buy traded down to something like 4x earnings in 2012. So maybe one lesson is that things like AZO (12x) or CVS (13x FCF) aren't really that cheap. On the other hand, they seem more defensible than BBY.

This question is not about Amazon (otherwise it would be posted in the Amazon thread). But the question is whether the Best Buy case study can help value investors find any treasure in the various Amazon-related sell-offs this year. Perhaps this is a re-hash of things discussed on the Best Buy thread, but I doubt many investors are aware that BBY has actually outperformed AMZN since 2013. So I thought this might be a useful discussions for people considering investing in things like Autozone, CVS, or MSM. Things that look cheap but are widely considered value traps due to the Amazon threat. Maybe all this thread is good for is to nudge a few investors into reviewing the Best Buy thread.

Jeff Bezos and the mighty Amazon are a clear and present danger. Among the expected casualties -- Walmart, Costco, Home Depot, Autozone, CVS, Fastenal, Staples, The Gap. Given this widely held view, it would be interesting to see a case study on Best Buy. Amazon introduced electronics, video games, and media in 1999. These product lines were Best Buy's core business. They were also products that were ripe for e-commerce. In the meantime, entire segments of Best Buy's business have largely disappeared: CDs, DVDs, video cameras, digital cameras, GPS... Since Amazon started selling electronics, Best Buy grew EPS 11% per year. BBY's multiple dropped from 37x to 15x earnings. Yet, Best Buy actually outperformed the S&P 500 since Jan 1, 2000. And Best Buy's shares hit all-time highs this year. Is Best Buy a unique tale of survival? Or is the Amazon threat to grocery, pharmacy, home improvement, auto repair, industrial distributors and apparel overstated?

This is not correct. For one thing, small RIA's and asset managers generally don't care that much about trading costs. And they are not IBKRs primary customers.

I haven't been using IB as a user very long but have noticed investors complaining about outages on other platforms while IBKR was stable during very volatile periods. You haven't specified what you are logging into, but sounds like a browser-based interface. Possibly you just need to clear your cache. If you can't log into one interface, try another (e.g. iphone or TWS). Their backend is solid, so I suspect any issues you are having are front-end and not related to market volume or volatility.

I'm not convinced that working capital changes accurately reflect Amazon's underlying earnings. They are a derivative of growth. And if you subtract WC, 1/2 SBC, and capital leases, the number gets very close to NI. And depreciation seems like a more accurate proxy of maintenance capex than CapEx plus capital leases, so I think your life would be easier if you started with net income and then made your adjustments. Then you can add back growth investments which flow through the income statement. This might not be true in your case, but I think many Amazon bulls prefer the FCF number simply because it is higher. -- This is probably obvious in light of Buffett's recent comments... But all the historical data on value versus growth is based on "old school" growth stocks. As Buffett points out, modern growth stocks (Apple, Google, Facebook) are able to rapidly achieve very large markets, with high margins, and enormous ROIC. It took 125 years, for Coca-Cola to reach $7B in net income. It took Google 18 years to reach $20B in net income. In other words, this time really is different. And historical relationships between growth and value might be breaking down. Certainly Google and Apple have been ridiculously underpriced for much of their history. Many value investors would be wise to selectively add some of the "new school" growth stocks to their portfolio. Edit to clarify: What I'm trying to say is that the dynamics of growth stocks versus value stocks isn't any different. A few growth stocks are big winners. Most are losers. But what is different is that the winners are so big, that it might mathematically tip the odds in growth's favour. -- I do worry that Amazon, Tesla, and Netflix might be forming bubbles. But I don't think anyone could argue Facebook, Google, or Apple are egregiously overpriced.

Why? Is stock based compensation not an expense? Is property purchased using a capital leases not CapEx? Is float added really profit?

Nifty Fifty revisited: https://www.aaii.com/journal/article/valuing-growth-stocks-revisiting-the-nifty-fifty Slightly underperformed sp500 to 1998. There is some criticism of the methodology IIRC. Specifically, there may be hindsight bias since there was no definitive Nifty Fifty list.

Before it was a book, it was an article: http://www.cfapubs.org/doi/pdf/10.2469/faj.v51.n1.1865

Online lenders: LC and ONDK * Though there is some argument that these stocks have just dropped from outrageously expensive to expensive. OnDeck trades for less than book value but that is probably appropriate given the negative ROE.

I don't know the company well, but the obvious question is why are the margins (and ROE) sustainably high. This seems like it should be a cyclical, commodity, capital intensive business. Sometimes management can overcome a bad business. But with the turnover in management, this seems unlikely.

A warning to anyone long BAD: Marc Cohodes just announced that he is short BAD. Given his recent track record (CXRX, HCG), this is likely to be an unpleasant experience. Disclosure: No position.

Agreed.