Travis Wiedower

I'm surprised to see only one person mention autonomous in this thread. If autonomous driving comes to fruition, I suspect most auto manufacturers will look like Blackberry and Palm Pilot twenty years from now. GM is taking it seriously and Fiat Chrysler / Jaguar were smart to lock up partnerships with Waymo, but autonomy will benefit from network effects. And network effects means only a few winners, and only a few winners means a lot of bankruptcy / consolidation among the auto makers. None of the traditional auto makers are tech companies - it's not in their DNA. A few may be able to make the transition, but if autonomous driving is possible then this industry is on the verge of getting massively disrupted. And if so, a lot of these auto makers will be classic value traps even at these levels because their terminal value in 10-15 years is zero.

My only clarification / quibble (and maybe I simply misinterpreted): I don't think learning a lot from mentors and being impressed by them is mutually exclusive. Speaking anecdotally, but I learned a ton from Buffett when I was starting out (one of the first things I did when I got into investing was print out the entire buffettfaq.com website and read it all) - not so much anymore. I was pretty underwhelmed by the Berkshire meeting this year, but only because I know how he's going to answer the vast majority of questions since I've read so much of his stuff in the past. None of that takes away from how impressed I am and how much respect I have for him though - probably even more so actually. The longer I invest the more I appreciate how difficult it is and the more humbled I am by his long-term track record (which is blown up and hanging next to my desk as a reminder).

I've met a few analysts who got their roles directly from non-traditional backgrounds, so it's definitely possible. Probably the most important traits for an analyst are passion, brains, and investment skills. Degrees, Wall Street experience, CFAs, and MBAs can be decent proxies for those traits, but you'll have to prove you have those traits despite them (having your CFA is a big plus though). Those few analysts I've met that have succeeded all reached out directly to money managers and included one or two of their own investment write-ups. There's hardly a better way to get others to understand how you look at investments than to get them to read write-ups you've done. Good luck!

My account is still at 45 days.

Watched a couple movies over the weekend thanks to this thread: The Wizard of Lies - really good. The film makes the wife and sons out to be totally innocent, which is really sad if true. Fuck Madoff. Too Big to Fail - barely good enough to finish. Poorly made/written and there are other higher quality documentaries and docudramas out there that do a better job covering the financial collapse. Speaking of, The Big Short remains my favorite investing movie - I've watched it ~5 times. Margin Call is really good as well.

Why do you think Amazon is a bubble? Seems like it's in the ballpark of fairly valued to me.

2. These are almost always judgment calls. If the company has made one acquisition in the past fifteen years, I generally ignore it. If they've made six acquisitions in the past ten years, I'll probably assume acquisitions are a normal part of their business so I average those costs of acquisitions over a period of time (as a percent of revenue) and assume that percent going forward. It's similar with restructuring. If they've had one or two restructuring charges in the past decade that seem legit, I probably ignore those expenses. If they have "one-time" expenses every year or every other year, I assume those are a normal part of the business. It's all about trying to figure out what the normal operating business generates in terms of FCF. 3. Like KJP (and similar to my answer above), I deduct D&A and then add back in a normalized capex number. If it's a more mature business, I look at capex margin over the past 5-10 years and use that going forward. If the business is growing quickly (thus their capex margin is probably decreasing over time) then I'll probably assume that capex margin slowly comes down over time. Every company and situation is different and judgment calls are required. That's what makes investing fun :)

+1. Qualitative factors are huge, but the books that helped me the most on valuation are McKinsey's two books Valuation (aptly named) and Creative Cash Flow Reporting. I've read the second one twice and have a combined 28 pages of notes I've taken from both books that I still refer to on a semi-regular basis. They're more textbooks than anything (i.e. dry, slow reads), but I can't recommend them enough.

Why are those the four options?

Woah that is frightening. Hadn't seen that before :o

You can get most of this through Gurufocus on the Interactive Chart tab. If you're cheap like me you can use the free version, click out of the annoying pop-ups asking you to sign up, and when it restricts access you can open up an Incognito tab and keep using it. Not the most efficient method if you're pulling data for tons of stocks, but I use the above method to occasionally use their charts (which are pretty damn good for being "free") and it's fine.

Not sure if this completely applies here, but I know I've read that you can't reimburse fees in a way that acts like a performance fee for non-qualified investors. So if you have three good years and charge a 2% management fee each year and then you have a down year and don't charge the 2% fee (or reimburse it), regulators may look at that as equivalent to charging a performance fee to non-qualified investors, which isn't allowed.

Probably should have clarified we play dealer's choice with some made up, high action games mixed in. The best is a double board, split pot PLO game we invented. No 15% VPIPs allowed :) Once I started playing more poker games I couldn't go back to hold em. In terms of other games, I've really come to like Backgammon. Unfortunately I don't have any friends who play, but I probably average ~20 games per week playing against a computer. It's a healthy mix of short-term luck and long-term skill just like poker and investing.

Don't fold for hours for starters :) I play wayyyy looser in small home games, don't take it seriously at all and just focus on having fun. Ideally I'd break even every time I play, but that's obviously not possible. There have been several times where I'm up big and purposely dump money at the end of the night though (good thing none of my poker friends are on this site lol). I really enjoy poker and trying to outplay people in big pots, but I'm also not trying to take money from my friends. It's also a good excuse to get a group of friends together to hang out for a couple hours.

I played full-time for a few years and would reiterate everything said so far. One other trait poker helped me with is accepting new information (good or bad), not emotionally reacting to it, and just focusing on making the best decision with the new information. This mostly applied in live poker. If I'm sitting at a table and the worst (or best) river card hits, I can't react at all to it. I just have to accept the new information and make the make best play I can given the new card and any new action. I agree with Hielko that it's probably my disposition anyway (low key, unemotional), but playing live poker emphasized that trait. There's also no better crash course in variance and thinking about everything in terms of expected value. I still think about stupid things like choosing which line to stand in or picking my walking route to the gym in terms of which has the best expected value (shortest time) and whether that differs from the one that has the least variance and how so. Definitely made me appreciate how much luck and variance is in the world. I still love playing, but only get to ~once a month or so. Haven't played seriously in years though, now it's just an occasional $50 game with friends (which is the most fun way to play anyway).

On one of Patrick O'Shaughnessy's podcast he mentioned that his fund did a back test on companies that sporadically buyback stock and that group has significantly outperformed over the years. I think I remember his father, James, talking about this same concept in one of his books, but I'm not 100% sure on that. Anyway, my point is that your inclination that CEOs who opportunistically buyback stock makes for good hunting ground has some evidence to back it up. I have no idea how to replicate a screen like that though.

Expected market returns going forward are still positive, they're just lower. So maybe expected returns are +4% instead of +8% or whatever. It sounds like your net worth is pretty high, but I don't understand why going from $10M to $9M (or whatever it is) during a temporary correction matters? The market is going up long-term. A correction is only a permanent hit to your net worth if you buy high, sell low, and don't buy back in for several years. With that being said, your situation is an annoying one. I agree with racemize--throw money in an index fund and never look at it. It'll be worth a lot more in 20 years, that's all that matters.

Investors Field Guide is fantastic. I've learned quite a bit from the guests Patrick has had on his show.

I think peer comps can be a valid data point, but valuation really needs to focus on the individual company. In my opinion, peer comps are way overemphasized as a whole in investment write-ups. The book Valuation really helped me crystallize my thoughts around peer comps and I ended up writing a blog post about it--might be helpful to you vegaseller. https://traviswiedower.com/2017/01/31/peer-group-valuation-is-mostly-useless/

^^ That's a great blog post by Nate. I've had three notable anecdotal events this year that make me think the economy is too hot, but who knows... 1. I know quite a few people in real estate in Austin and it's absurd. I've heard numerous stories of houses going on the market and getting 20 offers. 2. One friend here owns over 100 properties all around Texas. He stopped buying in Austin 3 years ago and stopped buying in Texas altogether last year. All he's done since then is sell properties because he said there's no good deals in the entire state. 3. A family friend in Cincinnati sold their house earlier this year and got offers from the first three people that walked into their open house. Had it under contract within hours of putting it on the market.

I have a similar setup to yours. One folder per company and one Word document per company where I put all my notes. Those notes include everything from reading 10-Ks to conference call notes to industry research etc etc. Every new note I add I put a space at the top of the document and the date I'm adding that note so there's a timeline record of my thoughts and analysis that's very easy to follow. Anytime I make a buy or sell I add a note with my current thinking and why I'm making that decision--helps to go back and analyze my thoughts at the time and why I was right or wrong (helps with hindsight bias). That Word document can easily be 20-30+ pages for companies I've watched and owned for a while. The folder also contains one Excel document with a various amounts of spreadsheets for modeling and tracking certain key metrics. Finally, I put a variety of documents in that folder related to the company--presentations, write-ups, industry journals, etc.

I think it's easy to forget that all valuation methods involve the same assumptions that DCFs make. Most other methods just make those assumptions implicitly vs a DCF that forces explicit assumptions. Ultimately no valuation method is perfect so it's best to look at companies from multiple angles. Below is a quote about DCFs from a blog post I wrote on this topic last year: https://traviswiedower.com/2016/05/17/my-love-hate-relationship-with-dcfs/

Went down a 3-hour crytocurrency rabbit hole this afternoon--interesting stuff. Anyone have a good non-technical book recommendation that isn't written by a total fan boy? Just looking for a good overview of everything and how it works, not 101 reasons why crypto is going to take over the world.

Nothing is guaranteed, but all have a very high probability of getting there eventually so I'll say +2 to time.

Valuing high growth companies is the same as any other company (estimate future cash flows and discount them back to today), but there's generally a much wider range of possible outcomes so it's a more difficult task. If a company (like Amazon) invests almost all of it's "earnings" back into the business, you have to think about how the business will look when it matures in 5 or 10 or 20 years and what it may be able to earn at that point. It requires asking yourself a lot of questions such as: [*]How might this industry evolve over the next 10+ years? [*]How big might the eventual addressable market be? [*]How might this company's competitive position change over that time? [*]How durable is their competitive advantage (assuming they have one)? [*]Is the company or industry at risk for technological disruption? [*]How much operating leverage can this company benefit from as it scales? and on and on. The investors who can predict how industries and companies will evolve over time more accurately than others will make the most money. It's not easy though, that's what makes it fun :)