JayGatsby

A family member had something similar... not a kids toy, but pretty similar. He put a value on the business and asked friends/family to invest at that valuation (as an example, if he valued it at $1M and was raising $100k, those investors would be buying 10%). Few takeaways for me: 1. Building a market for a product that doesn't exist is very challenging. This should be factored into the valuation. 2. Be clear about what the money is being used for (marketing vs inventory, etc). This is a good exercise to do up front to build the strategy, and also avoids any confusion down the road. Time spent building a strategy up front isn't wasted. The strategy will change as you learn the market, but it's important to think about how you're going to launch the product (will you focus on ecomm/facebook sales or focus on getting into toy stores... how will you do each? how much does each step cost?). 3. It's your money and you've worked hard to get it (or someone else has). Don't discount the value of your contribution. My 2 cents.

I know people will criticize the source, but this article has some interesting datapoints: http://www.zerohedge.com/news/2017-07-31/schwab-new-accounts-are-levels-we-have-not-seen-dot-com-bubble-millennials-rush-stoc

Good read by him. Shares are down ~50% since then as the business has underperformed. He was right that the brand licencing business was pretty worthless and in decline. I'll have to dig through it a bit more and see if there are related party transactions. I didn't see anything in my quick read to suggest the owner had done anything nefarious over the past 5 years. The question now is whether it's at the tipping point where there is no more operating business and they simply return cash. Schwab placed 25 shares for me today... so $30 of stock and $5 of commissions. Better double from here!

Sorry, that's what I meant. Still doesn't seem like a huge percentage to me. As you point out, a good chunk of this is likely hedge funds. If a fund like Greenlight is 120% long and 100% short I don't see that as being as systemically dangerous as being say 220% long which is what people may infer from the chart. Having said that, I do agree that the lack of volatility can lull people into a sense of complacency and a perception of less risk.

The second chart says current margin debt is a bit less than $250M? Doesn't seem like a massive amount versus a market cap of ~$20T, but I guess it's meant more as a measure of underlying bullishness/complacency than as a measure of actual systemic risk.

Not to get the thread of course, but this seems like a decent little cigar butt: -Mkt Cap of $34M is 56% owned by a company out of Hong Kong, leaving $15M in public hands -Current repurchase plan is for $5M. Runs through December -Lloyd Miller owns 1.5M and has been pushing for cash distributions for years. In 2015 the company did a $19M special dividend -Operating business is pretty poor (Import cheap electronics under the Emerson brand and sell to big box retailers), but they've managed the decline well. Sales have declined from $163M in 2012 to $21M in 2016 but EBITDA was basically breakeven in 16 and there's no capex. Inventory and AR have mostly already been converted to cash. -A licensing contract terminated at the end of 2016 that contributed $3.6M of revenue in 2016 at likely no cost. My guess is the licensor decided the Emerson brand doesn't have much value. Business now is largely selling cheap microwave ovens to Walmart, which, not surprisingly, doesn't have a lot of margin. -They recently terminated the CFO and replaced him with a board member affiliated with the controlling shareholder. This is a bit of a red flag, but the old CFO made $480k last year while the new guy will make $150k (plus bonus?). He also loses the $50k he received as a director, so net this saves the company ~$300k assuming a 50% bonus. Haven't dug into it too much but it seems fairly low risk for a negative enterprise value business. TBV/share is $1.98 versus $1.27 share price. If they execute the buybacks that gap will widen (although business is likely currently EBITDA negative). Seems like it's getting pretty close to the point where there isn't really anything left from an operating business perspective. Risk seems to be that the controlling shareholder decides to do something other than wind down the business. They haven't made any acquisitions that I can see though. The controlling shareholder was involved in a complicated liquidation of a HK holding company that may be worth reading into more.

That's really interesting. So the key is the companies that are so beat up that no rational person would touch them... with high TBV the upside optionality is higher than the downside optionality (on average).

Can anyone share a list (or parts of a list) of what this portfolio would currently hold? I ran a similar screen on CapitalIQ (https://drive.google.com/open?id=0B1tb4Z-iuO9Bd3NDYWxmT3JOYWc). I've looked through a good number of the results and haven't found any that really jump out at me as good investments. That has the bias of my opinion, so the key to making the strategy work may be to eliminate that ;). Some are Chinese companies, some are retailers with deteriorating results, some are homebuilders/land owners, some don't have English financials (which leaves you betting on the CapIQ/Bloomberg analyst inputting the numbers correctly). Trans World Entertainment is one I've watched for a while... they have a large shareholder, a lot of inventory and a huge amount of NOLs. If they just slowly liquidated stores as sales declined and reinvested that into something low risk but cash producing it would be a great investment. Instead they overpaid for an Amazon seller that loses money. My personal experience has been that investing primarily on the basis of low price/book / net-net has generated my worst results. Again, that's a limited sample set which incorporates my selection bias. I'm skeptical of a company that can't earn decent ROIC in today's economy, unless it's O/G (or something else that is cyclically down).

Agreed. One of my new favorites. The audiobook is read by Zell which I enjoyed.

Interesting question. I buy most electronics online and buy less electronics overall (outside of phones) because the replacement cycle seems to have slowed down. My TV is ~10 years old but isn't all that different than a brand new TV. The last time I went to Best Buy was for a cell phone case that I needed immediately. Does Best Buy do significant financing? A lot of companies seem to have quietly changed from manufacturers/retailers to finance companies from an earnings perspective. I know companies like Conn's will sell TVs and such with monthly payments. I know Best Buy is in that game as well, I just don't know how significant it is for them. Conn's was doing great for a while, but then their financing got too loose and they had to tighten up. They did their financing off their own balance sheet and reported credit metrics in the financials, so the whole cycle was very transparent. Conn's would have healthy margins on the product side and basically aim to breakeven on the credit side. If Best Buy is outsourcing the financing it could be much less transparent.

Really depends what you want to do. If you want to do public markets investing or private equity location really doesn't matter for the business itself, so you're really looking for an established team with a strategy you find interesting (and that also finds you interesting). If you want to do large-cap sell-side investment banking your options will be more limited. One thought is to check around for family offices. The # of formal family offices has been growing rapidly and they create really interesting opportunities in nontraditional cities. Like these folks: https://www.theglobeandmail.com/globe-investor/sobeys-and-mccains-join-forces-to-invest-in-boosting-canadian-businesses/article534342/ Feel free to shoot me a PM if you have more specific questions. I'm 30 as well... did IB, PE, corp fin and am now in Denver doing some things on my own that haven't succeeded or failed yet.

These companies don't seem especially cheap to me even with the price collapse... they could have simply been overvalued before.

The price of the Serta mattress I bought 4 years ago on Amazon is down 9%. Looks pretty similar to the one LC pointed out for $200.

lol. +1

A lot of these loans are provided by the federal government. The heartless Republican answer would probably be to stop providing these loans, which would force that decision to the private market. A lot of these schools would disappear overnight, for better or for worse. Gary Johnson talked a fair amount amount how access to capital had driven up costs and totally messed up the whole system.

They're fairly different but I really like Jim Rogers' books if you're interested in global investing. He's been an extremely successful "emerging market" investor. If I remember right, Street Smarts was the high level summary written later. Investment Biker and Adventure Capitalist are the stories of his trips around the world (1989 and 2000, respectively). The reason I put emerging markets in quotes is he's critical of the idea of emerging markets as an asset class and was early on saying that BRIC was a flawed concept. His basic edge was just going places and talking to people. That gave him the actual understanding of the cultures and governments in which he was investing, while most asset managers were just reading about it. As an example, his counter to bullishness on India has always been to tell people to try driving across it. He's always been positive on China because he saw the ingenuity and work ethic of the people when he first rode across it sometime in the 80's. He likes situations where the political/economic culture is changing. There's a video of him online buying paper shares at a window in China... I think just as the exchange was being established if I remember right and probably as the first American to buy shares. Some people criticize him for possibly being overly negative on the current monetary situation... I guess we'll see.

That's it. They don't own their distribution though so they need to deliver that same experience through other merchants. Maybe they've started doing that by now. It looked like they used to basically tell retailers how to retail their product. If Macy's can't figure out how to online retail, RL needs to teach them.

I bought RL. I believe RL has one of the strongest brand values among clothiers and that is what will help them survive during the downturn. Also, if you assume eventually everything will be sold online, I think brand recognition becomes even more important. ^^^this right here, and think RL is a good choice I'm not disagreeing necessarily and the stock decline at RL from peak looks enormous. One thing to be cautious of though is for men's RL had an amazing moat for in store retail. They were one of the only brands that had stores within a store at the major department stores. Even when the department stores were kind of crappy those sections were always hardwood and really nice. I recently ordered a replacement RL polo shirt and it came in a cheap plastic bag within another cheap macy's plastic mailer. Even though it was the same product I'd always bought it delivered a very cheap feel and I thought about returning it just based on my subconscious reaction. They don't seem like they've figured out how to deliver the same experience online.

Interesting article on Elliott: https://www.ft.com/content/541d8f8e-3a3e-11e7-821a-6027b8a20f23 Not a totally fair description of the Arconic situation I don't think, but the quote came from ValueAct. The Arconic CEO sent such a bizarre letter (with a soccer ball) to Singer that there was really nothing a reasonable Board could do to save him.

This blog is very good so I suspect the book is as well: http://www.bakadesuyo.com/2017/04/barking-up-the-wrong-tree-book/ . There's a few "bonuses" and he says it helps him a lot to have preorders (I don't know why), which is why I'm posting before I've actually read it. The cover flap description is a bit promotional / Freakonomicsish, but if you take a look at some of his blog posts you'll see the types of stuff he writes about and the science behind it. I'd put it in a similar category as Farnam Street... how to think and live better drawing on the lessons of others. In the author's words "what leads to a successful life, all drawn from scientific research and expert insight". Here's the promotional blurb from Amazon:

You may have seen this already, but here's Mark Cohodes' presentation which was posted overnight: http://turnoutthebadgerdaylight.com/ Bit of color from Zerohedge: http://www.zerohedge.com/news/2017-05-14/marc-cohodes-scourge-home-capital-reveals-his-latest-short

I've never owned a Toyota, but part of it may be their long-term mindset (Rule #1 "Base your management decisions on a long-term philosophy, even at the expense of short-term financial goals."). If you treat your products and customers as long-term assets the market should value them similarly. I've heard from Subaru owners that the Subaru dealer network makes it so pleasant to own a Subaru that they have no reason to ever look at anything else. My mom has a Toyota and nothing has ever broken so it's hard to comment on the dealer experience! I own a "certified pre-owned" BMW and they take the exact opposite approach. The dealer network (at least in Southern California where I was at the time) couldn't be more short term focused if they tried. Now it's off "warranty" so I take it to a private shop (in Colorado) that I've been happy with. Even between those two the difference in attitude is stark; "You bought your car at a different dealer so it's obviously a lemon" versus "That's an awesome car. Have fun you shouldn't have to see us for a long time". The little things matter too.

I like seeking alpha. You load in all your tickers and then it has a newsfeed for those tickers. It picks up earnings / press releases, and SA will also have summaries/links for important company related news for larger companies (see below). They also usually have earnings calls transcribed within about 1 day. Most of the user generated content is pretty poor, but some can be worthwhile. As an example, here's two a few news items by SA staff editors that popped up today for companies on my list: https://seekingalpha.com/news/3257362-elliott-says-letter-arconic-ceo-ouster-read-threat-intimidate-extort https://seekingalpha.com/news/3257288-arconics-kleinfeld-chairman-ceo-shares-plus-5-percent-premarket https://seekingalpha.com/news/3257324-chipotle-hikes-prices-440-restaurants

I was talking to a student in the UK recently and they have an interesting system. Here's a decent summary of it: http://thecollegeinvestor.com/13871/student-loans-different-uk-vs-us/ Basically tuition is capped (all school's are public and there's no states, so it's a bit different), the loan amount is capped , the repayment is based on your earnings, interest is low, and after 30 years it's officially discharged if you've never been able to repay.

Good article, but I disagree with the author's conclusions. There's been increasing discussion that access to capital is what's driven up the price. You see it in the stats she quotes on the number of administrators and amount of construction; the colleges aren't primarily competing on price. If the government wasn't guaranteeing the loans lenders would be more focused on the amount of the loan and earnings multiple as that's the amount they can lose. Potentially the lending would be through the school similar to car loans. Gary Johnson talked about this during the presidential election, he just wasn't very articulate: http://www.ibtimes.com/why-college-so-expensive-libertarian-gary-johnson-wants-eliminate-education-2383517