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If you are going to learn the trade and understand value investing, I would start by investing in stocks yourself. I would also invest with a few folks that post here (like Sanjeev and James - sorry if I missed other with funds but these are the only two I know that run funds) both have published records that beat most mutual funds. The difficult part with mutual funds is the institutional constraints they have (diversification, benchmarking and firm size). Even the best funds like Fairholme can only beat the market by 5% per year. To do better than that you need to have concentration. I would say that many folks here on the board have done better than most mutual funds (even the best ones) and it is not because we are smarter than the fund manager it is becuase our ponds are too small for them to fish in and make a difference and we can concentrate. Packer

Does he and how does he value float? How does he incorporate investment performance into his valuations? Packer

The quickest and best way to get experience is to just do it. The data is readily available. For examples of good analysis see the "You can be a Stock Market Genius", "Benjamin Graham on Investing" or see the Value Investors Club board in addition to this boards entries. From these and your reading you can reverse engineer some the techniques and perform them yourself. Packer

One suggestion is to dive in and read 10-Ks and Qs. One place to start to look for current ideas is to go to magicformula.com and run the screen and start looking at these firms. They will give you a flavor of current deep value plays and you can get a feel of why these firms are there. Then you can assess whether the change is permanent or temporary and buy the temporarly out of favore firms. I started by chosing a moated industry such as media/cable which has alot of cheap companies to look at to begin with. Since the universe is so big, I had to focus to get my hands around something. Packer

I would read Klarman's book, Intelligent Investor (which you have read) and Greenblatt's books (they are fun light reading with good insights). Benjamin Graham on Investing gives you good insight into Graham's process. More advanced would be Philip Fisher's boks which talk about the qualitative side of security analysis. As to getting the CFA, if you are planning on entering the security anlaysis/valuaition fields as a carrer it would be worth it otherwise I would spend my time reading, thinking about and performing valuations on firms of your choice. Packer

Interesting idea in an untimely sector (aggregates). Do you have any idea if the sale proceeds from the land $12 to 15 million will be enough to get to FCF break-even as managemnet has stated? How much do the projects have to be delayed before there is re-financing issue? Given the current run-rate of $1.1 m per month of FCF losses it looks to be 12Qs with no cap-ex. It appears they have a plan (see last conf call). The question is how viable is it? Thx. Packer

Do you want to ask the next question by how much? Packer

Have you guys looked at the portfolio turnovers (greater than 100% per year in 2 case) and the macro bets these guys have been making. At some point these guys might just blow themselves up. Another sidenote is the Meritocracy mutual fund that has these guys ideas in it is traling the market over the past 10 years. Only some observations. I would place some of the investors on this board way ahead of these guys. Packer

They all have some debt except MGAM and LACO. The lowest debt is in SURW, SGA, and FLL. LACO is selling for less than its tangible net worth and is generating positive FCF. The real question is how much are the Indian Casino receivables worth? Packer

Maybe I am the only fool that is fully invested and wished he had more cash. Myth sounds like he maybe close. I have found stuff in the media space (radio and cable cos and movie theatres), gaming cos and some shipping. Not too exciting but steady. With 20%+ FCF yields I hope I am not missing something. Packer

We had pretty good discussion about these a few month back. I think were able to come up with a few names that had the following good characertistics: above average BV growth, a long track record (at least 10 yrs), around book value and positive redundancies in the reserve triangles. Packer

I know may on this board investing in special situation. Does anyone use Fat Pitch Financials Contributor Board as a source for these situations? I think there is a $125 per year fee. TIA Packer

How is the data when you look at 3, 6 months or 1 year of weeks. With such a short window it is difficult to draw any conclusions. Like 2 weeks of stock price movements. Packer

I was reading Longleaf's current semi-annual report on stock vs. bond pricing and also re-reading the Intelligent Investor. Chapter 3 is the section that talks about this. Once again Jason Zweig (as commentator) is clueless or oblivious to this discussion. The more I re-read his commetary the less I think it brings to the text (obviuos ommisions and clear "efficient market" index-bias). Anyhow, according the text the comparision to earnings or FCF yield to AAA bond yield is pretty high (somewhere between 2 and 3 to 1). When the ratio was this high in the past 1940s and 1950s, stocks outperformed bonds tremendiously. In looking at the data from the 1960s it is incredable how low the ratio got as low as 0.72. Packer

I admit I don't know much about the details of the case but if the judge approves both plans what happens next? Does each class then vote and the majority plan wins? What are the rules? Do a majority of each class have to approve or can the debtors cram down? To what extent are more shareholder proceeds above the warrants (i.e. participation in the rights offering) dependent upon the judge? TIA for the responses as I find this situation interesting. Packer

I haven't been able to determine what the new bonds will sell for but an 8% yield is OK but lacks the upside (at least for me). You may want to look @ the preferreds if they are available as they have a 10% dividend and are convertible. Packer

In looking at the plans (latest 2 issued 9-21 and 9-22), the equity plan gets to participate in the rights offering (@14.5% of total) plus 5% new warrants with SP of $24.64. The rights offering will be for $9.70 for stock worth $16 to $18 per share. The debtors plan receives the warrants only. Some questions: 1) can individual investors participate in the rights offering and 2) what incentives do the debtors have to accept or compromise with the equity holders? Uncertainty over these items is what is drving the stock price down. Packer

In addition they are purchasing shares themselves.

Given Fairholme's size, I agree that it will be difficult but he does seem to be changing some of the deals he is getting involved with (General Growth is one) so amongst managers I think he has the best chance for his size. I think part of the reason for the interest of stocks on this board is to outperform funds. If you cannot do that by a significant margin why waste your time? Packer

I agree. It is the creative use of frameworks in different contexts that creates value. In this case since there is a production price where the commodity is lower than, I think you can use that price as value benchmark because eventually the price will return to costs. The context Klarman was discussing in areas like collectables, art and other items where a majority of price is above production costs. So examples today wouold be gold and other commodities selling a premium to production costs. By association, cash flow from these premium commodity prices should also be recognized and discounted appropriately. Packer

I also think Charles Ellis is right from the perspective of mutual funds and other managed investments were rules (like diversification) were developed to prevent mistakes. How many mutual funds will buy FFH LEAPs (even though they were incredibly cheap) or have FFH concentrations like folks on this board? Unconstrained many of these institutions could remove many of the value opportunties out there but due to their constraints they will mostly be index huggers. Good for us as our research adds value. That is why the best modest size fund out there (Fairholme) is going to get you S&P + 12% but many boardmembers can get S&P +15% or higher. Packer

I like Klarman's definition - if can create cash flow it is an investment otherwise it is a speculation. You can value an investment but not a speculation as it is solely dependent upon what someone else will pay. Packer

I do accept what vinrod has stated for a group of folks. Nobnub has presented an applicable set of filters. For the folks that have not made it through the discover and accept stages of value precepts, I think index funds make sense due to not falling into other mistakes (momentum, leverage & speculation) and low cost. However, for those who have made it through those 2 filters, they do not. We may disagree on how many folks can make it through those 2 filters (I think quite a few can if they try and are provided the correct framework which should the focus on the Intelligent Investor). As to investors beating the index, from my own experience and others on the this site when we have shared our returns, they have outperformed the index at 5 - 10% + rates for many years. That is why I thought it would be interesting catalogue our returns/experiences similar to the Graham and Doddsville article to show it could be done by interested folks. Packer

As to value mutual funds outperforming over time, I disagree. Over a 10-yr period, Longleaf has outperformed over 5%. So has Sequoia, Farholme, Mairs & Power Growth, Mutual Series and Harbor Int'l. What funds were on your list that underperfomed? Did they have a value manager at the helm and low turnover? I agree that some value index funds can add some value via low cost and a value tilt but buying index funds over the past 10-yrs has not yielded much return. You guys seem to relagate the average investor to some kind of idiot who is an emtional basket case. I disagree. I especially disagree about readers of the Intelligent Investor. If you have gotten to that reading and understand the concepts then you should at least be able to find an advisor/mutual fund that follows those ideas. True there are some folks that are emotional basket cases but what we and value investors do is not rocket science. It can be performed with algebra and an average IQ. High IQ's may be a disadvantage due to making the process too complex when it doesn't have to be. In summary, I think recommending index funds to those folks who understand and accept value investng precepts is not very smart. This is what Zweig does throghout the value investing book (which I think is a shame) because if you didn't know otherwise (via boards like this) you would be condemend to lower performance than the concepts would provide. To a certain extent its like a Bible commentary written by an agnostic or atheist. BTW I have no problems with his type of commentary in Random Walk Down Wall Street as this is consistent with the concepts in that book. Packer

I agree if it is the best of poor choices but if this is the case then maybe the plan should be changed. Packer