InspireByReason
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Posts posted by InspireByReason
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We do a very simple decision tree every quarter, on everything we own, over a 6 month horizon.
Up, down, no change with a simple P(x) to each; no values, and trend over time.
It makes you more aware of the volatility associated with your hold decision, and sets you up for hedging.
See a significant decline since the last quarter? maybe its time to lighten up by 50%.
SD
This is such a strange practice. Why would you sell something at a lower price?
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Why is it surprising that a massive influx of migrants from culturally backwards parts of the world could be a net negative for European society?
When you have uncontrolled migration from these parts of the world at these levels it creates ghetto's where integration is not only unlikely, it's impossible. Certainly there could have been a better solution for genuine refugees through the creation of safe zones within their own countries and a flat out you're being deported if you show up to Europe illegally. Immigration must be limited and legal, otherwise we will have more of what we're looking at now which is the rise of populism and empowerment of reactionaries and the silencing/self censorship of the press.
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Thanks everyone for the input and suggestions. I'll definitely heed some advice. 8)
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If you enjoy reading books where sentences are randomly abbreviated into acronyms then you'll love the writing; IDLWLT (I don't like writing like that), so it never clicked with me and since IDLWLT I had trouble finding value in the books (VLB), but I've found VLB in other books, so all was not lost. Oh wait, did my sentence just run on forever? Marty's do as well..
Haha I appreciate the humor. I know that you're interested in the kind of investing I'm trying to learn more about. I would appreciate any books suggestions that would scratch this... "Modern Security Analysis/Distress investing" itch. Hopefully help some future wanderers who consider going down this dizzying path too lol. Nailing down the good material in investing is a skill in of itself I believe.
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I tried to read one of his books. Agony would be the appropriate word.
Haha that's what I feared. I want to learn more about exactly what his titles entail but some of the reviews are so brutal it made me wonder if it was even worth trying.
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I'm getting to the end of the trail with highly respected value investing books and now i'm starting to look on the periphery for books that can help with more of the trench digging aspects of investing. Has anyone checked out any of Whitman's material like distress investing or modern security analysis? What are your thoughts on them? Were they helpful?
Cheers :)
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Just what we need, more young earth creationists at the head of the helm.
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Everything you guys are discussing is way over my head. Does anyone have a starting point to understanding the effects of rates/inflation/deflation on the economy?
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It's called a Management Information Circular
Thank you!!
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I'm looking to find out disclosure of ownership in a Canadian company. Is there a proxy statement or similar document to the 14A in sedar filings?
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I'm trying my hand at two highly leveraged situations right now. I also think the nature of the industry matters. Both of these companies are cashflow positive rental/leasing oriented businesses in industries that have recently tanked. Taking hits on earnings mostly from write downs/depreciation.
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I've been thinking about this for quite some time. It makes me fearful for my parents savings.
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"We assume all stocks are purchased on December 31st, and held for one year.
We assume that the hypothetical investor completely liquidates each portfolio before forming
a new portfolio"
Just a hypothesis but I suspect the above methodology could have led to a large part of the positive result. Why? I'm thinking that net-nets are usually one-pop wonders (with a few cases of longer term turnarounds). Like a cigar butt, they rise to IV and then wallow in low returns going forward. But if you sell everything in a year or two when this criteria is met and start again, it might make sense for this result to be achieved. If you select a portfolio of leading stocks for the long term, you wouldn't liquidate and depend on your return from the compounding of the good business over many years.
Two points:
You might want to check out the January effect which relates to your comment and is talked about in the net-net article basically January alone accounts for about 10% of the out-performance of net-nets.
Your comment reminds me of a deeper question I am asking myself. Is value investing even about intrinsic value? To me it appears that the reason low P/B does well is because of random hiccups in the market where the business appears to do well for some period of time and the stock price goes way up. I feel like the real value effect comes from the fact that market expectations are so horrible that positive surprises get massive bumps. In this sense low P/B is more an indicator of low expectations than anything else. Net-nets might have the advantage because they simply can outlast companies without cash and they indicate very low expectations. This might also be why negative earning net-nets out perform positive earning net-nets...they have more room to surprise.
I think when you think the Buffet way, you expect that eventually a company through the power of its intrinsic value alone will force the market to recognize its value. Coke is a very good example of this. Coke's earnings and dividends increased so much over time that it was impossible for its price not to go up without resulting in absurdities like 100% dividend yields or 0.1 P/E's. Coke's increase in intrinsic value is the catalyst Buffett relied on.
In that sense cigar-butt investing seems ridiculous because the "intrinsic value" of a lot of these companies in the long run is zero. You really are making money off short term changes in market perception and then selling. I think this psychological hurdle is why people have a real hard time with these methods. They really do rely on the markets random changes in expectations and perception in a way that Buffett's quality companies method doesn't.
But if it works....it works.
This doesn't make sense. The "intrinsic value" of these companies are worth what they are worth. Net net is just short hand for liquidation value so of course in the long run these companies are not going to grow in intrinsic value but this doesn't mean that they aren't worth something right now.
This is the only method of investing I feel comfortable doing. I don't know why so many people shy away from dirt cheap cyclicals, turnarounds and liquidations. It's the most simple and arguably the most predictably successful.
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<i>But, the best predictor of success in life is IQ. Multiply a 20 point IQ deficit across a billion people and you end up with a lot of needy people. They drain the resources that would otherwise go towards funding infrastructure and investment. Taxes go up and wealth gets redistributed.</i>
Again, that's rubbish! Buffett and Munger have high IQ's, but Buffett has said numerous times that he would not be successful if he had been born to parents in Bangladesh and would have probably ended up as a Lion's meal if born in parts of Africa.
I would suggest that the differentials you are seeing in IQ's is because of the lack of infrastructure, resources and low per capita income...not the other way around. If you level the playing field in terms of access to resources, you change the outcome...combat corruption and create a free-market system, and the citizens will flourish. What was Singapore's IQ like before Lee Kuan Yew took the country in a new direction? How did China become the global colossal it has become? Were U.S. patriots any more intelligent than their British compatriots...but what have we seen happen over 240 years?
Cheers!
Agree 100%. IQ is a consequence of good infrastructure not the other way around, the IQ's of Indians will rise as the infrastructure and policies of India is improved.
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Graham mentions that one should show concern for buying cheap companies at the height of a market but what I never understood is if you are looking at every investment as buying shares in a business why should a cheap price dissuade you from buying in regardless of where the market is as a whole? Is it only because there may be even cheaper prices right around the corner?
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SB - Safe Bulkers Inc
CFL - Canadian Equipment Rentals Corp
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How the hell would you value something like this?
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The average IQ in India is 82. While at the same time the average IQ in China is 100. Prem may find some real gems there but I don't like investing in places with low IQs.
I would question the IQ of anyone who would use this as investment criteria. Also the comment suggests someone doesn't know a lot about IQ testing.
+1
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Thanks I actually own both of them. Haven't read the 5 rules though.
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Cheetah you suggest understanding business models but how do you actually go about researching to understand different models? I have yet to find a platform or book that talks about business models. Also on this point, why is this more important than looking at value or what is the difference?
Understanding the business model is absolutely critical for valuation. A 10 PE or EV/EBIT is means different things to a See's type company (good margins, low cap requirements, seasonal, limited growth prospects) versus a Google/Alphabet circa 2000 (good margins, ample investment opportunity, great growth requiring capital) versus GM or a mining company.
All this is about is increasing your circle of competence. Reading AR without understanding, including understanding the business model is better than useless, but not very productive. If you are in business or work in a business, look at that business first. Read the trade magazines. Do a one page Michael Porter analysis of the company or industry. Look at business school case studies of the industry.
Once you have the background, call people in the industry, competitors and suppliers. Ask them what are the key drivers in the industry, then see if you can figure out what financial data is most relevant. Don't be discouraged you have an exciting lifetime of learning ahead.
Personally, I do not read broker reports, but once you have done the above, one question you can ask industry participants is who is the best Wall Street analyst. (Remember they may only mention those who have looked at their company favorably.) With that info, look at any relevant industry report, with the second caveat that analysts create business for investment bankers and their orientation is short term. By the way, for many business, despite the furious technological changes, looking at old reports and predictions is humbling and informative.
Thank you for your answer. Are there any websites or books that you would recommend that explains things like "key drivers" and financial data?
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I appreciate the suggestions guys :) I think i'll start out by taking a closer look at some of these small companies.
I just read the business summary and risk factors. If I'm unmotivated by that point, I just move on. No point investing in something that's not motivating.
I appreciate the notion of vetting further research. One thing that really stuck out in Poor Charlie's Almanack was the idea of 3 piles. Yes No and Too Hard. The faster I can vet out the ones I'm sure I wouldn't understand the more likely I'm to find something good.
I am not sure reading 10k or 10q is the best use of your time. I think it's more important to understand a variety of business models and what drives their earnings. Small details are generally distractions
Cheetah you suggest understanding business models but how do you actually go about researching to understand different models? I have yet to find a platform or book that talks about business models. Also on this point, why is this more important than looking at value or what is the difference?
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I'm asking because I am a relatively new investor and it can be an incredibly overwhelming amount of information to process. Sometimes I become demotivated by it. For instance I was researching an oil company and it had recently acquired another company with a combination of common stock and preferred shares. I wanted to figure out whether or not it was a good acquisition so I went to value the company and became lost in the minutiae of understanding what was actually paid for it. Cash acquisition makes sense to me but when it comes to paying for something in shares/preferred I was stumped.
I've read my fair share of accounting and investing books but I still feel like a newbie when reading annual reports. Have any of you had this feeling? How did you overcome it?
Thanks!
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I'm actually finishing it up right now it's a really good book for general business wisdom and ways of going through life with a candle to guide you when it's dark. I highly recommend it. It was a nice break from all the accounting books ;)
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Hey guys,
I've been looking around for any information on what an 'appropriate' executive compensation looks like and can't seem to find much. I would love to hear if anyone has some tips or at least pointers on what I can look for in seeing whether or not the executive team is gaming their shareholders. Do you look at earnings or rev to comp? What about considering stock options? <--- This seems to be one that Munger thinks is most important yet I haven't found anything on how to bring it into a calculation.
Thanks everyone.
Chris
Proposed new SEC rules for OTC securities, relevant for us?
in General Discussion
Posted
Has anyone heard any updates on this?