DocSnowball

The nws has not been upheld in any court, as far as my limited legal understanding goes. Instead, courts have upheld Lamberth who said there is no possible judicial review of what has been done stopping right before looking into the nws. So not the same. Lamberth ruled "go talk to congress". In a way, the Supreme Court has done the same. And in an strange way, so has Mnuchin. Although he appears to be changing if Paolo -who has never been right- is right. Thanks, appreciate your thoughts, as always - it may just be my problem then, that understanding the situation is outside my circle of competence!

However, with the NWS being upheld by the courts so far, shareholders are dependent on the kindness of Mnuchin now and legally the companies have not even paid back a cent of bailout money. Are these not the fundamentals? I cut my position down to 2% of portfolio given the increased risk of zero, or a long delay in getting paid back, or not getting close to par if you’re an optimist.

A question for the legal experts here - What does the Supreme Court decision really mean to the legal question that was asked - that it agrees with the lower courts that FHFA can do whatever it wants per HERA? Does it also mean that legally the companies have not paid down a cent of the original bailout amounts yet to Treasury? Feels like I got the legalities completely wrong here...or at least so far. Thanks in advance for sharing your thoughts, much appreciated

The pursuit of happyness - although not hardcore finance

How did it go? What were their questions?

Try Fidelity, they are a little more agnostic Vanguard and TIAA absolutely will not, it is why we pulled our IRAs from them to fidelity in case we ever have to unexpectedly leave the US

@LC thank you that is a great point I just went through the primer on financial statements and found it helpful. The little summary is helpful to add to the objectives: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/AccPrimer/accstate.htm When doing a financial analysis of a firm, we would like to be able to answer the following questions — What are the assets that the firm has in place already, and how much are they worth? How risky are these assets? What are the growth assets of the firm and what is their value? How risky are these assets? What is the firm earning on its assets in place, and what can it expect to earn on these same assets as well as its growth assets? What is the mix of debt and equity that the firm is using to finance these assets? How risky is the debt? How risky is the equity?

Thanks a lot to all of you for contributing - then these are the main objectives for me. 1) Reading the annual reports, earnings calls, and financial statements and translating them into projected earnings, as well as assets and liabilities. 2) Estimate a lowball and high end range of market cap valuation 3) Understanding what material factors I think are driving and will drive the valuation going forward, and tracking them over time. I'd like to develop this level of understanding in my field of biotech and healthcare (which interestingly a lot of investors shy away from because of risks that cannot be foreseen, but this also brings a lot of mispriced opportunities). Just ordered the books and will try to work on a couple of companies this semester. Will try to open up my first thread in Investment ideas with this! Thanks again

I would add in some qualitative research. My best education was reading 10ks and doing some light qualitative research, then writing my price on the 10k cover, then compare to the market cap. Do that 20 times and you will learn. Thank you both. If I can ask you a bit more, can you share how your valuation skills evolved from #1 to #20 to now? Would love to know the evolution!

Thanks so much - yes, this is very much what I’m trying to learn especially in biotech. Because a lot of the valuation is based on projections of trial success or peak sales into the future, and then handicapping those projections based on risk of failure of the drug or company, or of its marketing. Do you all have suggestions on how exactly you crystallize your qualitative back of the envelope thinking into a written document- how do you make it play out and put it together so that you can keep going back to it as fundamentals change or play out to see what range of projections you’re seeing play out?

This is also my understanding. My valuation process isn't very scientific but mistakes come from misunderstsnding the business instead of valuation. As such it is important to understand the accounting and the business. I've been trying (without success) to find books about business models (example: how a construction/retail/oil/bank/restaurant company makes money and how to measure it) because that is where money is made. We just studied this in Strategy class taught by the same professor who teaches Value investing, so I’m much more comfortable with this part. The problem is without a strong handle on valuation I wonder if I’m understanding the story or telling myself a fairytale...

Thanks so much for sharing! Love your bond model, very easy to understand in a mature company.

Not to forget getting even with Obama by doing so. At some point they will want to spin a story about what Obama did. That is very well aligned with their interests. Also, any politician who lets go of this 100B plus money on the table will be criticized by their opposition. Loss aversion, Disliking bias, Incentive caused bias (new shareholders of FnF will be Trump friendly), Reciprocity bias (towards Paulson Berkowitz etc), Availability bias of Moelis blueprint are all at play here to cause a lollapalooza effect

Where did you learn valuation from and how? I've struggled in this area and am considering a semester long course through Professor Damodaran's online valuation course at NYU (link below). http://www.stern.nyu.edu/programs-admissions/online-certificate-courses/online-valuation-course Are you a storyteller (or even a quant) who struggled with valuation? How did you overcome your shortcomings in this area? Thanks in advance for sharing!

Congratulations! Really happy for you!!! I share your feelings on the Perry decision (just don't have the same returns for 2017!) You've made more % return in a year than I will in my life, so feel free to ignore my 2c - but if you haven't yet, take a look at "A short history of financial euphoria" by John Kenneth Galbraith. Once leverage is introduced into cryptocurrencies, it will start to meet a lot of the criteria mentioned in the book. How much has your life changed after a 12000% year? Congrats, that’s awesome. +1 on congrats. How did you convince yourself to continue to hold when it started reaching significant amounts? And how did you convince yourself to go all in on crypto to begin with? I've been convinced that crypto was going to be huge and life changing since 2014 yet I never put in significant amounts do to the risk and due to the fact that I didn't think it was going to go exponential until sometime in the 2020s. I thought I had time and I didn't want it sitting as dead money until then. I'm not complaining my crypto gains have been incredible, but they could have been massive because I invested far too little even when I knew better. One thing that is good though is that I invested so little that I'm still holding and am not under pressure to sell. Congratulations for not only having the insight, but for having to courage to put your money where your thinking was.

If you're able to, email them ahead of time and ask them what their top question is. It will give you rich ideas on where to spend more time.

2015: studied value investing, discovered CoBF 2016: 192% (tax free ira) 2017: 7% (tax free ira + taxable brokerage) Antibiotic companies down 40% from mid year despite the story progressing on track, patiently await recovery. Happy to be learning everyday and grateful to compound at above inflation rate and risk free rate! No scope for envy or jealousy. Paid off our mortgage and completed my MBA in 2017. Portfolio: AKAO PRTK FNMAT FMCKL Cash

Biotech M&A with cash inflows after tax reform - two that I’m holding are Achaogen and Paratek Antibiotic stocks for small and micro caps were annihilated in Q3 and 4 2017, time for big Pharma to wake up and stop them from consolidating together

Merry Christmas, and best wishes for a happy New Year for everyone! Thanks for all your wishes and for your friendship and insights!

Well said! This is the risk variance graph from our corporate finance textbook - as you can see, after 5 stocks the slope of the curve flattens quite a bit; after 20 not much difference on adding the 21st

Yes, but over time position sizing has been a lesson learnt here - i have 9-10% portfolio in this, and if it goes close to par it becomes 30-35% which can be held for many more years untouched. It’s hard to put any more at risk based on past history.

Many have had phenomenal returns with a large portfolio. Lynch owned on the order of hundred(s) of stocks and he killed the index. So did Schloss. Even buffett had around 100 holdings in the 60's. I think concentration on half dozen stocks should absolutely be value plays. That is they should be sure bets on undervalued assets -- not earnings. You’re right, everyone has to have their own investment philosophy and it can be concentrated or diversified. Personally, I’ve only found 3 ideas in 3 years despite looking and have not been able to diversify (Goal is 5-15 total investments). If valuation is from growth assets rather than current assets, then a much bigger margin of safety than 25% is desirable, more like 50% plus - if there is more risk, one has to be sure to be adequately compensated for that higher risk.

Great post - I’ve been thinking of the same. After completing my MBA and studying healthcare and investing for two years, I find myself with a very small circle of competence in my area of expertise in a subspecialty of medicine, barely. So I can either concentrate and know what I’m doing, or diversify. I’ve chosen the former and that too in micro and small cap companies (only 2 so far where the initial investment thesis was not disconfirmed), where I have a reasonable idea of their business model, story, valuation and teams. It is def a roller coaster, one has gone from a share price of $3.50 to 27 to 10 over the last year! Time will tell, but imho wealth is created by concentrating in good ideas, as long as you don’t lose money doing so. Otherwise what’s your edge over simply indexing (when valuations are reasonable)

+1 seems to be something put in place a while ago. The legalese is beyond me, but glad it does not take away from the catalyst of upcoming threat of a draw when DTAs change Here's another WSJ article from today - their new found appreciation of FnF's business model is almost too good to be true. https://www.wsj.com/articles/treasury-will-allow-fannie-freddie-to-retain-small-capital-buffer-1513867331 Quoting part of it "The Treasury agreed to modify the terms of the U.S. backstop of the companies after discussions initiated earlier this year at the request of FHFA, said senior Treasury officials on Thursday. Fannie and Freddie have reported strong profits in recent years because they have dramatically restructured their underlying business of guaranteeing mortgages that are bundled into securities and sold to investors. They have raised the fees they charge lenders and are guaranteeing higher-quality loans than they did before the housing bubble burst in 2007. Through September, Fannie and Freddie have paid around $276 billion in dividends to the Treasury, while they were forced to borrow some $187 billion in the years after the 2008 financial crisis."

I’d been wondering why contents of the Senate bill would be leaked to Bloomberg, by those not friendly to GSEs. Now it makes sense, to prepare the ground for this capital retention perhaps?