mwtorock
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Posts posted by mwtorock
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Charlie has secret hobby of designing college dorms ;)
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Bluelinx updated slides yesterday. base case scenario of a bit sales growth (bear case recession and bull case SFH go above avg like 1.2m), with cost savings and reduced debt, the company could make $7-8 EPS in a couple years.
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No that's not what I'm talking about. That's just trend following versus being contrarian. I'm talking about specific times in a company's history when deep changes happen which make the numbers look terrible on paper for specific one-time reasons that a computer model might wrongly interpret as a sign of long term underlining weakness.
"As a result of the Cedar Creek acquisition, which has the potential to be wonderful in the long term, current debt has increased dramatically and large one-time expenses are being incurred to close redundant facilities and merge operations. Many of the machines may not factor in the qualitative attributes that attract me."
Yep, special situations, like teacher Greenblatt calls it.
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Seen some comments about indexing and somehow imply that is passive investing. I think there is a huge difference. Indexing is a tool that you can use for passive investing. How many of you or the people you know actually gone through market cycles without getting in or out index funds? Ask all the equity fund outflows in december 2018 - it is pretty hard.
If you try to get in or out of markets using index funds, to me it is not really passive investing. Real passive investing like buying BRK for years and not selling is very very hard.
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Just feels like a familiar scene that happened in Q4 2015. Market shakes a bit when central bank becomes less dovish.
Just keep in mind though, average bear market is around -30%, we are about -15% here in the US equities, so even if it is a bear, how much downside is there?
Next year is the famous third year of a presidential cycle, which has been almost always positive for US indices in recent history. I would not bet against that.
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He surely did not like Ray Dalio. :P
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That's not how the market works. If TSLA buys FCAU, the market will no longer assign this ridiculous premium to TSLA shares.
Wouldn't it be interesting if TSLA bought FCAU or some other automaker and started selling the cars online bypassing the dealers. I'm not sure if there is some kind of contractual thing that would prevent it from doing that, I've never looked much into the auto industry and how it works (or doesn't work).
Also it could offer its selfdriving feature on every car as a $5K option.
Cars need maintenance. If you look at dealership's financial reports, like AN, they don't make much money from selling cars. Their biggest recurring rev is from maintenance rip offs. Margin was ridiculously high.
Therefore I don't see the point of by-passing dealerships for selling cars. Also, doing this would piss off these dealership, and how would you handle after sale services?
EVs theoretically should require less maintenance. No oil change, less brake replacements, etc. I think that is why Telsa went to the direct model.
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Hey Eric, chinese stocks are hot topic now. how about taking Travis back to talk about JD thoughts? Or anyone that is familiar with chinese stocks?
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-Do you think that Mr. Einhorn was/is right but was/is unable to wait long enough for his thesis to work out given the unusual preeminence of a population of momentum and price action investors and the larger proportion of passive indexing?
Yep. i would definitely think that he is or was right at least on some of the ideas. But he was/is too confident that he chose to profit from the thesis by shorting the 'bubble' stocks. To me, shorting is very difficult with timing, size, etc. It is probably better to try to profit in a different way.
-Have you considered that he may have been fundamentally wrong or that he may have overestimated his capacity to predict a shift in investor sentiment?
Yes, probably. I dont personally know david, but i feel like he probably overestimated his influence especially in the short positions. Several years ago whenever greenlight 13F filing is up, the long positions would jump the next day, and whenever DE discloses a short, the stock would tank. Those days are long gone now, but i dont know if he recognize that.
-What makes you say that bulls have total control of the market?
I think it is a natural result of bull cycle. How many successful high profile shorts we heard in the last two years? We had short positions that made perfect sense fundamentally but got taken private at a price that probably only happens with rates near zero. And then you have momentum traders, growth investors and passive indexing continue to push the growth/momentum stocks higher. AMZN almost doubled in less than a year from 500B to 1T. it is probably still undervalued per my barber and my realtor, and they are buying it. They are probably going to make money, but they are not buying it for any fundamental reasons.
I dont know if we are in a late stage of bull market, but i have seen more and more people care about price action or growth potential more than anything else, even in the circles of 'value investors'. I think until the trend changes, it is very hard to short a basket of stocks. And probably nobody knows when the trend would change.
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@mwtorock and Liberty
Many ways to skin a cat but if someone is selling equities, there must be some other buying.
Reminds me of the Dalbar studies suggesting that the individual investor may be his or her worst enemy (in terms of fees, taxes and especially timing).
Liberty,
Do you know if the funds data showed by Bluegrass include ETFs?
Equity funds often consist of retail and smaller individual investors. It seems that the small investor has not enjoyed the ride.
Mathematically, some did as this is, outside of fees, a zero-sum game.
I've seen data that the top 10%'s share of stock holdings has been increasing and foreign investors have also loaded up.
From 2009 to 2017, I understand that US total market cap went from 15,1T to 32,1T, including buy-back activity.
https://data.worldbank.org/indicator/CM.MKT.LCAP.CD?locations=US&view=chart
If the mutual fund and ETF crowd has increased ownership only by 0,2T, the difference has been made up by others: direct holders of equity, rest of the world (international investors, sovereign wealth funds and even central banks) as well as public and private pension funds, insurance company funds and hedge funds.
It's very hard to distill insights from all this but the growth in market cap has been driven by a fundamental recovery but also by a significant increase in price multiples and the latter can be related to sentiment somehow.
Who knows what the future holds?
Philosophicaleconomics tried to answer this question around 2013 by looking at average household equity allocation and subsequent return. Interesting to note that the long historical inverse correlation trend has broken down recently. New plateau?
For investors like Greenlight Capital, using certain value metrics has resulted in relatively poor results on the long and short side.
Maybe it is my wording that is misleading. The case in point is the short position of bubble basket, which consists of probably growth stocks and moment stocks like AMZN, NFLX, TLSA, and so on. The funds that short these names underperformed and had large outflows over last couple of years(looking at Greenlight), and the funds that long these names (including a few guys here) outperformed and hopefully had inflows. When the long funds get new money, they tend to buy the same kind of businesses/stocks, and put further pressure on other positions of the short side.
even if DE is right about the bubble, it is a lot easier to benefit from the long side than from the short side.
agree about the market since 2009 was not all smooth sailing. we even had EU crisis. and i was not talking about the broad market. the reference to 2009 was just that the bull market started then. one thing though, i dont know whether we can look at just pure equity funds as active has lost AUM to passive index funds or ETFs. for market cap weighted indices, the new inflow drives up the large cap growth names as their weights increase. also other types of funds may also buy stocks. for example, most of the macro funds i know of also have US stocks positions, and they tend to be following the trends a lot (from what i hear). so for things like AMZN that has been in a long term up trend, it naturally goes up because of moment trades or trend followers. that is until the trend changes.
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slightly off the topic, but after a long bull market since 2009, the bulls (bullish hedge funds plus index funds) have total control of the market now. they are getting more money under management and they buy more of the same stocks, then they outperform and again get more money under management. it goes on and on. the high profile shorts are getting squeezed.
shorting is really hard.
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Screw this new age bullshit about visualization.
LC is right about youth helps. Like anything related to age when you're young and have that marvelous 2k portfolio is the time to LEARN. You'll make some mistakes (hopefully not too many). But pay attention and learn from them. You'll of course recoup those losses by flipping some extra burgers. Then when you're older and have that 200k portfolio you'll handle situations much better than because you've learned your lessons in the past.
The way to calm your stomach is not visualization exercises. It's knowing your stuff. Know what you own. Know what it's worth. This is where investing in individual names is superior to index investing. You know what you own and you know its value vs the mythical "market".
Bull markets are fun. Like a nice party. We all showed up, there's music playing, and we're getting drunk on returns. But bear markets are where the wheat separates from the chaff. The market doesn't care about your feelings and let's face it this gig isn't for everyone. Noone's even mentioned the sideways markets between the bears and bulls. Where you know you've put together a great portfolio and you're screaming in the woods because the market doesn't recognize that. How shitty is that?
Bottom line, there are bull markets, there are bear markets, there are sideways markets. It's all part of the market. You take the bitter with the better. The ones that work hard and prepare do well. The ones that don't become bear chow.
Best said! Could not agree more.
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best does not mean largest. A shares / H shares ETFs can give exposure to largest companies, but Munger is more likely pointing to individual companies that managers like Li Lu hand picked.
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probably about 10 yrs ago before the financial crisis, i interviewed at orbis for a risk management job. i got through the first couple of rounds so i was getting serious and spent a couple of days studying their holdings. Then when they asked me what do i think about risks next, i told them that they have permanent loss risks on a couple Natural Gas names and Chinese Gaming names ( i should have mentioned Lehman but i was not there yet ;) ). Obviously i did not get that job. But those managers are long gone now I heard.
i think they are really beating the benchmark type of strategies, like Ken Fisher style i mean, not necessarily value. But it is just my personal view, and they may have changed a lot.
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where is the menu entry? I can't find view -> Pagee STyle ->no style
Right click the top bar of firefox window, check Menu Bar, and then view -> Page Style ->no style
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Any suggestions of companies to buy to profit from this?
just kidding... ;)
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of cause if you gone through all the letters before, you aren't going to see any new info in this book. but the author did a nice job to organize them and put into context. it is a good read and can refresh some valuable ideas (at least for me).
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Google caches Seeking Alpha Pro articles in their original version (which SA apparently posts for free for some temporary period). Example: https://seekingalpha.com/article/4122501-charter-communications-deal is a Pro article, and https://webcache.googleusercontent.com/search?q=cache:-cmUqhmNTpwJ:https://seekingalpha.com/article/4122501-charter-communications-deal+&cd=1&hl=en&ct=clnk&gl=us is the cached version of the full article. To get to page 2, just add ?page=2 to the end of the URL ( ex. https://webcache.googleusercontent.com/search?q=cache:-cmUqhmNTpwJ:https://seekingalpha.com/article/4122501-charter-communications-deal?page=2 ).
Cheers!
Paul
This is awesome way to deal with the pay wall. Thanks!
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Yeah, i used to read through all the short articles on SA when working on a long idea. but now just the latest transcripts... >:(
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and next quarter he will have another set of different stuff ;)
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AZO - tax cut tailwind and cold weather will help to outperform
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thanks so much. this is like bacon egg cheese and coffee for the morning :D
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stop torturing people that have not owned berkshire shares long enough ;)
Lou Simpson passes at age 85
in Berkshire Hathaway
Posted
RIP investing legend