Saluki
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Posts posted by Saluki
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@james22 I remember seeing that study in the book "Range." It's a great way to think about hedgehogs vs foxes and how it works in the real world. And yes, the diverse viewpoints and pattern recognition are the best way to solve problems that haven't been seen before. I think Range and The Innovator's Dilemma should be required reading for every business major.
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The early Ben Graham type of thinking was heavily focused on asset value instead of income. The thinking was that income can go away a lot faster than the assets that support it. So in an asset heavy industrial world, a company with no income but valuable assets could be liquidated. The problem, which Munger identified, is that in terrible businesses it's not fun to sit around hoping that someone will buy out this company before it goes bankrupt. In the information age, the best companies (META, GOOG, MSFT, CRM) don't require a lot of assets, but they do spin off lots of cash. Margin of safety has to mean something different there (network effects, switching costs, patents, better products). And if margin of safety means something different with these types of companies, than value traps has to have a different meaning too. I don't know how to identify it though.
There are asset heavy companies that the METAs and GOOGLes are built on, the fiber providers. But they exhibit commodity like tendencies. You care about bandwith and speed, not the brand name of the provider. So how much do those assets give you a margin of safety if the tech has to be upgraded constantly and the legacy facilities have environmental risks? And what about things like banking? If the government will bail out all depositers, regardless of the FDIC limit, then why does it matter where you put your money? You will deposit where they pay you the most, and borrow where they charge the least, which will race to the bottom and erode margins.
I think Graham's idea of giving your stocks a timeframe to play out is a great idea, which I should incorporate. In a month it will be 3 years since I bought ATEX. I haven't sold a share since I think the licenses are much more valuable than the stock is trading at, but at some point they should be able to deliver the revenue that they were promising. When I bought SWBI, I didn't have a deadline in place, but I believed that within a year of the new factory opening, would be a good time for it look much better and sell. And with VTS I assumed that one year and a day would be a good time to sell the shares in my taxable account. Other companies I just bought because they were really cheap (TV) or the growth prospects look good, but I couldn't figure an end destination (FFH, JOE, GOOG). So if I have a timeframe for some stocks, why not others? Why not just set a date in my notes when I buy so that I don't talk myself into holding "until it comes back"? It seems to me that if many of my investing mistakes have been emotional/tempermental and not mathematical, then whatever safety rails I can incorporate with regard to process should improve the outcome.
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trimmed a little META in my retirement account and bought some FFH and OXY.
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It says "video unavailable". Did they pull it down?
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Sold some META in my retirement account and deployed it to FFH, STNG and OXY.
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Trimmed a good chunk of META in my retirement account. Still keeping almost all of it in my taxable account.
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I think most of my biggest mistakes were emotional / temperamental, not quantitative. Particularly in 2008. I reacted better in 2020, but still not ideal. Some of them are things like holding on to a loser until it gets back to even. Or panic selling. I think doing a post mortem is helpful to see where you went wrong. Keeping a one pager with some notes that I write on the back of a Value Line printout of a company is helpful too.
Peter Lynch said that if you can add 8 plus 8 and get a number close to 16, you know enough math to be an investor, because the most important organ isn't the brain, it's the stomach. Focusing on that part has been helpful to me. Reading things like "what I learned from losing a million dollars", "the psychology of investing" and even "fearless golf" have been useful. I have a little post it note on my monitor with a quote from Dr Gio Valiante (performance coach for Steve Cohen) that says "deploy capital proportionate or the opportunity that presents itself at the moment" to remind me to follow the process, not the emotions. And I have two little rubber duckies of Warren and Charlie from the Berkshire AGM on my desk too. I don't know if it helps, but it doesn't hurt.
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I agree to a point. If they had done a passive investment like they did with Alibaba and had said "instead of a billion, how about $500mm for half the company, you can get rid of your investors who want you to cash out, and you can keep running it as is until you are ready to go public. We'll be hands off like if you sold to Berkshire" That's a plausible scenario with a happy ending.
I think it's useful to study some of these industry leaders who stumble so that you develop some pattern recognition and can hopefully bail on something like Google, Amazon or Apple if you see the signs. I read an incredible book on Sears once. Sears was such a dominant retailer that it had the company divided into 5 territories in the US because it was too big for one person to manage. If you broke Sears up into it's territories, it would still be the 5 biggest retailers in the US. If you think of the Sears catalog and then realize that Sears founded Prodigy internet, you realize that it's not inconceivable that they could've been Amazon. Apple credit card? Sears had Discover. They created Allstate Insurance too, think of what they could do with that float. They had so much cash lying around that they almost bought Caterpillar.
So what happened? Ego. The power always rested with the retail guys and they didn't like that Allstate, Discover and the new financial stuff was so profitable because it meant that they could end up running the company eventually, so they decided it was a distraction and started casting off the pieces as the retail continued to struggle. Can you imagine if Amazon was not run by the founder and the e-commerce guys decided to spin off the cloud business because they saw it as a threat to their power? Stranger things have happened. Maybe it's because I was an M&A lawyer and I'm programmed to look for things that can go wrong and anticipate and prepare for it? Maybe these cautionary tales have instructive value? Maybe the ashes of fallen giants are good places to look for value (General Growth made Ackman his first fortune, Sam Zell wasn't called the grave dancer for nothing). Who knows?
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Scott Galloway, who is an investor talking about Yahoo going public again.
I think Yahoo Finance does a really great job with the Berkshire AGMs and I always said that AGMs could be their "thing" for other companies like MSFT, GOOGL, TSLA, META etc. I don't how Yahoo makes money, and how they pulled up from that nosedive before it went private but I'd curious to see their filing. I think Marissa Mayer gets a lot of hate for her disastrous run as CEO but they were a basket case before that. The previous CEO had the opportunity to buy Facebook for a billion dollars. Zuck's investors told him that if Yahoo came through with the billion dollars, that they would make him sell. The CEO, who told everyone who would listen that he was a great negotiator tried to talk Zuck down to $700mm because the market was tanking. "You're young, you'll still be rich and go live on an island surrounded by girls in bikinis". Zuck went back to the investors and said they didn't offer $1 bln so he didn't sell.
Prof G does make a good point about making money in distressed companies. I remember one hired gun CEO saying that if you smell smoke, you should run towards the fire because that's where you make the big money. But the flip side of that is Peter Lynch's quip that "the problem with turnarounds is that most of the time, they never turn around."
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On 7/8/2023 at 6:14 PM, SharperDingaan said:
Russia's recent 500K bbl/day cut back is roughly 15M bbl/month ... not far off the current floating capacity anchored off Egypt.
Transshipment is the elephant in the room that no one talks about. When China boycotted US Soybeans during the Orange man's presidency, instead of shipping soybeans to the Port of Long Beach and over to China, farmers shipped them to Brazil, unloaded them, and all of a sudden they became Brazilian soybeans which picked up the slack.
If the Russians are still pumping the stuff out of the ground, it's gotta go somewhere. It just can't sail direct. It's gotta do a layover somewhere to cover it's tracks. Might be bullish for VLCC rates.
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Sold a few META shares in retirement account and bought a little STNG with it. My finger was hovering over VTS in my retirement account and would've sold some like @Castanza and bought more OXY if it was $58, but unfortunately they tend to run up together.
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Partly to learn, and partly to rub my nose in my mistakes I'll talk about a recent missed opportunity due to thumb sucking. I started looking at airports as a business. I own Fairfax India and I like their airport, and I know that there are a couple of other ones out there like TAV, which Mohnish has talked about and I wanted to see if other good ones are around. Ambani owns several, but the management there is questionable. I looked at CAAP last month and read the 10k and it looked good but I didn't pull the trigger, and it's up 30% since then. Although, with the family curse, if I had bought it, it might be down 30% now. I liked that in Argentina they get paid almost completely in US dollars, so they don't have currency risk, but I still couldn't get comfortable with it. Their other big airport, Brasilia, is the capital but it's no Sao Paulo or Rio. But I don't think that's what bothered me.
I guess my issue is that, if you are operating someone else's airport, it's an asset light model, which can be very profitable, but it's not your asset. If a stable, prosperous country like Chile can take away your mining concession when your contract is up and give it to someone else, how stable is your income in places like Brazil or Armenia or Argentina if the rulers decide to let someone else profit from your efforts for a while.
Maybe more airports (even in the US) will start having private operators to handle the assets, but this isn't a moat like a patent. It's like operating a restaurant that you lease from a landlord who can hike the rent at renewal if you're doing well. Does anyone else here invest in airport operators? Am I looking at this business the wrong way? Any other good names out there?
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Finally pulled the trigger on a starter position in BTI. It should drop at least 20% because of the curse, so get your checkbooks out if you want a bargain in the next couple of weeks.
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Other than inputing individual trades into a spread sheet to figure out my rate of return, I didn't know how to see if I was doing better than passive investing and by how much. My brokerage shows you cumulative time weighted returns, which would give me an accurate answer only if I didn't make any additions or withdrawls to the account. So I don't have a good estimate for returns in my taxable account. BUT I just realized that my ROTH IRA hasn't had any additions in a while (I converted some of my traditional IRA to a Roth IRA during the temporary tax cut year, but haven't added since because taxes went back up). So when I used the tool, it's comforting to see that all my efforts aren't producing a result that is worse than passive investing.I have no desire to ever manage money for anyone, and honestly if someone was looking over my shoulder and questioning some of the dumpster dive stocks, I might be tempted to hug the index and underperform just like the pros. But I do think individual investors can play a different game than the pros and part of the positive returns are due to this website. The signal to noise ratio is very good here and reading up on a thread here is part of my process (along with 10-ks, investor presentation, trade mags, interviews with the CEO etc). I definitely make fewer errors by being able to bounce ideas off of smart people here and get their feedback. And talking with people with compounder mindsets is helping me look for more of them and avoid quick pops in commodity shitcos.So thanks to everyone on here for your help. I appreciate the culture of sharing and generosity on here.From July 1, 2020 to July 6, 2023Showing prior-day close of business data Select to view help about how often this performance data is calculatedCumulative time weighted return93.99%
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Sold about 10% of my NETI shares in my retirement account (It's up 30% in a few months based on a merger agreement) and while I still think it has room to compound, there is other stuff that is cheap now. Redeployed it to OXY, PXD and STNG.
OXY is below the price that Uncle Warren is buying, and PXD also has a lot of Permian assets like OXY, and is a similar market cap, but no one is looking at it. Weird. I've written about STNG in another thread.
I hope I'm right about my oil basket, but I can't think of a better short term vs long term thesis than buying oil stocks when they are beaten up now. Biden still hasn't refilled the Strategic Petroleum Reserve, the majors are buying back stock instead of digging more wells, OPEC cut production, Russia can't get western tech to improve production, and every major shale basin except the Permian is producing less than they did before because the well production in fracks is front loaded.
I had my finger on sell button on META and SWBI in my retirement account today but I couldn't bring myself to pull the trigger. I may sell META next week but I think now that Cathy Woods is in it and people are bullish about the Twitter Clone, there is going to a retail investor pop before it reverses. SWBI is not expensive, but it will take a while for the new factory to get finished, and I feel like Mr Market is puking up some good stuff in energy lately.
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Added a few shares of OXY and PXD (both are a wager on oil prices and the Permian basin). Nothing to write home about, just had a couple of dividend payments come through.
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I thought about selling META in my retirement account before the big swoon, based on valuation, but I just let it sit there. I bought a few shares when it got ridiculously cheap, but nothing to write home about. I'm starting to look at the valuation again and think it might be worth it to sell some META because it seems that the last bit of good news (Twitter clone) is already priced in. ~40x earnings and still spending money on the metaverse? It's moat is incredible, but there are a lot of bargains out there, especially in the unloved things that are the polar opposite of ESG (my gun stock moved up but, energy , shipping and cigarettes still look like bargains). Hmmm.
As far as "the top" goes: the index is cap weighted and the stuff that is on fire like NVIDIA and AAPL are looking fully priced. If everything goes smoothly, they will probably keep doing better, but after experiencing a pandemic, a war in Ukraine, an attempt to steal an election in the US, is smooth sailing the thing we should be betting on?
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I'm more than half way through this book and would highly recommend it to anyone interested in the tobacco industry. It covers the development of Juul and some of the other non-tobacco nicotine products. If you didn't have a low opinion of management at some of these companies before, this book will enlighten you. The Altria guys, were slow moving and stupid, which is not a good combination. When Juul (then called Ploom) was a startup and needed a few million of seed capital, the private equity guys and other tobacco companies were falling over themselves and flying out to silicon valley to meet with these guys and see what they were doing, but Altria made Ploom come to Richmond for a meeting and then an idiot Altria lifer named "Captain Jack" Nelson literally put his feet up on his desk and talked down to them. A few years later they would pay $10 billion for a minority stake in the company, at a valuation that was twice what the prior round valued the company at a few months prior. Add the billions that they overpaid for chewing tobacco and a few other bad ideas and soon those billions start to add up to real money.
These cigarette guys had a weird fetish about tobacco leaves. One industry higher up thought that the vape stuff wouldn't catch on because it had no tobacco. It didn't burn anything. Why would anyone want it? They want it for the nicotine! Without nicotine, smoking a cigarette would be as popular as blowing bubbles or lighting a sparkler. They didn't get it. And the slow movement was a sign of pride for them--a feature not a bug. One CEO said that over your career "progress" is moving the clock hand from noon to 12:03. If you try to move it from noon to 3pm, you will be canned.
The chemistry stuff about the nicotine salts is particularly interesting and it's what gave Juul an edge. About 10% of smokers who tried a vape ending up switching. When Juul mastered the chemistry, about 60% of smokers who tried Juul switched. Fascinating read.
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5 minutes ago, Spekulatius said:
SF real estate is definitely down , but not 35%. If I were to make a guess it’s probably more 10% (more in very swanky areas). I still have friends living in the Bay Area and nobody talks about RE down 35% so far. I do think a 35% crash in RE in the SF area is possible even with RE in the US overall not taking much of a hit.
I think we want a diversity of opinions here . Maybe it’s just me, but I want both the @Gregmal and the @Gmthebeau to post.
Having lived in NYC for the first half of my life (and worked in construction with my Dad), Ive seen that real estate in some cities goes up and to the right for decades,, but not in a straight line, and it's usually the people that get in late on FOMO and bet everything on black are usually the ones who get wiped out and people like Ackman in General Growth who have money when no one is lending can do well. But you have to keep reminding yourself that this time isn't different. Even Brookfield got caught on some properties that they overpaid for when interest rates seemed like they stay in low single digits forever.
I lost a bunch in Florida before the great financial crash investing in some flips with my dad and brother. But I also bought a bank foreclosure condo in 2010 for $20k in Florida that Zillow says is now with $140k. The first was foolish because I knew the prices didn't make sense but I outsourced my judgement to my brother who had already flipped several successfully. The second one was just me sharpening my pencil and making my own decision. So I will always make mistakes but hopefully not the same ones.
Over time real estate tends work out because it's a spread bet between housing prices and inflation. If housing prices in NYC drop by 30% but the dollar gets cut in half due to inflation, then you will do okay in real estate especially with a mortgage because you borrowed in today's dollars and paid it back in future dollars which will probably be worth less.
And most people here don't know each other so unless you can point to a "what are you buying today " or "what are you selling today" post, everyone should be taken with a grain of salt. I try to be transparent because fake data points don't help me and no one knows me so my ego isn't tied to peoples opinions here. And I've gotten useful feedback on many things by crowdsourcing gaps in my knowledge.
I have no specific knowledge about Tesla that would make me invest or short it. Better for me to just watch. It can't blow up if I don't own it or short it. I don't want to bet on it but I'd still like to learn to see if I am right the next time I spot it.
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On 5/27/2023 at 2:34 PM, John Hjorth said:
Saluki,
If you chose to visit Oslo, the capitol of Norway, I would suggest you to visit the HQ of Norges Bank Investment Management [http://www.nbim.no][The Norwegian Gorvernment Pension Fund Global] [the worlds largest investment fund].
The location is fairly close the Oslo Opera and the Oslo Stock Exchange. The adress is :
Bankplassen 2,
NO-0107 Oslo,
Norway.
The underwhelming experience of such visit will likely overwhelm you and your spouse dearly. It's really a "wtf?" experience.
John, I know you were probably kidding, but I was in the neighborhood and stopped by. They wouldn't let me inside here or at the stock exchange and seemed quite surprised that I wanted to see inside.
Needless to say the better half didn't find it as amusing as I did when I was questioned by security. "No, I don't have an appointment with anyone in particular...but I work in finance and I'm on vacation so it all makes perfect sense you see..."
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2 hours ago, gfp said:
HostelWorld is not listed in the USA. Dataroma and the other 13F trackers will not show non-US listed securities, OTC securities, short positions, etc. That's why Berkshire's dataroma / 13F doesn't show Airbus, BASF, BYD, Munich Re, Insurance Australia Group or the 5 Japanese companies.
Ah! Got it, thanks.
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On 6/27/2023 at 4:37 PM, giulio said:
FFH stake in HostelWorld is above 5%.
I don't see this holding in Dataroma. Does Hamblin Watsa have different holdings to than FFH?
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I have 3 editions, but I'm probably going to order this too. I bought whatever the current edition was in 2000, then bought the new one after. Then I bought a reprint of the original edition which I decided to read but never got around to. I know I have a book problem but compared to gambling, drugs or fight club it's not so bad.
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This is one I've always struggled with. I think value guys (as opposed to growth or GARP or momentum) have the same weakness that you have to train yourself out of. Since you like buying cheap, when it gets to a price where you wouldn't be a buyer, you sell. I thought a lot about mistakes like buying Hanesbrands on the spinoff from Sara Lee and patting myself on the back because I made like 40% in 6 months. Then it traded flat for a couple of years and went up 10x from there.
Other than having a sell price in mind when you buy, I think one thing that's helped me sit on my hands recently is asking "is the company getting better or worse?" and if it's the former, I hold on for a while longer. If it's the latter, I ask "is it permanent?" then decide from there. Temporary: Google (ChatGPT), Facebook (Apple privacy and Metaverse), Permanent: Hanesbrands. With Hanesbrands, back then the company was getting better even if the price didn't move much (fall in cotton prices and growth of athleisure). And the market recognized that. Whereas now it is impaired (getting eaten alive by Gildan which has newer machines, less debt), so it's a time to sell. I'm trying to recognize that pattern in the future.
I overpaid for Fairfax after attending my first meeting in 2018 and having rose colored glasses on, and it was underwater for several years, but I didn't sell because I could see it was getting better and for some reason when a stock has a dividend I am much more patient with it than stocks without one. I think stepping back looking at the metrics helps sometimes too, but sometimes the story is not in the numbers. With FFH, I remember scratching my head when it was selling for 80% of book value (giving the assets or management a negative value) and I saw Prem doing a tender offer and buying shares hand over fist with his own money and I was darn near sure Mr Market was wrong so I just sat tight.
With JOE the price went no where, but they were buying back a lot of stock and to me if you buy back 10% of the shares and the price doesn't move, I still feel like I'm up 10%. STNG is another one like that. They already bought back 10% of the market cap this year and might buy back another 10%. If the stock doesn't move, I still feel like I'm up 20% on it. OXY is another one, it's price is the same as it was a year ago buy the enterprise value is $10bln less, so I feel like I'm buying a better company. (Stock price going down, but the company is getting better, so hold. If something happens and it gets worse permanently, sell).
This ARKK Just Won't Float!
in General Discussion
Posted
I know it's popular to beat up on ARKK, but I still wouldn't short it because the world is crazy. Buying an out of the money call option to limit your risk is probably the only way to do it and not lose sleep at night.
People flocked to her when her pandemic picks went parabolic, but if you look at her process, not her results, it's terrifying. You should be able to identify a cogent theory not just look at the results. Because the number of data points is infinite you need to understand why something works, not just that it seems to work now, so it will work forever. Butter production in Bangladesh has a 99% correlation with SP500 moves. But you wouldn't bet on it, just like you wouldn't make decisions on the economy based on the outcome of the world series, because certain correlations occur by chance. https://www.bloomberg.com/news/articles/2022-10-24/bad-omen-for-us-economy-phillies-winning-the-world-series
She liked to tout that her analysts were not accountants or finance majors as a feature not a bug. Is the reason that most active managers can't beat the index because they are accountants and finance guys, or is it because doing it is so hard that even highly numerate people have trouble because they are competing against each other and cancelling out their edges on average? If the odds of becoming a boxing champion by training in a boxing gym are miniscule, does that mean I have a better chance by recruiting fighters from the music school?
I'm not long or short, just here for the entertainment. I hope you make some money on the trade.