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RVP

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  1. Assuming appropriate skill and understanding, I think as much as possible (even 100%) if you can gain full control and the company's capital allocation destiny is in your hands. Otherwise, 10% - 30% tends to be the sweet spot for me. And I try to frame the idea through the lens of a recessionary/ depressionary environment, not vs. whatever the opportunity set may look like today.
  2. This needs to be re-labeled "Sponsored Content: The Paradigm Shift, brought to you by [insert marketing co here]".
  3. Agreed. Money's been way too loose for too long, and moral hazard's only getting larger by the day. And just like in 1999, Pokémon cards are back in vogue: https://www.polygon.com/2021/2/9/22274841/mcdonalds-pokemon-cards-anniversary-25-scalpers-ebay-prices-resell-happy-meal
  4. Doesn't the delta hedge thing cut both ways? Like if sentiment turns for whatever reason and the stock becomes less bullish or even bearish, wouldn't the market maker sell the stock to avoid being overhedged? These days it feels like there are Cheshire cats all over the place seducing folks to imagine...
  5. In a world of abundant capital and VCs willing to tolerate years and years of losses, I think having everything under one roof is not only a big advantage, but increasingly a necessity. Yes spinning off divisions can allow you to be more focused & efficient, but in an upside down world where growth is all that matters and near/mid-term profitability is an after-thought, you need a very big bank account to endure/adapt to the uneconomic competition and disruption. A lot of Berkshire's non-monopolistic/ non-regulated subsidiaries may be mortally wounded going it alone.
  6. I would argue that on balance, Pershing Square has benefited from being promotional (plus being large shareholders). And whether their picks were right or wrong, the market has been rather quick to agree/ disagree. I would also argue that PS's holdings for the past two years skewed towards compounder-type businesses (that were never really "value" on an absolute basis even when taking into consideration their asset-light nature), and for the most part already had considerable marketing heft within the enterprise. And because they benefited largely from the large-cap/ compounder trend, there really was no need to go out to the media touting XYZ position. Were the inverse true, I would wager they would not be sitting quietly.
  7. Agree that lower interest rates benefit cash flows further out in the future. But long-term prospects are just that, "prospects". Isn't the notion that companies (outside more obvious cases like Amazon) are able to convince investors of their long term prospects a form a good marketing? And if a value company is not in secular decline, shouldn't they be able to do similar? Is the investment community focused primarily on said value company's near term robust cash flows (instead of future), because value investors/ management put it front and center, and is that a marketing problem?
  8. So it sounds like there is often a lack of external stimulus to nudge value investments (the average ones) to re-rate to a reasonable multiple in a timely manner (i.e. from 6x to 10x earnings or whatever relevant denominator). Absent broader macro forces, does this not imply a marketing problem?
  9. Yes value has a performance problem, I recognize that. I'm trying to better understand the cause, not the result. And I'd like to repeat that I'm not talking about businesses in secular decline; those usually deserve to underperform. Perhaps I should've clarified that I'm thinking about value stocks that truly are value (let's call them "true value" for convenience) regardless of whether they are asset-heavy or asset-light (i.e. buying growing cash flow streams at a discount, buying productive/ unique assets with staying power at a discount, etc.). So assume we are talking about companies that are not value traps. Based on my observations, the fastest performers/ the ones that don't have such long periods of divergence among true value stocks exhibit some or all of these traits: 1. Healthy top line growth 2. Company IR effectively communicates with the street (i.e. we are SaaS, TaaS; we have huge TAM) 3. Company's shareholder base/ hedge funds have a good following and communicate the story to the world in a compelling way 4. Publicly traded float largely controlled by a fund/ a few funds #1 is straightforward, but I wonder whether a true value stock/ true value investing will languish for long periods of time without the other factors. I will be the first to defend that fundamentals matter and eventually plays out. But instinctively I suspect the cadence of the returns are heavily tied to marketing, especially as more and more capital get sopped up by the companies in the largest ETFs.
  10. Completely agree with the above comments 100%. If I were to explain value investing to someone, it'd be along the same lines. Temporary impairment, mean reversion, buying $1 for less than that, etc. And I think that's the problem. At least for me, whenever I share the merits of value investing to non Graham and Doddsville folks, I usually get very bored stares (emphasis very). These are people who work on wall street, who own businesses, finance students. Basically a group that tends to know their way around numbers. Yet when they hear about "cutting-edge" developments (new online marketplaces, robots, modern medicine, etc.), their eyes light up. I recognize that value investing's generally "unexciting" nature is an age old issue, but I really do think the divergence has been exacerbated far longer than most are accustomed. And I do think its inability to capture today's mainstream attention (even for a medium moment) is a problem, especially in a world where we have more things than ever vying for our attention. Value works, but after long stretches of time passes... something about markets staying irrational longer than you can stay solvent. Buffett may not have talked his book, but I think the veil/ mystique he created was just as effective a method (if not more) of putting value investing right there in the psyche of the masses. Everyone wanted to know how he did it, and much energies and resources were mustered to try to pierce the veil. You can argue that that's made value investing much less attractive (too much competition/ overcapacity), but you could also make the case that the marketing for the strategy was superb and therefore any divergence was shorter and performance fantastic. I just don't see an equivalent energetic, consistent, larger than life value person today. Today it just seems like the growth group (and their captivating icons) trounces the value group in regards to marketing, which I'm convinced has had a meaningful impact on extended performance divergence.
  11. We all know the performance divergence between "growth" and "value" investing has been pretty wide for a while now, and that's only been exacerbated in 2020. There have been so many explanations for this, just to list a few: - Growth stocks have fundamentally and consistently blown past expectations, allowing them to work through initially "high" multiples - The internet has brought down many barriers to entry, allowing growth to scale faster and cheaper - Low interest rates benefit cash flows that may be far out in the future - Huge amounts of capital printed globally create a very robust and excessive funding environment for all sorts of ventures While all these explanations are sound, I don't see any reason why value investing can't benefit from the same trends. What's stopping your [boring business name here] from communicating like how [exciting startup business name here] does, and potentially also obtaining high multiples/ generous funding? I'm not talking about businesses in secular decline. I'm talking about the many businesses around you that are quietly chugging along just fine (and that value investors love to swarm around), but maybe not exhibiting hyper top-line growth (because they choose to grow profitably/ responsibly). If a startup can raise unfathomable amounts of capital at sky high valuations by promising super growth and future dominance, why can't an already dominant established player (whose lunch the startup may be eyeing) point to what they've built, while also planting seeds of exciting promise to come in the minds of potential investors? A lot of people attribute Buffett's early success to his incredible capital allocation (completely agree) and much easier environment (somewhat agree). But if memory serves me correctly, wasn't Buffett also a master at creating an incredible image for himself and his companies? Was value investing truly the greatest during Buffett's time because of the opportunity set, or was value investing's incredible stretch also aided by a young, hungry Buffett able to captivate the minds of so many (just like how Bezos/ Musk was able to do in more recent times)? Long story short: is the divergence between value and growth investing largely a symptom of the group of growth investors knowing how to tap the mainstream psyche way better than the current group of traditional value investors?
  12. I think the answer depends on the business on a case by case basis, and there's no way anyone can benefit from them all. If I'm fairly confident that the company can maintain some level of profitability in the short to mid term and management's capital allocation is sound, I'd probably accept smaller levels of discounts. If I don't see any hope of profitability on the horizon, I'd probably require a deep discount and some type of potential catalyst that could close the discount in a reasonable time span. And finally I like to examine how severe cash burn could be in a worse case scenario year (i.e. no business), and bake that into my hurdles.
  13. Matt Ball, a media exec/ analyst offers some good (at least as far as I can tell) perspectives on the video game industry. Regarding cloud gaming and distribution: https://redef.com/original/how-cloud-gaming-will-and-wont-disrupt He argues that cloud gaming is less about frictionless/ low-cost distribution than opening up the market to "spectator-participants". Regarding gaming production: https://www.matthewball.vc/all/videogameblindspot?curator=MediaREDEF He makes the case that traditional studios (TV, movies) may want to get into the game of video game publication directly in order to capture more upside in a larger and growing market.
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