scorpioncapital

so minus 25-50% coming up? :)

You can further divide the Net-net beast into sub-categories. I.e. you can even specialize within net-nets. For example, some net-nets appear to be similar to SPACs or pools of capital at a discount. Others are biotech stocks. Others are lagging industrials. I can imagine a specialist can probably find some connections as to how to specialize here. I wonder in that study if some of the overall gains came from a few biotech net-nets, or conversely how much return was detracted by that sub-sector.

"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.

I wonder what happens when not only every country wants its own currency but every state. How about every city? Every company? :)

If a discount is baked in, just buy when there is a discount to the discount :)

I had my eye on this one SPRT...also not entirely sure if it's negative enterprise strictly defined, but life insurers seem extraordinarily cheap some of them trading at 0.5x tangible BV and less than 10x P/E.

because canada allows large access to US markets, I'm not sure this is a great thing for the country as how can they hold down rates, sell debt, and invest in the economy if people want US products out of the country? It almost is the same as the emerging market problem with Canada as being an emerging market and capital flowing out as policy divergence continues.

If you know something or are good at summarizing something, consider selling information. You'll have to spend some time to setup the info product and marketing, but a wise young man once told me that even though all information can be obtained free on Youtube or google search, people still buy information from people they like, that solves their problem without having to go everywhere and pick and choose.

the EU seems to be on a warpath with all US companies trying to buy businesses in Europe so approval will be interesting to watch.

Interesting liquidation strategy he had - he sold his winners and kept his losers :)

Negative equity may be caused by amortizing or writing off an asset but not the liability. Or borrowing against an intangible asset with strong cash-flows. Like Graham said, many of these cases are highly leveraged scenarios on account of the credit of a strong cash-flow franchise. In an acquisition, you might have a large goodwill element against debt - like an LBO - but while this will show as positive equity, if the value of those cash-flows diminish, it's really negative equity. Many of these situations will be especially sensitive to changes and growth rates of cash-flows. There's nothing else to go on. Reminds me of negative interest rates. Using the entire business as a credit card. Not sure what is to be achieved by such high leverage. A zero equity is dicey enough and as the years go on, even a zero equity business will turn positive from retained earnings unless they are distributed. The faith in the cash-flows is really acute. You have to have a stellar situation and even then I think in a real global stress, these businesses are going to be more fragile than one with real assets that can be used for something - even if that something is selling firewood to keep the lights on.

Google was a 10 bagger. Now it's 550 billion so that means it ipo'ed at about 55 billion. The sweet spot can be very large. I'd say even up to 10-20 billion is small enough to make a difference.

Perhaps he's referring to the difficulty in finding the next winner early, hence the deceptive part. If you read Philip Fischer, it's exactly what he's advocating, not necessarily IPO, but a real full on effort to think about and find the next 10 to 100 bagger growth stock, if not at the baby stage, at least at the junior stage.

Technically it's declarable but foreign taxed and undeclared should be roughly equal to declared and foreign tax credit. The question is what is the tax system like in China? Lower/higher/non-existent/taxed at source? If lower, they are definitely getting a benefit. Marginal rate in Canada is what 45 to 50%?

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.

Stocks always go up, like real estate , you can't lose :)

Just wondering, as in the past he invested in Cap Cities but for the last decade or two he hasn't done anything in the field. Has he ever talked about this field or if he soured on it? For example, from his experience with Solomon Brothers and investment banking it seems pretty clear he learned the headaches and reputational/black box risks of investment banking and has stayed away for the most part.

Sure, I don't think he meant that FCF should be hugely negative to be a shining example of disruption and a great growth engine. However, I would argue that disruptive growers that start off a small FCF base (perhaps losses in the first few years) are going to have sky high P/E ratios. Those who can see the future 10 years out for some of these companies can indeed do quite well if they are not blinded by the value investing precept of moderate P/E ratio.

Disruptor versus cash cow is probably the wrong way to look at this. You remember Buffett's famous "short horses" speech: http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm Most "disruptive" tech stocks aren't great long-term investments. But there is a combination of economic castle, moat, and reinvestment opportunities that is very powerful. You are better off looking for the next Copart or Costco or McDonalds or Starbucks or Precision Cast Parts rather than speculating on biotechs. Why? Because these "boring" companies generate enough cash flow to sustain their growth. Their growth is fairly predictable. They are less susceptible to disruption. To rephrase, focus on business model innovation rather than technical innovation. " Incidentally, if you think interest rates are going to do that--or fall to the 1% that Japan has experienced--you should head for where you can really make a bundle: bond options." Amazing, he was quite prescient in 1999. I wonder how many investors did the bond option thing if they had thought this was coming. I would love to see an article from him in 2016 what he thinks will happen the next 17 year period.

One message I got from this professor is that the low real growth environment (not nominal padding) may be due to coming to the end of sufficient new innovations and reliance on sustaining innovations which lead to low productivity growth. Although I'm not convinced this is a permanent situation, it may be a a temporary plateau.

It's interesting question. You can probably make a fortune selling life rafts to people on the sinking Titanic. Only problem is, what do you do with the cash when the ship goes down? Now the economy is far more complex and lots of moving parts and everyone looks after their self interest - especially in finance, but I wonder if this, in the aggregate, leads to low growth which taken together means more zero sum activities instead of real growth. If real growth comes from disruptive innovations, some will lose money for sure, but some will gain big for themselves and society. That's why it feels so strange as a value investor who wants to stay away from losing money. My solution has been to try and find businesses that are balanced between disruption and profit making. Some may argue they are not as creative as they could be, but having one foot in both doors so to speak and maybe some department in one of these companies will hit upon something as a fluke :)

I was watching this amazing video - where he describes the problems of RONA & IRR and how there is a tension between efficiency and disruptive innovations. As investors, we love free cash flow, but paradoxically, this sows the seeds of too much money and the end of growth over time. So I was thinking, either we are happy with low growth or we look for disruptive companies. Yet the new disruptors are unlikely to make money right away. What do you guys think? Should one look for the biotech or disruptive tech stock or go for the free cash flow or maybe the middle ground, no innovation but at least some place to put your capital back to work (e.g. reinvesting in capital intensive industries where government guarantees a decent return)?

Think of the psychology. By planting the seed that passive management is bogus, you can claim that MY active management is the answer. Salesmanship in all its modern day glory.

I thought this was a joke. For every renter there must be an owner right?

Not bad... http://ordonnance-investing.com/OE%20New-3.pdf