prunes

Esteemed value investor Joel Greenblatt has a new book out on Tuesday called The Big Secret for the Small Investor. I have read both of Joel's other books and enjoyed them. Although the are written for the average person, they both contain very strong wisdom belied by how easily the books are read. You Can Be a Stock Market Genius presents the reader with a survey of special situations investing opportunities: spin-offs, mergers, restructurings, etc. The Little Book That Still Beats the Market was I believe the first in what has become the very successful Little Book Of investing topics, and argues that one can outperform the market, on average, simply by buying the cheapest stocks available. This book is probably most similar to Dave Dreman's writings. Although Greenblatt is definitely a value investor I doubt that his new book will simply be a rehash of his first two. Anyone care to take a stab at what the "secret" will is?

Michael Lewis was on NPR's Planet Money podcast on Tuesday promoting the new edition of the Big Short, and he mentioned that Kyle Bass actually ended up on the cutting-room floor. He had predicted the housing bubble as well but sold his CDSs in 2008 and had already moved on to sovereign debt issues. Lewis remarked that he keeps a basement stocked full of canned goods, etc. "just in case."

Of course :)

Worth your time to read: http://www.zerohedge.com/sites/default/files/Kyle%20Bass%20Feb%2014.pdf Time to consider buying LEAPs on FXY?

This board has many industry-specific discussions but I haven't seen much specific to real estate. I thought it could be beneficial to have a thread devoted to REITs. Although I work in the real estate industry, I have a difficult time identifying underpriced REITs. The REIT market strikes me as being fairly efficient. The possible exception, I suppose, was in 2009. As with the rest of the market, opportunities were tremendous then, and I kick myself for not pulling the trigger. My father, who also works in the industry, dissuaded me, citing the great uncertainties related to deleveraging at that time. For those of you who track this industry, what do you look for when attempting to identify and analyze underpriced REITs? What are you bullish and bearish on these days?

That article just cherrypicks examples of particular goods that have seen costs increase. John Williams has been arguing this for some time, at least two or three years. 10% inflation sustained over a number of years would lead to substantially decreased discretionary income during that time. Can anyone here truly say that they've seen 20 - 30% reductions in their discretionary income (holding salary constant)?

I believe that biases and heuristics greatly influence the stock market. Some of these biases include anchoring (e.g. one's estimate of value being influenced by, or "anchored" to the prevailing trend), the confirmation bias (i.e. the tendency to focus only on information that validates one's hypothesis), and the availability heuristic (i.e. the tendency for our estimates of probabilities of rare events to be swayed by how easily examples can be brought to mind). Dave Dreman talks about these biases a bit in New Contrarian Investment strategies but his treatment is short and serves primarily as a lead-in for the rest of the book. I was wondering what books give more in-depth treatment of these psychological biases, especially in the context of behavioral investing. Also, if any of you find this topic interesting, the following essay by Eliezer Yudkowsky is pertinent and very interesting: http://singinst.org/upload/cognitive-biases.pdf, although it is more focused to existential risk.

Are you a trader or an investor? If you are buying the trend, an increase in price would signal an affirmation of the market's enthusiasm, and averaging up might make sense. I disagree with that strategy personally. On the other hand, an investor recognizes that price has little relation to value. If one is confident in one's convictions, the only rational response to a lower price is to average down. Obviously one needs to be aware of diversification, however.

One thing that Ben Graham preaches throughout Security Analysis is the need to look beyond trailing earnings and short-term trends. Because the future, ultimately, is unpredictable to all of us, trends should not be relied upon to any great extent. Yet even on this board with its many Graham acolytes, I see a frequent aversion to companies with near-term declines in revenues even though industry outlook is relatively neutral. As as example, take SuperValu (SVU), which we have a thread about in the Investments category. With SVU it is tough to compare TTM revenue with historicals beyond the past few years due to some major acquisitions (the financials don't break out performance by subsidiary/banner). Net income, however, shows a consistent increase over the past ten years. http://i53.tinypic.com/245h3yq.png Net income is shown with impairment charges added back. 5-year average income is $488 MM. 10-year average income is $370 MM. B Because of the continuing declines from FY 2009, the share price continues to tank. But the 5- and 10-year averages show strong upside potential if/when income reverts to the mean. Graham probably wouldn't call SVU an intelligent investment because of its debt overhang, but I imagine that he would call it an intelligent speculation. Am I perhaps misinterpreting what Graham says about the need to look beyond just the past two or three years in this particular circumstance?

The problem with models is that most of the time they are sensitive enough to allow you to arrive at nearly any result you want! Models are only as good as the assumptions that go into them, and making the right assumptions is difficult. I work in the valuation industry and most of the time (not all) we start with a good idea of where value is going to be and work towards it. A lot of the work in valuation is supporting your estimate of value and designing a credible analysis.

Let me chalk up another recommendation for Good Calories, Bad Calories. (I eagerly await reading Taubes' new book.) I think GC, BC is the kind of thing people here will love, most of us being very contrarian by nature. Seriously I cannot recommend it enough.

As it is no one I know orders the venti size. This trenta strikes me as something that will be akin to the 7-11 super big gulp: people make fun of it, but few if any actually buy it. Seems to be a good indicator that SBUX management is out of ideas.

I'm new to this board so I'll have to give you the benefit of the doubt on your statement that on this board he would just fall into the middle of the pack. All I know is that there is a big difference sustaining 20% average performance over 10+ years, and that I could die a happy man if I were able to achieve that. I think you are being unfair to him though. 20% over a long period of time is, objectively, great performance. Also, I wouldn't exactly call his results volatile if you're comparing them to the S&P, e.g., he clearly isn't achieving his performance just by increasing his beta.

If you read the MoneySense articles linked below you will see that they looked at his brokerage statements.

That LL Cool J article is amazing, thanks for posting that.

I bought BestBuy (BBY) on its big dip a few days ago. That is up about 5% now. I bought Corinthian Colleges (COCO) at $4.30 and was up 30% until Barclays downgraded the edu sector yesterday, and now its only up about 10%. The remaining holdings include BRK, PG (which I strongly am considering selling), and a very risky biotech that I have way too much money tied up in (PVCT.OB).

I initially ran across Jim Chuong's site when searching for Buffet's partnership letters. In case you aren't aware of who Jim is, he is a pharmaceutical sales rep for Novartis, who also happens to run an investment partnership that generates very strong market-beating returns. Even more unusually, Jim has done this while specializing in only a few particular stocks: K-Swiss (shoes), Fossil (watches), and Oakley (sunglasses) in the early years; and in recent years, the addition of The Buckle (apparel retailer), American Eagle (apparel retailer), and Columbia Sportswear. He also holds a stake in Berkshire that he considers to be equivalent to cash. Jim is a proponent of Buffet-style value investing, and all I can say is that he has been very successful. He also has adopted Buffet's writing in his annual letter to his partners. As to his performance though, I will let his numbers do the talking. http://i54.tinypic.com/zssfiv.jpg What do you all know of this guy?

Another basket of companies to consider--many retailers are very cheap right now. Wal-Mart is trading at 12x forward earnings. Best Buy is trading at 10x forward earnings. Aeropostale, a designer and retailer of teen apparel, is selling at 10x forward earnings as well and consistently has shown return on assets of approximately 30%.