oddballstocks

Sounds like this thread just confirms my view, no one screens. I agree that specific screens can be done by anyone. So how are people finding ideas, just bumping into things? I will do extremely broad screens or go through lists of stocks A-Z. But I don't think anyone else is doing that either. Are most professionals just listening for ideas from others and copying them? Is that why we get crowded trades? Here's the question. If you don't screen for stocks how do you get a starting point of things to look at? If you say "I look for stocks in the news" isn't that a screen? Or "52 week low list" isn't that a screen? Or all Biotech stocks, isn't that a screen? Am I crazy?

Further to that they paint a picture as if the way they find ideas is the equivalent of wearing a tuxedo and drinking tea with their pinky in the air while screening is like digging ditches. IDK, I didn't really get that sense. I liked this quote: "It's so difficult to find truly compelling ideas that you have to take them any way you can get them. When I find some way of simplifying the process of locating bargains, I'm unapologetic about reusing it for as long as it works." Sure, I'm not talking about Gottfried in particular, just these newsletters in general. This observation has been from a number of them over the past few years.

One thing I've noticed from these newsletters which struck me recently. It seems as if everyone's answer to "how do you find ideas" is to say "we are different, we don't screen for stocks" So if all value investors are doing the same different thing of not screening then maybe using a screen is truly different? Food for thought.

Some things need to be experienced. I'd recommend a trip to a local Kmart followed by a trip to a local Sears. This way the Kmart will make the Sears look good, and when you see how bad the place is the fog will be lifted from your eyes and this thread will make sense.

The next CEO of Berkshire adds one more loop to her belt.

I guess it had been a year or so since someone flogged this horse, so maybe it was time to drag it out again? People have been saying this since the 1990s, it hasn't happened yet. Bass made the same prediction a few years ago when I started to invest in Japan. Here's my question, what model predicted what's happening? If you go back in history and look at the predictions things about Japan have been wrong, so why will it change suddenly? There are tailwinds, about 4% of Japan is invested in equities. Even a slight change in attitude could provide a huge boost to the market. Think of second order effects, so if Japan suddenly needs to raise money they might dump their $1T in US Treasuries, what happens to the Treasury market when that happens? Could it be that the US might be hurt more? If there's a sudden run to the exit in Treasuries do you think China would sit on the sidelines as well? Japan is a modern country, yes something will eventually go bump, but if it goes bump there then I'd expect the US to go bump eventually as well. We're on the same path as them. The Japanese are fairly resilient. It wasn't even 70 years ago that the country was mostly wiped out and they've not only recovered, but become a world power. Something to ponder.

Read the same thread. Here's what's funny, retail investors don't pay, institutions do. Yet all of these startups are targeting retail investors. It's a lot easier to get one hedge fund to pay a few grand a year verses a retail investor to pay $30/mo. Big companies pay big money without even blinking an eye. I was in a meeting about eight months ago where the Director I was meeting with received a phone call. He looked at the caller ID and ignored it. Then complained to me it was a sales guy trying to get a "tiny" $500k deal signed. To this Director $500k wasn't even worth picking up the phone for, yet to anyone in the real world that's significant money. It was interesting to say the least. This isn't the only example of this I've come across. Here's my advice, forget retail investors and target institutions and funds. Figure out exactly what they want and give it to them, they are willing to pay.

I've come to the conclusion that information is freely available, or available easily. We are flooded with information, but we struggle to make decisions. What investors want isn't information (morningstar, yahoo finance, capiq, bloomberg) but rather decisions. That's why this board exists, that's why research firms exist, that's why newsletters exist. The market for finished investment ideas is huge. Most people want the finished idea rather than the information that will lead them to the result. So what type of software should be created? Something that fulfills this. For example there are sites that list screen results of net-nets. But what doesn't exist is a list of net-nets with a blurb saying why you should invest in some and avoid others. Some of this can be done programatically, but a lot requires human analysis and intelligence. I like giving away free ideas. I bet this would be a hit. Scrape sites like this, Motley Food, Seeking Alpha, Yahoo, VIC, anywhere with discussions and tickers. Then parse the responses to generate a sentiment analysis to gauge popularity for an idea. Combine that with fundamentals and provide a finished 'answer' to users.

I thought this was a good article about his funds and approach. It's worth noting that he spent $35m of his own money and about 10 years researching this strategy. It'll be interesting to see where this goes. On another level Greenblatt is a genius. His spin-offs and special situations strategy worked well but it wasn't scalable. He realized that and came up with this relative valuation system that's extremely scalable. He's managing 10x more money now than he was in the past. Even without taking 20% of the profits he's doing well with is 3% fee, which is absurd in the mutual fund world. The guy has built a moat around his products via his own research. They have their own database with modified financials for every company out there. http://www.nytimes.com/2014/10/23/your-money/a-book-four-funds-and-a-flood-of-cash-.html?_r=1

It is wonderful! With a gorgeous terrace right in front of the sea, from which I have seen many beautiful sunrises! Very romantic… I think I could keep a girl more than just a few months over there… even talking about stocks all the time! ;D ;D Gio Spent a little time looking at images from Google for the area. I haven't seen a bad picture yet. If you have pictures of the place that'd be awesome to post.

And like Sears this spin-off will probably be more successful and generate more wealth than the other one..

The issue is there's a peg, so the trade isn't long or short it's just the binary bet that one day the peg will be removed. I remember Ackman pitching this, I remember a discussion around it on here as well. It could be another 5,10,15 years until the peg is removed. No one knows. Maybe when the Chinese elite start to bet on this trade it's time to join them.

What do you mean by “supportive responses”? Some responses were “Yes, I would do it!”, that is a “supportive response” to me. Other responses were “No way… You must be crazy!”, and that is a non-supportive response to me. They both are fine, and I accept them both and both make me think. You, instead, with an arrogant tone said that it is a waste of time to even ask the question I formulated in this thread… Well, I might respect your point of view, though of course I don’t share it, but still I don’t understand why you took the trouble of first reading this thread, then posting your thoughts… on a subject you have openly said to consider only a waste of time! Finally, I think I have put a decent amount of work into this board… If I have to make a decision, an investment decision, about which I still have some doubts, and I want to hear what other people on this board, whose judgment I respect a lot, have to say about it… Well, I think I have earned the right to share with them my doubts and listen to whichever good advice they might give! Not only: I would also add that it is precisely one of the most intelligent use of this board! ;) Gio Very well said. I think you should buy the place. You are familiar with the area, the seller is someone you know and trust, and you can at least rent it to cover expenses. To me there's some optionality here. At worst you have a nice place in a town you already like, you have a place you can stay. But you can also rent it to cover the carry costs, or potentially sell it for a gain at some point. Buying a nice property in a luxury tourist town at a discounted price isn't something most investors have the opportunity to do. With a town like that there is often strong demand from foreigners who are always coming in looking for a place to purchase. If the property is nice and you like it and you're comfortable with it I'd say pull the trigger. It sounds to me like the uncertainty is around what will happen in the future. We don't know what'll happen, although I'd argue you have a bit more insight into the town than anyone does in the markets.

Nate, what types of local businesses would you recommend? Where I grew up, there was almost nothing of any scale except retail. That, and an absolutely incredible ice cream shop chain. So I've got nothing to go off of. (Off topic, I always thought it would be fun to own that place, because I'm positive it's a See's-like business in every way you can think of. It's too bad it's named Whitey's. I'm guessing that might limit it's scalability...) I think too many people are looking to "kill it" on a business and would pass over something decent that doesn't have eye-popping numbers. A family member works for a manufacturing company, they have maybe 100 employees, most likely a 5% net margin or so. Given the numbers I've heard the owner is taking out $250-500k a year and leaves a little for reinvestment. Is that a money printing machine, nope. But anyone who can make $250k-500k in the Midwest can live like a king. There are a lot of light industrial companies, or just small companies in general that aren't very profitable, but pay the owner nicely. Ice cream stands can do well. A former co-worker's neighbor lived in a solidly middle class neighborhood on the back of the earnings from his ice cream stand. He works all summer and takes the rest of the year off. Sure he doesn't have a house in the Hamptons, but it is only working about five months as well. There are a lot of local business ideas that can generate a nice income but don't scale. So you have to settle with being comfortable rather than rich. My guess is not many on this board would make that trade, too many trying to the top. For the rest of us it spells opportunity. Nate, I appreciate your input and you bring up a great point about, rather than investing in stocks, investing in local private businesses (or perhaps a bit of both). Do you see in your area opportunities to invest in local "small manufacturing or service company with nice margins, good earnings and low capex requirements" that pay 7-10%.? When I look at local businesses that are for sale I see restaurants, laundrymats, gas stations, mini-markets, and more restaurants. I'm not seeing a lot of solid businesses of the kind you describe at the multiple you describe. Maybe you are saying one should start a business, but that's not really apples to apples. Sure I'd love to build a business and take home 250-500K a year. No I don't need a mansion. But is that really a fair alternative to buying shares of stocks? I think that's a different beast and presumes the skills and opportunities (and a little luck) to do so. So, I'm inspired by your comments and your advice, and I'm a willing buyer of local businesses at those levels. How do I find sellers? There was another thread about this, not sure the title. In short the best opportunities aren't advertising with business brokers or on lists. The best approach is to talk to a few local CPA firms, or some business valuation firms. Let them know what you're looking to buy and see what's out there. There are plenty of smaller companies that aren't actively shopping themselves, but given the right situation they'd sell. Another popular route is to be a capital provider for a portion of the business. Say a manufacturing company needs capital, you inject some for equity with the intention to take over a portion of the company in a few years. We had a family friend growing up who did this a few times.

This is a total tangent but it's such a cool story I'll share anyways. Had a friend who was a survival trainer in the Air Force for years. He was intense, loved that stuff while he did it and left the military probably 10 years ago. Owned a coffee shop with this wife, normal life stuff, very normal guy. About two years ago he wrote a book. Now this guy is not a writer. He writes terribly, misspellings, bad grammar, everything. He essentially told a fictional story meshing his experiences in the Air Force with some doomsday scenario. The book went nuts, completely nuts. Sold like crazy on Amazon, became a prepper favorite. He said he expected his family and a few friends would buy copies, was blown away by the response. So this book catapulted him to a minor prepper status position. He knew what he was talking about from the military training, and now he'd written a book. So he and his wife took full advantage. They sold the coffee shop and he opened a prepping consulting company. He is busier than ever, helping people build bunkers, buy guns, buy food supplies. He's writing another book and is doing a TV show. He happened to be very lucky and have the intersection of a few skills. He had the survival experience, wrote, and is very entrepreneurial. He saw his opening and jumped in.

You brought this up on the FFH board on a different thread...I thought it was interesting and took the time to pull as many of the company's returns as possible. I dividend adjusted, split-adjusted, and parent-co M&A adjusted the returns history to follow the company's returns that owned the brand at any given time throughout the time period. I had returns for 85 of the 100 companies; some were private; some had too many M&A transactions to get historical stock data. The findings: the S&P 500 had a total return of 136%; the top brands had a total return on average of 272%. Interesting notes: -If you remove apple, the returns of the brands drops to 197% -Apple's returns (6580%) dominated and skewed the group so much so that Apple's stock combined with any other portfolio mix of the 85 (for instance the worst 10, the worst 20, etc) would have still outperformed the S&P 500. -The next highest return aside from apple was Philip Morris (for Marlboro brand) -If you remove the top 10, the rest of the pack performed average in-line with the S&P 500 -The top 10 consisted of Apple, Philip Morris, Volkswagon, Nike, Amazon, Hermes, Budweiser, Starbucks, Mcdonalds, & Brown-forman (Jack Daniels). Watsa, Thanks for doing this, fascinating results. This is really awesome, thanks for putting that together. In many ways I'm not surprised that it was a single stock that blew the doors off in terms of performance. What's really interesting though is the brands with the top returns weren't the top brands necessarily. So an investor in 2004 who is picking a concentrated portfolio of 5-8 names from that list has a better chance of missing one of the big winners and performing in line with the S&P compared to picking them. As a strategy of buying all of the top brands this would clearly work. But I don't get the sense that anyone investing like this is doing that. Buying all 100 of these companies is a great way to go, but buying the five 'best' is really a lucky draw.

Nate, what types of local businesses would you recommend? Where I grew up, there was almost nothing of any scale except retail. That, and an absolutely incredible ice cream shop chain. So I've got nothing to go off of. (Off topic, I always thought it would be fun to own that place, because I'm positive it's a See's-like business in every way you can think of. It's too bad it's named Whitey's. I'm guessing that might limit it's scalability...) I think too many people are looking to "kill it" on a business and would pass over something decent that doesn't have eye-popping numbers. A family member works for a manufacturing company, they have maybe 100 employees, most likely a 5% net margin or so. Given the numbers I've heard the owner is taking out $250-500k a year and leaves a little for reinvestment. Is that a money printing machine, nope. But anyone who can make $250k-500k in the Midwest can live like a king. There are a lot of light industrial companies, or just small companies in general that aren't very profitable, but pay the owner nicely. Ice cream stands can do well. A former co-worker's neighbor lived in a solidly middle class neighborhood on the back of the earnings from his ice cream stand. He works all summer and takes the rest of the year off. Sure he doesn't have a house in the Hamptons, but it is only working about five months as well. There are a lot of local business ideas that can generate a nice income but don't scale. So you have to settle with being comfortable rather than rich. My guess is not many on this board would make that trade, too many trying to the top. For the rest of us it spells opportunity.

This thread has had me thinking, found a list from 2003 of the 100 best brands: http://www.brandchannel.com/images/home/bgb_2003.pdf I'd love to see the market results for those 100, and then them as a group. Just looking through it seems like a lot of the brands were peaking when they finally get to exalted status. Anyone looking to buy a Sun Microsystem workstation today, an AOL subscription, a Nokia phone, anything from Sony, digital camera etc. Interesting to note as well the strong showing by luxury brands. I don't know much about luxury, but it seems like these guys are the ones with true staying power. Maybe I'd want to buy a bunch of luxury stocks, diamonds, yachts, private planes, and jewelry shops and hold those for ten years.

Wow, quite the statement, Sears for 10 years. Do you ever think about the overlap of holdings? For example Berkshire owns Coke and Johnson and Johnson, and Fairholme owns Sears. You're increasing your exposure by some amount, maybe it's small, but it's something.

Hi Oddball---I'm not meaning to suggest that ten years is not a long time. I couldn't even drive 10 years ago. That being said a better question may have been what companies do you think have enduring moats/competitive advantages? Nothing lasts forever. Ten years ago investors would have said names like: Blackberry, Nokia, Cemex, Walmart, Target, eBay, Harley Davidson, and others. While great brands they all underperformed the market. These were names I remember looking at back then that were revered great brands that investors loved. They're all still around today, but for how incredible they were they underperformed an index fund. The problem with these polls is that they're not around in 10 years to evaluate. You can get a glimpse of this by looking at the old Morningstar forums, I believe the archives go back into the 1990s. Saw a quote recently that said in essence when you can't get fired for buying a brand anymore that means the company is about to stop innovating for their customers, and by proxy failing shareholders. It's interesting to think about. A culture has to be incredible to get to the top, but I've worked for some mighty lazy companies that are sitting fat and pretty at the top, milking their market. To hash out my answer further, I think for someone not managing multi-billions, the best way to guarantee great returns for the next decade is to invest in a local private company. Invest in a boring company, something with a niche. A small manufacturing or service company with nice margins, good earnings and low capex requirements that pays out a portion of earnings as dividends. I've talked to a few people who've done VERY well for themselves owning positions like this that pay 7-10% (or more) in dividends per year. It's not hitting it out of the ballpark, but it's steady returns, and they're more predictable compared to figuring out which large national brand will endure. Even Coke is coming under attack. Suddenly sugary drinks aren't the rage. Pepsi has a non-sugar drink in each category and is prepared for the future. Coke is working feverishly to stick their fingers deeper in their ears. If I were a predicting person I'd say we're a few years out from Coke spending an absurd amount of money to buy some up and coming beverage maker that will 'transform' their business.

Not sure there are many public stocks I'd want to own. Maybe a few shares in some local private companies and of course my own business. Otherwise 10 years is a LONG time to trust in someone else with zero input, and zero opportunity to sell. A lot of things change in a few years.

Hi. If I can ask, how do you think about valuation, especially for MA? I own MA, and have owned since a month or two after the IPO. This is one of my few 'moat' companies. I am just holding on tight. Valuation might be stretched now, but if you think out 10 years the world will be increasingly digital vs cash based. MA is going to benefit from this. I prefer MA over V because MA includes Europe whereas Visa does not. Is this an incredible value play, maybe not here, but I think I'll be happy in 5-10 years verses where shares are at now.

This is the kind of comment that panics people. Ebola is not airborne and is extremely difficult to transmit through the air. I have no medical background, but I do read Wikipedia.. I have seen a number of articles recently that said no one is sure if it's transmitted by air or not. It can potentially be transmitted on droplets of fluid such as from a sneeze. The problem is the disease hasn't really been studied enough for anyone to know anything with certainty. It'll be interesting to see what happens in the US with this. One thing I saw said that 15-30% of Africans might have an immunity to this due to the fruit they eat, or through secondary contact with animals there. That is their body has had a very small exposure that they developed antibodies against. All of this reminds me of what our diseases did to the Indians when we came over here. Simple things like measles decimated the population because they'd never been exposed to it. I hope this isn't something like that where it's bad in Africa but they have antibodies, yet in the US we're doomed.

http://fortune.com/2014/10/14/buffett-proteges-ted-weschler-todd-combs/?xid=nl_termsheet I had two thoughts when I read this: 1) This isn't surprising, Buffett is going to pick incredible managers. It's expected they'll beat the market. 2) They're also running a small portion of the portfolio. What happens as these guys get bigger, will they see the same fall in returns that Buffett has as well?

Chicagoland. Was a superhot mkt fo 15 years before 2007. 2002 was as peak as it got. I remember in 2003 talking to friends about how they lived and worked there. They purchased a condo for an absurd amount of money way out in Elgin where it was "affordable". Both the husband and wife woke up at 5am so they could get ready then drive 15-20m to the train station for their hour long train ride into town. They worked in the loop until 6pm and got home at 7:30pm. They were together about an hour and a half at night before going to bed at 9 to start it all again. But they were so proud of being home owners of a tiny condo way out at the fringe of the city. Believe it or not that conversation helped shape my career decisions. I decided that I'd rather work for less money and live life rather than be stuck in the grind for 'more'. I remember telling my wife (girlfriend at the time) that I'd rather work at a grocery store and live in a tiny house compared to this 'American dream' these friends had. It sounded like hell. I have no idea how life has worked out for them, I've lost touch. But I know in my own life I've worked to arrange it so that I can live and enjoy life. I've made choices that have probably cost me future income, but the tradeoff has been more time with my family and less stress, two things that can't be priced.