oddballstocks

I agree on this option. Let's not kid ourselves most of us are not rational all the time, we're influenced by all sorts of things whether we realize it or not. How many people have had an absolutely terrible experience with a product, then went on to invest with the company because based on their research it was a good investment? I prefer to see myself as I am not as I want to be.

Or Japan finally blows up from its debt load, and those Japanese stocks plummet in dollar terms as the yen crumbles. Cheers! Always the optimist! How about we switch it around "Or the US finally blows up from their debt load and un-payable promises, these US stocks will plummet along with the dollar." There's always risk somewhere...

You got that right oddballstocks! This is a perfect example of confirmation bias and social proof bias at work. We all want the mystery stock heavily owned by the Guru who wishes to up his concentration to be the same one we own! We're just so darned predictable ;D I'm pretty sure whatever it is, it isn't one I own. So I want to know what it is so that I can look into whether or not I want to own it. Also I'm an actions speak louder than words type who finds it interesting that despite said guru's talk about Japanese stocks being so undervalued, he has a 60-90% position in some non-Japanese stock. Clearly undervalued Japanese stocks aren't among his best ideas either. And for those that believe in the idea that you dilute your returns by diversifying away from your best idea then yes, Japanese stocks aren't for you. I also wonder how many concentrated investors walk the walk and are willing to do what Monish is going to do, go 90% in his best idea. To me that's conviction and that's the logical end of the don't waste ideas meme. Why go for the second idea, just pile into the first. I hope him well, essentially he gets one shot with this, 90% into a company doesn't leave much room for error. Many entrepreneurs do the same exact thing, but they can control the outcome, and influence decisions being made, I'm not sure Monish is in the same position.

Your point is well taken, but I see it from a different angle. It's all in the assumptions you make, including Mohnish's confidence and his skill - to ultimately ascertain whether this one company is LIKELY to return 10x or 40x or 2x over ten years. I understand some people really, really like value investing. I find it interesting. But if you tell me how to sit on my hands and earn 40x over ten years, I'm fine never reading another annual report again. I'd rather be traveling! :) I actually agree with you. My view has been that the best way to get rich investing is to buy a moat company and let it ride. But here's the key, not some franchise company that's had it's run and is now enormous (Starbucks), but buying one when it's tiny and undiscovered. Why settle for a 40x gain when a lot of these go up 100x or 1000x? The focus for investors who love the business dynamics/competitive advantage stuff should be looking at small companies with growth potential and competitive advantages. You're never going to see your money go up 100x on a 50 billion dollar company, but it could happen easily for a company that's $60m and runs to $6b. The problem is most investors don't really know how to do this, they can identify a moat looking in reverse, but not going forward. Personally I find it easier to find items that are mis-priced and buy until they revert. But for anyone who can identify a competitive advantage in a small and growing company they will do much better than myself.

This thread is awesome, and it really going to the point about Japanese equities. Of the hour long presentation maybe 1m at the most was Monish talking about some pick he concentrated in. The rest of the talk was about Japanese net-nets and how abandoned and ignored they are. So what happens on the thread discussing the video? Everyone ignores the cheap Japanese companies and focuses on the 1m segment about some 60-90% portfolio allocation. That is a cool soundbite, but it seems everyone here just totally missed the forest for one single tree. Maybe Japanese equities will never revert to the mean, they will always sell below book value, and will remain ignored forever. I have a suspicion though that in a few years, maybe one or two, or maybe five people on this board will be talking about how they missed out on the epic run in some of these stocks.

Oddball, is that ALNEX on Paris or Frankfurt? It's the Alternext exchange, so it might be European not just French small caps. I really like all three of the French stocks right now. Nexeya and Installux are more domestic, but they're cheap! Precia is very international, but they're headquartered in France.

Good question! PREC.FR, STAL.FR, ALNEX.FR, SHFK, HNFSB, some community banks, and some Japanese net-nets.

The problem is longevity. A flash drive doesn't last as long as a physical hard drive, not because of manufacturing techniques but due to the physical limitations of the device. A flash memory location can only be written and over written so many times before the cell won't hold a charge. This is good for flash manufacturers because people will need to replace their drives quicker as they fail. What this also means is that until this problem can be overcome flash will never make an appearance in datacenters. I could see a hybrid where some information that's more static is stored on flash with swap on a physical disk. The problem is the speeds are so different you don't get the flash benefit the second you hit the physical disk, especially a laptop version. Most laptops still run hard drives at 5400 rpm, whereas a desktop drive at 15000 rpm isn't uncommon. The difference in rpm equals the amount of time it takes for the disk to physically spin to the location that the data exists.

Ouch! So there goes the reasoning that since a Chinese firm is audited by a branch of a Big-Four they're squeaky clean.

I know you asked for a seasoned expert, I am neither seasoned nor an expert, but I can't keep my mouth closed…. I seem to remember reading something a while back talking about what constituted a material lawsuit. The idea was if the prosecutor didn't mention how much they'd settle for, and there were no directly applicable caselaw then the plaintiff could reasonably state that they aren't aware of any material lawsuits. A fascinating side note, I find European companies are overly cautious in this regard. They squirrel away funds in a reserve to protect themselves just in case. I'd love to hear a lawyer comment on this.

Smart, but isn't it a little alarming that the FBI can access Google search terms? The FBI accessing google's data is one way. However that is not the only way to find this information. If you search for "Helen Fuchs Art", the first site that comes up is in google is a page on askart.com, when you click on the search result it sends a "header" along with your request that tells the askart.com's owner where the browser came from (google) and what search term they used to find it. You could directly contact the websites on the first page of results and ask them if would be willing to provide information for vistors who were directed to their site searching for the artists name. That is what I would do if I were looking for this information. Chances are when you explain you case to the website owners they would probably be willing to help. Didn't know Gundlach was posting on this forum… Glad you got your art back! I remember reading an article about him a month or two back where he said his traders would buy FB shares whenever they fell 2% and sell when they rose 2%. He said he was making more money on that trade than on the 10 year bond, putting it on those terms really gives perspective.

So the students, the wannabe investors are all dressed up, but the master isn't? I'd say who cares? He could have shown up in boxers and a robe for all I care, the talk was good, what he wore didn't change it a bit. There's also something to be said about knowing your surroundings, he lives in Miami, it's casual there. I'm more concerned about the stooges who show up in suits everywhere so they can cast off the air of a businessman, a suit doesn't make a person smarter, just hotter and sweater, especially in Miami. There was probably one kid in that class off camera wearing a Miami Heat jersey and mesh shorts who woke up late for class. That's the guy who's going to be the billionaire.

Weyerhaeuser is, in my opinion, the best way to play a rebound in timber and home building. Plum Creek is cheaper on a price per acre of land but has no where near the upside that WY has simply because Plum Creek is much more of a pure play land holder and Weyerhaeuser, in addition to having millions of acres of land, has a huge amount of lumber mills, pulp and cellulose fibers plants, a newspaper joint venture, and they also are one of the largest home builders in the country. Weyerhaeuser's net income benefits about $4.5 million monthly pre tax for every $10 increase in the price of lumber and OSB. This is just in their lumber business. So, if lumber were $100 higher and holds for a year at that price, the pre tax income benefit to WY's wood products division would be about $540 million annually. In the old days of a strong housing market, WY was generating huge amounts of cash in lumber, pulp, home building, and timber. The land value alone on WY is about $18/share. If you go back and look at even the worst of times, WY's share price didn't fall much further than $16-18 per share. At that point you would essentially be buying timber at liquidation value and getting everything else for free. What is liquidation value of timber? Do you take timber prices at the low, then tack on costs? Here's the great thing about timber, if there's a bad year you can do nothing, nothing at all and the value of your asset increases (the trees grow bigger). Here's the problem with that, if you're a company like WY or Plum Creek you have fixed charges you need to cover even in the bad years when there's no crop. The conservative way to play this is to stock pile cash in surplus years and spend it down at the low point in the cycle. Unfortunately most of these companies don't run that way. This is why I think the best way to own timber is in a really asset-lite structure preferably personally with title. In down years you don't have to do anything, in up years save the surplus cash. Seems like this might be a great idea for a savvy individual. Start a fund, buy a bunch of land, keep expenses REALLY low, and sell the heck out of it to hedge funds and institutions that want exposure to this asset class.

I have looked into Timber a number of times, I've posted about it a few times as well (links at the bottom). There are a few pink sheet pure plays, a few London traded global plays. I've found the best way is to just buy the land directly. If you trawl Craigslist in rural cities you can find deals for less than $500/acre. Sure you have to pay for a cruise and a harvest, but you'll get the highest yield, and your expenses will be under your control. I still haven't pulled the trigger myself because of the gas drilling, everything thinks they're sitting on a gold mine so land prices are jacked up. One way to play this is to buy timberland in states that don't allow drilling yet. I've seen plots in NY that are less than $500/acre, 50 acre+ plots. I've heard there are similar plots in KY. http://www.oddballstocks.com/2011/12/small-cap-pure-timber-play-keweenaw.html http://www.oddballstocks.com/2011/10/timber-as-investment.html

You have the answer to your question in your post, if the company grows at 8%, you get 8% growth. Depends on what's growing at 8%, if book value is growing and you buy above book you get less. If earnings are growing then you'll get your 8% growth.

I usually don't run screens, if I do they're very broad, like P/E < 6, P/B < 1. I've gone through lists of stocks from A-Z in the past. I get ideas emailed to me, some are good, some are terrible. I also bump into a lot of stocks. I'd say bumping into things is where I find the most ideas. So for example, someone might email me some idea, I'm looking at them, I look on Yahoo for competitors, and then find a link in a competitor message board saying "xyz stock is similar but cheaper" and down this rabbit trail I go eventually finding something interesting.

How about this, I'll flip it around. I could argue easily that every business that isn't going out of business has a moat. There's a reason they are still in business, customer relationships, a key plant location. A business with absolutely zero moat will be out of business soon as a competitor with the smallest semblance of a competitive advantage will take their customers. I think investors blow competitive advantages out of proportion. If you read a 10-k there's a section in there for competitive advantages, note how all companies are able to come up with something. To investors some of these things seem phoney, like "the strength of our customer relationships", or "our customer service" or "our quality". Seems like something that can be replicated. I am not a professional investor, I've worked at real companies in the real world, and those things do exist. I've seen a number of contracts walk from one client to another when a sales person leaves. There are also tiny companies that seem to have no advantage, yet a sales person or CEO who knows everyone, and people use people they know. Here's an interesting thought experiment, or a real one if you're so inclined. Call up some of these moat companies and ask the CEO what makes their company better than competitors. The answer they give might be much different than what an investor might give. Does the CEO, the person with the most visibility know the future of their company? Does the CEO know how to value it? I've been thinking about this some recently. Essentially a Buffett moat company is a leading company in industry. You have the Coke and Pepsi companies, Exxon etc. The truth is there is no secret sauce to their current success, they have one thing, inerta. When a company is so big is just continues to roll forward. Do you think that Exxon really has hired the 90,000 best and brightest? All companies supposedly hire the best and brightest, at some point the next person hired isn't quite as bright and so on and so forth. As for moats, I think the true ones are found in smaller growing companies. I listened to an interview with the author of a book, Blueprint to a Billion recently. He talked about companies that grew from $1m in revenue to $1b in revenue in 10-15 years. These are the Starbucks, the McDonalds going from infancy stage to the industry leader. To go from $1m to $1b a moat has to exist. So the question to everyone who's looking for moats is this. If you can get good at identifying a durable competitive advantage why are you investing in $10b companies that have limited growth. Instead why not look at these tiny companies in a startup stage, if a moat exists you could make 100 or 200x your money rather than 15% a year. Another question to anyone who's an expert on a business model and can somehow see into the future. Why use that in investing, why not start a consulting business, or start a business to exploit it?

I wonder what the motivation to do this is? He already has the mutual funds, he's already wealthy, and he already has plenty if status in the investment community. When I see this it reads the same as when an athlete joins dancing with the stars, or an old actor is suddenly wants a reunion show, they're out of money. I doubt Greenblatt is in the same situation, but I wonder why do this? If he cares about investors then dump them on the fund with lower fees. If this is basically a hedge fund version of the magic formula then it will always underperform the mutual fund because if the extra 2% drag.

I never initiate a position bigger than 5%, but I have positions bigger than 5% due to them growing. I usually will buy something in the 1-2% range, if it falls or I really like it I'll continue to accumulate. Right now I have 50 positions. I wish I had some rule or something but position sizing seems to be a gut thing.

Oddball, if you don't mind discussing it I'd like to know a little bit more about how you operate. What size positions do you usually have, or how many stocks do you usually hold? Do you invest strictly in stocks? Do you always stay fully invested? Do you tend to invest more in quality companies that earn higher returns on equity, or do you buy mostly average to below average stuff? Do you usually try to invest around BV or lower, like Walter Schloss did? Hopefully you don't mind me asking you about this. I am always interested in hearing how smaller investors have beaten the market, and I imagine there are others on here that would be interested as well. Thanks, My investments really break down into three categories, special situations (spin-offs, liquidations, other strange things), net-net's & cheap stocks, a few decent companies bought cheap. Like everyone here I'd love to own a few companies earning incredible returns year after year without me having to do anything. I recognize that I probably won't discover a franchise company, and most franchises I find it's too late, the growth phase is over. My view is also that these companies are cheap rarely, and come around infrequently. I have purchased two bonified moat companies over the years, and a number of franchise niche companies. A franchise niche is a company that can earn impressive returns on equity, but the market is constrained. They're not a Coke where they can convince most people in the world to drink it. It's more like a specialty glass company, or a scale manufacturer. The second category is what keeps me busy, the cheap stocks, the net-nets, low p/b, low p/e, the fun things. I've done well with these sorts of companies, but usually returns are limited. So maybe 50-100% upside, maybe 200%, but that's usually it. There are a lot of junk stocks that'd qualify for this category, I try to find ones with a margin of safety. I'm more concerned about losing money then finding the next eight bagger. The last category are the special situations. I usually bump into these while looking at the cheap stocks. A cheap stock will be in the process of liquidating, or is a spinoff or something. Spinoffs have been good to me, but they seem overheated right now. I've found a lot more success in picking international spinoffs. There's a lot of research that shows that buying spinoffs is a good strategy, the stuff I've seen on Europe is different. Spinoffs there are usually divestures of junk divisions, so they're really ignored, and hated by the market. Finding a compelling one can be a big winner. Most recently I've done well with Treasury Wine Estates. While all this is great, it's really just a system that works for me. I like cash as well, my goal is to have 5-10% in cash at a minimum, in the past year I've been up to 15% in cash. I do have bonds, but they're in a 401k account. My 401k is funds, I have 80/20 stocks/bonds, and about 50/50 US and international. The 401k performance isn't included in my numbers above, I've determined the asset allocation, but I'm not actually picking any stocks. I don't know if what I do could work for anyone else, it works for me because it fits my personality. I think that's key, find something that fits your personality. I should also mention, for all the gains I've had some considerable losses as well. I've made stupid investments, bone headed investments, and misguided investments. Each year I start the year looking at my holdings and wondering if they'll do anything. I'm actually astonished at my own performance, I really don't deserve it. I don't have any special ability not available to all investors, I'd venture to guess 95% of this board is much smarter than I am. The thing is I just keep buying cheap companies with a margin of safety, where I figure my risk of loss is low, and good things just happen to a lot of these companies.

How do you go about finding trustworthy information & financials for international small-caps? It's a space I'd love to get into but am not sure where to begin. For international small caps if the company doesn't publish information on their website, or the regulator's website I don't invest. There might be unlisted markets in other countries (I know New Zealand has one), but to really exploit it you need to speak the language and have local knowledge, and the ability to contact the company. So the advantage is to the local.

Of course there are never frauds on exchange right…what about the recent China reverse mergers? Being on an exchange and SEC reporting didn't save any investors from loss. Some of the biggest frauds have been exchange listed companies, just because a company is audited, or has a prestigious listing doesn't protect anyone from anything. My view has been that any investor buying a share in ANYTHING needs to do their own due diligence and not rely on anyone else, auditors, an exchange, regulators. The old expression is apt "caveat emptor".

Sure and if you put your money in with Madoff and took it out at the right time you did well too. Same with the China frauds, timed perfectly some investors did well with those too. Just because some people have made money doesn't validate an approach. I agree too many red flags, everything is fine until suddenly it isn't, and at that point it's too late.

Why not? Because as investors all know stocks only go down after you buy them. Ones you sit on the sidelines waiting to go down only go up… In all seriousness I've changed my approach some. I used to build full positions right away only to see the price drop. Now I'll start smaller and build in with a drop. Sometimes it never drops and I'm kicking myself for not buying bigger to start. There's always regret.

I should clarify, the reason I was asking for an email/pm is so I don't end up with 10 people all trying to submit financials for Ash Grove Cement. I also need to send a confirmation code to complete the registration.