Morgan

I ordered Walker's Manual of Penny Stocks 3rd Edition and it came in so I looked through it last night and found some very interesting companies. All data is old. The newest is from 1999. Interesting to see companies for these valuations, but is absolutely just a start off point. I didn't have chance to look at many of the companies - maybe only 30 or so out of the 500, but there is some good stuff there. One thing I did notice is that many, almost all of the companies I looked at, had very small margins and relatively volatile earnings despite consistent revenues. Getting sued or some other issue seriously kills the bottom line with these companies. Whitney American Corporation Market Cap: $213,301 P/E: 0.24 In 1998 they earned 112k, with 575k in FCF and in 1999 they earned 999k with 1,579k in FCF. So you could have (theoretically) bought this company for 213k and earned a million dollars in the first year. Ridiculous. W W Capital Corporation Market Cap: $325,224 P/E: 3.0 In 1998 they earned 87k with 283k in FCF and in 1999 they earned 105k with 258k in FCF. In 1996 they lost 718k but were profitable for 1997-99. The Coeur d'Alenes Company Market Cap: $694,904 P/E: 6.5 1998 they earned 251k with 22k in FCF and in 1999 they earned 142k with 720k in FCF. Health Power, Inc Market Cap: $6,512,785 P/E: 1.67 This company had some losses in its past, but 1999 had net income of $3.8m with FCF of ~$4.3m. The market cap was only ~$6.5m in 1999, but was taken private in December 2000 for $36m (I think).

Reading google cache can be very useful from time to time. Knowing how to use Google creatively is definitely helpful. I am a DIY-er, but I'm a lazy DIY-er. ;) Going through 3,000 stocks isn't my idea of efficiency, so if there are others to work with (http://unlistedstocks.net) it makes it easier. I'll use the books as a starting point just to learn more about that segment of the market and then get onto the site.

Really excellent site Parsad! I've only been here for a little bit, but have learned a ton! Looking forward to learning more, more, more! Cheers!

It's really strange to read stuff that was published on the web in 1996 (I'm a youngin). Especially regarding a company and its financials. I find it completely strange that these books could be of much serious use considering the data is so old. I guess it's a good starting point to learn of the existence of companies in your circle of competence that may be inefficiently priced then do follow up research. But man... it seems strange to look at financial data from 10-15 years ago and hope the companies are still similar (or in business). Although you can get the Walker's Manual of Penny Stocks from 2000 for ~$4 on Amazon. So why not right? Walkers Manual Penny Stocks 2000: http://www.amazon.com/Walkers-Manual-Penny-Stocks-2000/dp/0970001002/ref=sr_1_13?s=books&ie=UTF8&qid=1361415440&sr=1-13&keywords=Walker%27s+Manual Walkers Manual of Unlisted Stocks 2000: http://www.amazon.com/Walkers-Manual-Unlisted-Stocks-2000/dp/0970001010/ref=pd_sim_b_1 Walkers Manual of Micro-Cap Stocks 4th Edition (2002): http://www.amazon.com/Walkers-Manual-Micro-Cap-Stocks-4th/dp/0972068813/ref=sr_1_14?s=books&ie=UTF8&qid=1361415440&sr=1-14&keywords=Walker%27s+Manual (I don't make any money if you click those links)

That's true, it probably is smarter long term assuming we continue to use the same resources for fuel as opposed to other renewable sources. But I wonder though, how would US policy makers ensure we use their resources first without noticeably damaging the economy and/or getting kicked out of office?

Gustave Le Bon's The Crowd: A Study of the Popular Mind. This isn't as much as history of bubbles (let alone recent bubbles), but a primer on mass psychology. It talks about how crowds form, think and how leaders are selected, etc. It's still applicable to modern times as humans haven't changed much in the last 100 years. You can probably get a used copy on Amazon for a few dollars. I found it to be worth my time to read it.

I agree 100%. Though I also like to have a fcf generating machine that I can control. The reason is that a (more or less) predictable stream of cash helps very much reducing what Mr. Klarman in “Margin of Safety” calls “the opportunity cost”. Of course, it could also be reduced through special situation investing, or through high-yield bonds investing. But I find the nitty-gritty of business management and decision making to be much more fun! :) giofranchi I tend to lean towards the fcf machine and control aspects. I've discovered that I'm better at making money in real estate than in stocks. I have far more control, but it's definitely not as passive at all. Buying and holding BRK, FRFHF, LUK, BDVSY, etc would make you money, but in my experience I'd be more likely to make more money in real estate. Buy anyways premfan, the choice is ultimately yours. Good luck and let us know what direction you go!

A few thoughts... Free Cash Flow Machine: Creating an enterprise that shoots out cash that can be redeployed into new investments is very important to growing. But it also needs to be combined with scalability (or somewhere else to invest it at least). Management: As others have said, the Patel Way works very well. There are other ways to do it, and one way is to hire excellent, trustworthy management. Maybe you have to pay them above average salaries, but then you'd be freer to look for other investments. Scalability: Building a business that you can grow and eventually get to a point where you're not dealing with the day-to-day, but are focused primarily on capital allocation is hard, but possible. Most small business owners, I think, don't think about (or don't care about) growing their business into a billion dollar enterprise that other people manage for them, so they don't go into businesses that are inherently scalable. I don't know exactly what you're aiming to do, but creating a large hotel chain from one hotel has been done and it will be done again. Could you do it? Do you even want to? Lots to think about...

Maybe I'm not thinking about this in the right way, but depending on how you finance this deal, you might be able to make a good return and grow nicely. It costs $900,000 to buy and if you can get away with only putting up $100,000 cash and have the seller finance the remainder of the down payment and you make $100,000 a year and you can reinvest that in another hotel and then two more... extrapolating out a few years, you might own a few hotels and be making a good chunk of change every year. Maybe your hotels wouldn't have the best margins or occupancy rates, but if you can make 5x your money in five years and do that multiple times you'd be doing nicely in life. Just a thought.

I've been interested in hotels for some time and a big obstacle seems to be making the jump from owning one or two hotels and being there all the time, to creating a larger chain and having other people run it mostly. As Parsad says, getting quality and trustworthy management is key. Just out of curiosity premfan, how big is the hotel you're looking at? I always find it interesting to think about the numbers...

Absolutely agree. This is so cool!

I am interested in office space and most of the office buildings in my small town are pretty old (built between 1900-1930) but ornately constructed and would likely need to be renovated on the inside at least to some extant, so it is likely that the first property would be a turnaround play. I think because it is an old building it would be considered a Class B (maybe Class C) building even after renovations. Junto, can you recommend a few good resources to research the cycles of the different types and classes of RE?

Great post bttmline. Would you mind posting that list of books? Or just a partial list? I looked at Professional Real Estate Development, 2nd Edition: The ULI Guide to Business but it is a little pricey on Amazon at the moment. I'm hoping to read, learn and get to know the players in my market and buy a property in the next 12-18 months. Can you recommend any questions that I should ask to brokers, owners and developers?

+1 on that. It was interesting watching the judges and how they watched the teams and how the teams reacted and held themselves throughout the presentations and Q&A.

Great! Thanks! I just ordered two book by Poorvu: - Creating and Growing Real Estate Wealth - Real Estate: A Case Study Approach Hopefully those will come soon and I can dig into them. I have done a good bit of reading about Frank Lowy and Sam Zell. Most of what I've read about them isn't too detailed and doesn't deal much at all with their younger, startup days, which is what I'm particularly interested in. It's difficult to find details regarding that kind of information as it was so long ago and not many people were paying attention to them just as they were starting. Do you know of any sources of information like that?

Does anyone here invest in, or know about owning and operating commercial real estate? I'm interested in learning more about it and how things are handled in general or compared to residential real estate. I currently own and manage four properties with 27 apartments and in the future am interested in expanding into commercial, but I know there is much to learn prior to the first investment. Any tips, book recommendations, case-studies, companies to study, etc? Thanks in advance!

That's really great. I hope they can do more with their money to help others.

If you do this I think it can be done relatively affordably. This guy (http://gsguy.wordpress.com/) rode 250,000 (150k? I can't remember) miles through the world on a motorcycle over 2.5 years for about $100,000. If you have the cash and are interested in that kind of thing, it might be something to look at.

Wheeling, WV. Looks like there are some people sort of in my area (oddballstocks, Vinod, staheyp). It'd be great to meet like minded people. Anyone interested in a meet up maybe in Pittsburgh or somewhere else?

What a great thread! I'm in a similar situation myself. Just graduated from college and am very keen on beginning a career in value investing. Good tips here indeed. Sharper, why don't you think it is good to work for a bank?

Here is a neat video from Ted. In the video he briefly mentions Watson and how it is really good at detecting the nuances of the human language. Imagine when that type of technology is given away (like Wolfram Alpha) and the people all over the world have smartphones with high speed internet connectivity. Imagine someone in the African desert using their smartphone to ask Watson a question. That will change their life dramatically. The future is only going to get better from here on out. Cheers!

Ha! That's pretty cool! I can just see it now... Every doctors office will have a "Dr. Watson Medical Terminal" on hand to speed up patient interactions. Or more interesting yet, remove the doctors office and just visit a "WellPoint Watson Center" for fast and accurate medical diagnosis. Each location could have a number of "Dr. Watson's" there. Put them into little cubicles and have the patient walk in and talk to the machine. The voice would be strong and relaxing to make the patient feel comfortable and confident in its diagnosis. Then have an inventory of medicines on hand that could be spit out to patients. Hmmm. Thinking about how to make sure "Dr. Watson" would stay up to date. Would it simply be software that is updated periodically? I imagine it would. There would eventually be problems with that. I wouldn't be surprised at all if people tried to influence Dr. Watsons decisions. Either for purely nefarious purposes or for economic gain (a la spit out a brand name pill in stead of a generic). How would this be regulated to help make sure that doesn't happen? If the machine is gathering data, how would it determine the good from the bad? So many things to think about... Good share Ross!

I think the attached is what you're looking for. Interview_with_Mohnish_Pabrai_2003.pdf

That was a good read. Thanks for the share!

I am in the camp of the techo-optimists as well. I also agree that computers are basically calculators, although they have been programmed to calculate many, many different things and as times passes they will only become more competent and less expensive. An example of this is the Watson computer that was on Jeopardy!. It is a very powerful computer that has been programmed to analyze many different things to spit out an answer. It did quite well on Jeopardy!. The computational power and storage space used on the machine will eventually become commonplace, although I don't know the timeframe for this. As an example, think about the computational power used in the first manned space flight compared to a modern smartphone; 1,000 times more powerful, 500,000 times more memory capacity and probably 1/1,000th of the cost. (those numbers may not be exactly correct). The point is that technology moves more and more quickly and gets better and better and cheaper and cheaper all the time. Bargainman's post was very good. It outlined some of the ways that technology is being used to enhance our lives. As humans have (almost) always done, we use the best tools we have access to to create newer and better tools and continually increase our knowledge. It seems logical and likely that humans will continue to develop more and more sophisticated tools to do more and more things. Whether the Singularity will happen I'm not sure, but it sure does seem logical. One of the serious issues as pointed out by Liberty is the potential for humans to use our phenomenal technology in a destructive manner. Technology is inherently neutral, but can be used for both good and bad. We as a species need to make sure we continue to use it for good as much as possible. So yes Parsad, technology will almost certainly save the world. ;)