west

I'm still collecting data for this (it's been about four years now), but I haven't updated my data webpage (mentioned in this thread). The data shows the MF outperforms, maybe 3%-4% more year on average since I've been collecting data, max. However, the selection methodology on the website has seemed to shift over time, so who knows how consistent it will be going forward At this point I feel like quant strategies are best for: Those who can backtest different startegies and come up with their own strategy based selections, "retired" fundamental-based investors who can have confidence in the system because they've got enough experience under their belt, and (maybe) people who can go years without checking their investment account. And I think these latter most people should only use quant strategies if there's a 100% completely automated way to do so (no strategy shifts *at all* over time... I'm not sure this is the case with the MF website) while being cost effective as well. And, at this time, I'm not sure there's a fund out there that fits these requirements...

Kraven is on reddit??? Joking aside, this is probably worthy of it's own thread. Things tend to get looked over otherwise. PS- Do you know about/follow r/SecurityAnalysis? Oh yeah, I'm bad, I'm nationwide. I barely know what Reddit is. I saw a link somewhere else. I'm not sure I know what Security Analysis you are referring to so I probably don't follow it. http://www.reddit.com/r/SecurityAnalysis/ There's less traffic than here, but there also seems to be less "noise".

As Kraven brought up in the Deep Value thread, Tobias Carlisle is currently answering questions on reddit: Thanks for pointing this out Kraven!

Kraven is on reddit??? Joking aside, this is probably worthy of it's own thread. Things tend to get looked over otherwise. PS- Do you know about/follow r/SecurityAnalysis?

Thanks guys. So I guess I'm wondering, how do you make the adjustment? Total Equity typically does not include the Minority Interest book carrying value already. Or do you make the adjustment on the Market Cap side of the P/B calculation? I'm not 100% sure any adjustment is necessary since Market Cap and Total Equity just reflect the equity interests of a firm. I'm not positive though...

Just curious, does anyone know if you're technically supposed to adjust Total Equity (or Market Cap for that matter) for Minority Interest in a P/B calculation? I know for calculating EV you're supposed to add the carrying value of the Minority Interest times an appropriate P/B multiple for the industry (assuming you don't know anything more about the Minority Interest than what's given), but I'm not sure what adjustments, if any, should be done for P/B. Thanks in advance!

Thanks for posting. It's always a good idea to "invert". I do have one issue with the study though. Net profit margins don't tell us that much without knowing how fast inventory turns over. They really should have reported return on capital instead.

Thanks Nate.

Are you sure you got that Browne title right? I can't find any "book" book with that title anywhere.

Can't easily save local copy of the file most times, and a PDF looks fine without their UI around it so they provide no real added value. Ditto. It's a zero value added service that has niche market monopoly (along with, perhaps, some marginal network effects?) just because 95%+ of the people out there don't care about PDFs so no real player addresses the market. And I refuse to pay them to download a PDF that's someone else's content.

Big thanks - I HATE Scribd too....... cheers zorro Off topic, but I'm surprised no one has done for PDFs what imgur has done for images. After all, I can only imagine that hosting PDFs is a lot less resource intensive than hosting images, especially, say, large gifs. I can't wait for the day that someone does this and Scribd dies...

Ahem. I hate Scribd myself. Here's a link to a downloadable/printable version from Sequoia directly: http://www.sequoiafund.com/Reports/Transcript14.pdf

Packer, Aswath Damodaran discusses his thoughts on industry standards for illiquidity discounts and his thoughts on how to come up with them in the first half of lecture #20 here: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/webcasteqspr14.htm He also talks about the same thing on pages 683-688 of the third edition of his Investment Valuation book. I think the lecture does a better job of explaining the top level concepts, but the book is better explaining the actual math. I hope this helps. (I'm not sure if this quite addresses the exact question you're asking...)

Packer, it looks like Greenblatt goes beyond naive equal weighting in his new funds and weights things by undervaluation instead: http://online.barrons.com/news/articles/SB50001424127887324616904580108330021565828

It's ok it's tax deductable. I thought fines weren't?

Packer, every book and every strategy I've read about does a naive equal weighting for the basket. 30 stocks in the basket? Each stock gets 1/30th of the portfolio. I don't do basket based approaches myself (I like to know what's going on with the companies I own) and I honestly don't know anyone else who uses them in real life. Except for (I think his name is?) txtaio on this board, if I remember correctly. Edit: Thinking about it, I guess I do do a basket based approach with my Japanese investments. I generally equally weight things as well, at least as well as I can considering the minimum order block requirements for the stocks.

Oddball, thanks for the recommendation. Are you fearful that beginning value investors using these one year earnings screens might put too much faith in them? I'm always a little fearful of that, which is why it's hard to recommend one year of earnings screening techniques without knowing how sophisticated the person is I'm talking too... My hunch is that it's best for most beginner value investors (or seasoned value investors who like to keep things simple) to avoid one year P/E or EV/EBIT or any other earnings based data and focus on P/B and build up historic earnings, EBIT and/or EBITDA by hand themselves. I could be wrong on this though...

topofeaturellc, I should clarify, I think it's hard to find individual cheap stocks in the US using classic screening techniques, at least outside of market pullbacks. Too many people are already combing the market using them. If you do a basket based approach where you don't know anything about the stocks beyond the numbers (I'm assuming this is what Donald Smith is doing?) you will most likely do well. This isn't the route I would take though because I like to understand what's going on with my stocks. I'm not sure I wouldn't panic in a market downturn if I didn't know everything that was going on with the stocks I was holding.

To clarify, as topofeaturellc suggests, the market may be a little overvalued *now* for screens to work well, but they have worked well in the past five or so years. However, you have to believe that some day stocks will be as cheap as they have been 2009-2012 and, perhaps, that the market is overvalued now and will revert to being fairly valued. And when the tide goes out, there will be some easy-to-screen-for bargains out there. I personally believe that if you wait for that you may be waiting for a while. And why wait when there's cheap stuff abroad or through not-picked-up-by-classical-screeners methods?

Yes. I'd say the US stock market is either too "efficient" or tends to be on the overvalued side versus undervalued side for classic screening techniques to work. I think as far a simple screens go, you can still get some cheap stocks by looking for P/B bargains, and then looking at their earnings history. You can also use the price/10 year earnings to some effect as you suggested. (An aside: These techniques still ignore the effect on balance sheet or off balance sheet debt has, unlike say EV/EBIT or EV/10 year EBIT. But good luck finding a free screener that does that.) However, even with the above mentioned screening techniques, *good* opportunities (not just ugly and justifiably priced low stocks) in the US don't seem to come along that often. If you look outside the US (or in the overlooked parts of the US like the OTC markets) it's much easier to screen for things. I think Nate of Oddball Stocks (www.oddballstocks.com) has a couple of posts on this topic. It's probably worth digging through his website to find them.

If you're really interested about this, I would recommend looking at the book Quantitative Value and also looking at what Damodaran has written about/lectured about on different price and ev ratios and what the fundamental drivers/companion variables are for those ratios. This being said, at least in the US you're probably going to have better luck cloning ideas from others versus trying to screen for things...

Thanks Parsad. I guess you learn something new every day (sometimes the hard way!) :D

I didn't, although it wasn't that much money. I might contact them again and try to do that. I was really more just surprised by the way the interest charge works. I thought with most credit cards the interest only gets charged to any revolving balance, not any new purchases during the period. To less financially savvy people who carry any balance, even a dollar, the way this works could cost them a lot of money.

Quick question for the board. I pay off the ending balance of my credit cards every month. Two months ago (or I guess I should say two billing periods ago) paid off everything except for $479.82 on my Bank of America credit card. It ends up, at the end of next period I got assessed interest on not just the $479.82, but all new purchases during the period as well. It wasn't a lot of money, but it still surprised me that my credit card worked this way. I talked to two different customer service reps and talked with a manager, and, yes, they say this is the way my credit card works. Is this typical for all credit cards? Or is this just a BofA scumbag-ery thing? Thanks in advance.

Nope! I'm greedy :D (I've also spent too much time on this to see prices for my picks go up without me.) This being said, I could have the rest of my positions established by next Tuesday if I really worked on it. And I've got 15 pretty good ones, some of which are close to Fujimak in awesomeness. However, I'm dragging my feet...