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Your best long-term idea today?


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Admittedly it's a tough market, but I am trying to find some new long-term ideas (minimum 3-5 year holding period). Any suggestions?

 

My favorite is Markel but it's already a full position for me.  Simplistically, I have a high level of confidence the company can compound BVPS at 13-15% over the long-term.  At 1.25x book today, that means it trades at 8.3x - 9.6x economic earnings.

 

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Why is it a tough market?  I just ran a screen for companies in France selling below 85% of book value with an ROE > 10%, there are 20.  I can run the same screen around the world and probably come up with 30 good investment candidates, sure it's not 200 or 2000, but to those willing to turn over rocks I think there are great opportunities out there.

 

I just ran my screen, there are 682 companies worldwide that are selling for less than 75% of BV with ROE's above 15%.  Maybe half of those results are junk, so 321 names that are potential purchases, it seems like there's a lot of opportunity...

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Why is it a tough market?  I just ran a screen for companies in France selling below 85% of book value with an ROE > 10%, there are 20.  I can run the same screen around the world and probably come up with 30 good investment candidates, sure it's not 200 or 2000, but to those willing to turn over rocks I think there are great opportunities out there.

 

I just ran my screen, there are 682 companies worldwide that are selling for less than 75% of BV with ROE's above 15%.  Maybe half of those results are junk, so 321 names that are potential purchases, it seems like there's a lot of opportunity...

 

Spot on.

 

Even in the US markets there are cheap behemoths and tiny companies alike.

 

BAC

JPM

C

AIG

GM

F

HPQ

NOC

TRV

 

...alll pretty cheap.

 

On the tiny side, I own companies like REPR that trade sub 15 P/E in spite of 40% annual growth, and 60% gross margins.

 

Nate blogs asset bargains every week.  You could just go buy all of those and do pretty well.

 

Packer posted some pretty great ideas in the US telecom realm. ALSK and GNCMA are cruising along nicely. I own some of those.

 

Saj Karsan has a killer cannibals list site... ASBB repurchased 11% of shares last Q. Trades at 80% of BV.  JCTCF is another 10%/yr cannibal that is basically a microcap magicformula type stock.

 

There was a thread here yesterday with a list of Japanese net-nets:

 

http://www.cornerofberkshireandfairfax.ca/forum/general-discussion/finding-japanese-net-nets/50/

 

You can buy the whole Russian ETF at a P/E of 6.  Gazprom has a monopoly on gas and trades at a P/E of like 3 or something stupid. Pretty hard to go wrong on that with a couple year horizon.

 

Most of Europe trades dirt cheap. Buy the EWI, GREK, EIRL etc. ETFs, the banks, the telecoms... the zipper makers, whatever... pepole are giving these things away... I think you could buy GVAL and I bet you'd get double digit returns over 5-10 yrs.

 

Nate posted this huge list a while back.  Tons of great stuff on here. I am sure he has sold some, but there are a pile of bargains:

 

ANCPA  ANACOMP INC IND NEW CL A

GAV:CH  CARLO GAVAZZI HOLDING AG CHF15.00 (BR) B

9476:JP  CHUOKEIZAI-SHA INC NPV

CDU:PT  CONDURIL-ENGENHARIA SA EUR5

7591:JP  EXCEL CO LTD NPV

FAVS          FIRST AVIATION SVCS INC CL A NEW

ALGEV:FR  GEVELOT EUR35

GWOX  GOODHEART WILLCOX INC

STAL:FR  INSTALLUX SA EUR16

KRK:NZ  KIRKALDIE & STAINS NPV

MA          MASTERCARD INC CL A

ALNEX:FR  NEXEYA EUR0.50

6149:JP  ODAWARA ENGINEERING CO NPV

PREC:FR  PRECIA NPV

RBRG  RANDALL BEARINGS INC

REOP  REO PLASTICS CORP

SVIN          SCHEID VINEYARDS INC CL A

SHFK  SCHUFF INTERNATIONAL INC

9932:JP  SUGIMOTO & CO NPV

TTHG  TITANIUM HLDGS GROUP INC

3331:JP  ZAKKAYA BULLDOG CO LTD NPV

6947:JP  ZUKEN INC NPV

BWLA  BOWL AMER INC CL A

HNFSB  HANOVER FOODS CORP CDT CL B

IVWIX  IVA WORLDWIDE FUND CL I

MPAD  MICROPAC INDUSTRIES INC

OPST    OPT SCIENCES CORP COM

PDRX  PD-RX PHARMACEUTICAL INC

RSKIA  RISK GEORGE INDS INC CDT CL A

SODI          SOLITRON DEVICES INC COM PAR $0.01

SSY          SUNLINK HEALTH SYS INC

WEBK  WELLESLEY BANCORP INC COM

WEIN  WEST END IND BANCSHARES INC

FIRT          FIRST BANCTRUST CORP NEW COM

FRMO  FRMO CORP COM NEW

KOGL  KOPP GLASS INC

SPCO  STEPHAN CO (FL)

53994158  AVALON CORRECTIONAL SVCS INC COM TENDERED FROM CUSIP 0534361

CNRD  CONRAD INDUSTRIES INC

FSBW  FS BANCORP INC COM

NSBC  NORTH ST BANCORP

SVCTF  SENVEST CAPITAL INC COM NPV ISIN #CA81731L1094 SEDOL #279629

SFBC          SOUND FINL BANCORP INC COM

UCBA  UNITED CMNTY BANCORP IND COM

BOTJ          BANK OF THE JAMES FINL GRP INC

CZWI  CITIZENS COMMUNITY BANCORP INC

PBCP          POLONIA BANCORP INC MD

WBB          WESTBURY BANCORP INC

WVFC  WVS FINANCIAL CORP

 

 

I don't know what will do the best, but I bet if you buy the whole pile of stuff above you would do very well... maybe not at Ericopoly pace, but I don't need to do that well!

 

 

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Bought AMZN

how do you get comfortable that buffett looked at this and didn't like it? He owned the bonds in 2003. This is basicly a typical buffett company. Right market cap , large moat, and he holds a lot of cash. And I would bet a lot of money that Buffett read all the AR's.

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@ blainehodder:interesting list, was this the result of a screener of some kind or just a portfolio snapshot? I own or have owned about ten names on this list and have studied another dozen. Probably because they all were featured on some popular value blogs. Might make sense to look at the rest too. With regards to Amazon:

 

Hmm.  Warren Buffett vs Palantir.  Thats a tough one.

 

-CM

 

;)

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how do you get comfortable that buffett looked at this and didn't like it? He owned the bonds in 2003. This is basicly a typical buffett company. Right market cap , large moat, and he holds a lot of cash. And I would bet a lot of money that Buffett read all the AR's.

 

I did not know he looked at it. That being said, I mean, do you think Buffett was correct on passing on it?

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@ blainehodder:interesting list, was this the result of a screener of some kind or just a portfolio snapshot? I own or have owned about ten names on this list and have studied another dozen. Probably because they all were featured on some popular value blogs. Might make sense to look at the rest too.

 

The pasted ticker list of community banks and netnets is from Nate (Oddball).  The whole post above isn't a pure portfolio snapshot but I would be happy with the total list for sure.  I would sleep well at night owning all of those, ETFs, netnets, megabanks and all... I do own a little of many.  I want 15%+ returns though... not 40%+.

 

turnkeyanalyst has some cool screeers too.  I quite like Greenblatt's magicformula idea as well! LO (pretty much milked now), PM, GPS, RGR, SWHC, BCOR (went on sale today!), EBIX looks set for a squeeze.

 

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how do you get comfortable that buffett looked at this and didn't like it? He owned the bonds in 2003. This is basicly a typical buffett company. Right market cap , large moat, and he holds a lot of cash. And I would bet a lot of money that Buffett read all the AR's.

 

I did not know he looked at it. That being said, I mean, do you think Buffett was correct on passing on it?

 

What is your thesis on AMZN? I looked at it but found it hard to understand.

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Then pray tell, what makes your analysis right? Is it correct if enough fanboys on an internet forum get excited about it? Given that AMZN has been up 800%+ since Buffett bought the bonds, passing on the equity was indisputably the wrong decision. The fact that you put AMZN in the same group as CYNK tells me all I need to know.

 

As a BRK shareholder, I would have no problems with Buffett buying CRM 10+ years ago.

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I think the thesis is that they will get bigger since internet retailing is still pretty small %, and eventually they will rise their prices somewhat? But find it hard to see when this will happen, and how much scale will play a role in this. If you had to put a rough ball park figure on what Amazon would be earning 5-10 years from now, could you do it?

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Then pray tell, what makes your analysis right? Is it correct if enough fanboys on an internet forum get excited about it? Given that AMZN has been up 800%+ since Buffett bought the bonds, passing on the equity was indisputably the wrong decision. The fact that you put AMZN in the same group as CYNK tells me all I need to know.

 

As a BRK shareholder, I would have no problems with Buffett buying CRM 10+ years ago.

 

I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.

 

 

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^ Yeah for sure, I think i-retail will be much bigger, but IMO limited in scope internationally as it is fairly US-centric, although they are investing in India. Not to mention their internet services business has such a huge potential market, from infrastructure to applications. I think 10 years from now, I hope they make 20B in FCF, or owner earnings if you will.

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I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.

 

You said, "The fact that a stock goes up after you decline to buy it doesn't mean your analysis was wrong".

 

Ok, then what shows this analysis is wrong or right?

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I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.

 

You said, "The fact that a stock goes up after you decline to buy it doesn't mean your analysis was wrong".

 

Ok, then what shows this analysis is wrong or right?

We don't know what Buffett's analysis was so we can never know if it was right or wrong, and even if we did we still might never know. That's the unfortunate reality of investing: we can only observe what has happened, but we can't observe what could have happened.

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I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.

 

You said, "The fact that a stock goes up after you decline to buy it doesn't mean your analysis was wrong".

 

Ok, then what shows this analysis is wrong or right?

Two points

1) Its antithetical to value investing to believe that market price moves validate or invalidate the research you did.

2) It doesn't really matter if your thesis was incorrect on something you didn't buy.  Its almost never worth rehashing it.

 

The reality is that value investing will always miss some great ideas. You have to be comfortable with that. 

 

I would never buy AMZN and I can't possibly fathom how someone who calls themselves a value investor as I conceive value investing could buy the shares. But that's ok.

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and I would hope you would at least question things if you were a BRK owner, understood how Buffett conceives value investing (Which is different from how I do BTW) and saw him buy CRM or even AMZN.  It wouldn't be logically consistent.

 

The closest thing to those businesses that he's participated in was NetJets - except there he was providing all of the capital.  And I'm not even sure how the returns on that look today to be honest. 

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I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.

 

You said, "The fact that a stock goes up after you decline to buy it doesn't mean your analysis was wrong".

 

Ok, then what shows this analysis is wrong or right?

 

We don't know. The last 10 years could've worked out better or worse for Amazon and the next decade could go either way too. That's why I think it's a bit assuming that you announce Buffett was 'dead wrong' on Amazon. You don't know what considerations he made, what alternative futures for Amazon he considered and how he weighted these scenario's. You can't look at a stock price now and judge a decision made 10 years ago - investing doesn't work that way.

 

Also, if you look at Salesforce, basically it has never been profitable. Any thesis that justified buying the business a decade ago hasn't been proven correct so far. Same thing holds (to a lesser degree) for Amazon. The jury hasn't reached a verdict yet, as far as I am concerned. If you bought KO in the 1980's, MSFT in the 1990's or GOOG in the 2000's the current and past earnings justify the purchase made. Although also in these cases things could've turned out completely different and you could argue that the thesis to buy them was incorrect at the time I'd say that these are in a whole different ballpark than AMZN and especially CRM.

 

By the way, I'd be aghast if Buffett had decided to buy Salesforce. It's brave that you try to make this point on a value investors forum though, always good to have a few dissenters in the mix :) .

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I have done no analysis and I never said that I did. I was just pointing out that your argument is results-oriented. If you put $1000 on black and win with roulette, did you make an 'indisputably' correct decision? No - you were just lucky. To judge the decision you have to focus on the business, not the stock price. Hence the CYNK reference.

 

You said, "The fact that a stock goes up after you decline to buy it doesn't mean your analysis was wrong".

 

Ok, then what shows this analysis is wrong or right?

We don't know what Buffett's analysis was so we can never know if it was right or wrong, and even if we did we still might never know. That's the unfortunate reality of investing: we can only observe what has happened, but we can't observe what could have happened.

 

I don't disagree, and I'll point out that I'm not the one who brought up "Bufett vs Palantir". Buffett can do as he pleases, I have no problem with him investing or passing on AMZN.

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Probably in the too hard pile. It is for me, anyways. Warren B. has boatloads of cash sitting around, and meanwhile here in Amazon we have the low cost retailer of the present and future. Even if he was "right" or "wrong" about investing in Amazon 10 years ago, why doesn't he pull the trigger now?

 

Maybe he just hates retail? Who knows! C'est la vie.

 

Edit: i think my point is...it's annoying enough to figure out why I personally did or didn't buy something. why waste time wondering why someone else does or doesn't do something!?

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