Your best long-term idea today?

[merkhet]

I have not dropped any of my points. It is still indisputable that going long AMZN was the right decision ten years ago if you had a investment case for doing so, I used "highly likely" to refer to a more general scenario with AMZN as an example.

 

The Force/bullshit is weak with this one.

 

However, what can be measured is the end result of making the investment. If you make a reasonable case for long AMZN and it goes up 800%, there is a good chance your case is justified. If you make a reasonable case for shorting AMZN, and it goes up 800%, well...hahahahha.

 

Explain to me how that was a general scenario rather than a complete recantation of what you previously said. Again "indisputable" and "good chance" are not the same.

 

See, when adults make mistakes, they try to admit it. See my previous post on how I shouldn't have written the words "prove out the strength of [the investment case]."

[writser]

No, there is absolutely no way to definitively judge the strength of an investment case.

 

No, this is badly mistaken. There is no way to definitively prove the strength of somebody's case for an investment. Read the bolded part over and over again until it sinks in. Investing has no built-in feedback mechanism, and an investment case is merely an opinion.

 

Wrong again.

 

If I am invested in, say, Fannie Mae, because I believe that the court will reverse the 2012 Amendment that sweeps away all of their capital -- explain to me how there is "no way to definitively prove" whether I was right or wrong. Why would the actual result of the litigation not "prove out the strength of [the investment case]"?

 

Oh...all this time you spent telling me that using results was the wrong method.  But I guess that you're getting around to my view. You realize in these scenarios you're looking at an investment case after the event happened? Markets reflect information that flows into them such as the FNMA court verdict or what TSLA's gross margin will be and that is what drives market returns, they do not simply appear out of thin air. Furthermore all value investors depend on the market recognizing value at some point, and if the market never recognizes the value of your holdings, you will not be a very successful value investor. Frankly, I find your disdain for investing in these names to be pretty amusing, it seems that you think that buying TSLA or AMZN is just throwing your money in a set of random outcomes, and which leads to some random price movements on a screen. I have no interest in correcting this view.

 

 

Speaking of pigs, my view is, "why argue with a fool when you can bet against him". I'll be doing that.

 

You miss the point. Merkhet never gave an opinion about either stock and he reminded you of that multiple times. It's just that your investment 'philosophy' doesn't make sense and sounds like something self-concocted taking parts of EMH and value investing as you see fit and he is trying to point that out to you. Instead you act insulted because you think somebody is critical of your AMZN purchase.

 

I think the core problem is that you fail to distinguish outcome from process which is a very bad trait for an investor. Like Merkhet pointed out, you make no distinction between a 'undisputedly' correct decision into one that is 'likely proven correct'. These things are so completely different that I wonder why we are even trying to argue with you.

 

I think it would be useful to study some casino games - just to get familiar with the concept of expected value.

[DTEJD1997]

Hey all:

 

One of my favorites for the next few years is Nevsun Resources (NSU).

 

The good points:

 

A). company is making money.  They made $.15/share in the last QUARTER.  This is with some minor problems with the mine and distribution.

 

B). There is a good chance they will make $.80/share in the upcoming 12 months.

 

C). They have an incredible balance sheet, they have close to $500MM in working capital.  This is for a company with a market cap of $790MM.  Of course, they have no debt.

 

D). They pay a dividend of about 4%.  I suspect this will be raised in the near future.

 

E). In a few years, they will start to extract zinc instead of copper.

 

F). They have several development projects that are promising.

 

Now for the negatives:

 

A). They are located in Eritrea!

 

B). They have one mine at this point.

 

C). They are mining almost exclusively copper at this point.

 

Management appears disciplined and makes good decisions.  They are likely to make an acquisition outside of Eritrea.  They are also likely to further expand in Eritrea.

 

So I think this a great company, at a great price.

 

Any one else looking at this?

 

 

[jschembs]

Palantir, just want to say that you are the man! Whatever the methodologies/religions we use, the end goal in investing is always about making money. We have to remember the kind of returns that Buffett was making in his earlier years. He didn't get to where he is from preaching his philosophies, he arrived there through his returns.

 

Hahaha, thanks. That is the difference between Buffett and John Hussman, one has the results, and the other has very reasonable arguments.

 

AMZN's returns over the last decade in my opinion are more the result of luck rather than skill. Yes, AMZN the business has continued to grow, but what case could be made for AMZN's current valuation 10 years ago? The company certainly has achieved growth rates at least in line with the most bullish of projections, so if based on those revenue growth projections, your thesis was also that the company in its current size would be valued at 150x free cash flow, then you have a crystal ball that is very valuable.

[augustabound]

That is the difference between Buffett and John Hussman, one has the results, and the other has very reasonable arguments.

 

I may have to clip this quote of yours to save for later.  ;D

I always thought Hussman was a windbag.

[yadayada]

My favorite one is Altisource. Very cheap now. Just read threads around here. I think there is a good chance they will be worth 3-6x more in a few years. And I think the whole regulation think is lot's of smoke and little to no fire.

[Packer16]

I guess folks have a different take on what the best is.  Is it highest appreciation potential?  If so then the large names (IBM and AMZN) probably will not be in that group.  These are both $100b+ companies today.  Who else is going to buy these that already hasn't?  You also have some of the smartest folks on the planet analyzing these and advising big investors where the correct price is.  It's like playing tennis against a pro versus your slightly overweight neighbor.  I'll stick with the overweight neighbor stocks like some of the Korean preferreds (Lotte Chilsung, KIH, BYC, Daesang  and Taeyoung E&C) or some of the Australian mining services firms (Boom and Emeco).

 

Packer

[yadayada]

Packer I think cash flow is a catalyst. I mean if Amazon would do 50 billion $ in FCF 10 years from now and pays out a decent %, it will trade up for sure.

 

And is there a discussion here somewhere on KIH? Is that the japanese one, or the Korean one?

[cobafdek]

 

I think the core problem is that you fail to distinguish outcome from process which is a very bad trait for an investor. Like Merkhet pointed out, you make no distinction between a 'undisputedly' correct decision into one that is 'likely proven correct'. These things are so completely different that I wonder why we are even trying to argue with you.

 

I think it would be useful to study some casino games - just to get familiar with the concept of expected value.

 

This point is key, and hits a very subtle nail right on the head.  I doubt that even that famous value investor in AMZN, Bill Miller, would argue like some of the above.  He would probably cite his colleague Mauboussin's paper http://www.michaelmauboussin.com/excerpts/MTYKexcerpt.pdf

 

[KCLarkin]

I guess folks have a different take on what the best is.  Is it highest appreciation potential?  If so then the large names (IBM and AMZN) probably will not be in that group.  These are both $100b+ companies today.  Who else is going to buy these that already hasn't?  You also have some of the smartest folks on the planet analyzing these and advising big investors where the correct price is.  It's like playing tennis against a pro versus your slightly overweight neighbor.  I'll stick with the overweight neighbor stocks like some of the Korean preferreds (Lotte Chilsung, KIH, BYC, Daesang  and Taeyoung E&C) or some of the Australian mining services firms (Boom and Emeco).

 

Packer

 

Don't keep us in suspense, which overweight neighbor is your best idea?

 

[Packer16]

KIH is the Korean one and it is under Investment Ideas.  The cheapest one is probably Taeyoung E&C preferred (it holds a majority stake in SBS Media - one of the largest media firms in Korea) at about a 25 cent dollar.  All of these are less than 50 cent dollars.

 

Packer

[randomep]

Hey all:

 

One of my favorites for the next few years is Nevsun Resources (NSU).

 

A). They are located in Eritrea!

 

 

Any one else looking at this?

 

How do you trade this stock?

[peter1234]

Hey all:

 

One of my favorites for the next few years is Nevsun Resources (NSU).

 

A). They are located in Eritrea!

 

 

Any one else looking at this?

 

How do you trade this stock?

 

Hint: it is not listed in Eritrea but .... US

;D

[Valuebo]

I guess folks have a different take on what the best is.  Is it highest appreciation potential?  If so then the large names (IBM and AMZN) probably will not be in that group.  These are both $100b+ companies today.  Who else is going to buy these that already hasn't?  You also have some of the smartest folks on the planet analyzing these and advising big investors where the correct price is.  It's like playing tennis against a pro versus your slightly overweight neighbor.  I'll stick with the overweight neighbor stocks like some of the Korean preferreds (Lotte Chilsung, KIH, BYC, Daesang  and Taeyoung E&C) or some of the Australian mining services firms (Boom and Emeco).

 

Packer

 

it seems a lot of people blindly follow buffett though, without asking themselves why he says something. You should wonder why he says it and nto blindly copy it.

 

They have the buy and never sell attitude, which is very suboptimal. Only reason Buffett never sells is because he is on board of directors like KO or he bought the entire company. They fail to see that buffett would have a different style of investing if he had a small amount of capital today.

 

And a lot of things he says are geared towards the daytrading crowd to get them to stop pissing away money to brokers basicly. So then it is better to take a somewhat opposite extreme point of view to educate them

 

Also investing in megacaps like he does with small amounts of capital is stupid at worst, suboptimal at best, unless they are very mispriced like BAC. You are handicapping yourself. For some reason a lot of buffett followers miss that. Both Munger and Buffett say that they would focus on small and microcaps if they would be investing today with little capital.

 

Well, this topic is about the long term. Long term means 5+, ideally 10+ years to me. For the TS, it was a minimum of 3-5 years. Maybe it's a shorter time frame for you guys, that's ok.

 

You're returns will be much smaller with IBM than if you buy and sell various undervalued small caps over that "long term" time span but that was not how I understood the question personally. I'm not really capable of picking small caps and not looking at them for 5+ years so if I had to do it, I would lean towards IBM as a 70 cent dollar, forgoing some return but keeping my sleep. While large caps get less mispriced than small caps, I think they can still offer decent potential if your goal is simply buying and forgetting.

 

edit: That being said and after thinking about it a bit more, maybe I should go with the JPM warrants.  ;)

 

Btw, my personal portfolio mainly consists of small caps.  ;)

[jtvalue]

I guess folks have a different take on what the best is.  Is it highest appreciation potential?  If so then the large names (IBM and AMZN) probably will not be in that group.  These are both $100b+ companies today.  Who else is going to buy these that already hasn't?  You also have some of the smartest folks on the planet analyzing these and advising big investors where the correct price is.  It's like playing tennis against a pro versus your slightly overweight neighbor.  I'll stick with the overweight neighbor stocks like some of the Korean preferreds (Lotte Chilsung, KIH, BYC, Daesang  and Taeyoung E&C) or some of the Australian mining services firms (Boom and Emeco).

 

Packer

 

it seems a lot of people blindly follow buffett though, without asking themselves why he says something. You should wonder why he says it and nto blindly copy it.

 

They have the buy and never sell attitude, which is very suboptimal. Only reason Buffett never sells is because he is on board of directors like KO or he bought the entire company. They fail to see that buffett would have a different style of investing if he had a small amount of capital today.

 

And a lot of things he says are geared towards the daytrading crowd to get them to stop pissing away money to brokers basicly. So then it is better to take a somewhat opposite extreme point of view to educate them

 

Also investing in megacaps like he does with small amounts of capital is stupid at worst, suboptimal at best, unless they are very mispriced like BAC. You are handicapping yourself. For some reason a lot of buffett followers miss that. Both Munger and Buffett say that they would focus on small and microcaps if they would be investing today with little capital.

 

Well, this topic is about the long term. Long term means 5+, ideally 10+ years to me. For the TS, it was a minimum of 3-5 years. Maybe it's a shorter time frame for you guys, that's ok.

 

You're returns will be much smaller with IBM than if you buy and sell various undervalued small caps over that "long term" time span but that was not how I understood the question personally. I'm not really capable of picking small caps and not looking at them for 5+ years so if I had to do it, I would lean towards IBM as a 70 cent dollar, forgoing some return but keeping my sleep. While large caps get less mispriced than small caps, I think they can still offer decent potential if your goal is simply buying and forgetting.

 

edit: That being said and after thinking about it a bit more, maybe I should go with the JPM warrants.  ;)

 

Btw, my personal portfolio mainly consists of small caps.  ;)

 

I agree that Small Caps are generally the best place to find value, but I don't believe that's the case today.  In recent interviews Greenblatt has talked about Small Caps being this expensive only 5% of the time compared to Large Caps only 40% of the time.  He states that he sees most of the value in the 50 largest market cap names today (specifically cites AAPL, GOOGL, MSFT).  I agree with him

 

Maybe it's a sign of the times, but I'm also going through a change in my investment philosophy.  Back in the 2005-2012 timeframe my portfolio consisted of mostly Small Caps and I turned it over 50% per year.  With the recent changes in US tax laws I now have an approximate 33% rate on long-term capital gains and dividends, making the pre-tax return hurdle that much higher. Therefore I'm looking for undervalued wide moat companies (usually they are larger in market capitalization) or compounding machines that I can hold for years.  As mentioned, MKL perfectly fits that bill

 

   

 

 

[AtlCDore]

I guess folks have a different take on what the best is.  Is it highest appreciation potential?  If so then the large names (IBM and AMZN) probably will not be in that group.  These are both $100b+ companies today.  Who else is going to buy these that already hasn't?  You also have some of the smartest folks on the planet analyzing these and advising big investors where the correct price is.  It's like playing tennis against a pro versus your slightly overweight neighbor.  I'll stick with the overweight neighbor stocks like some of the Korean preferreds (Lotte Chilsung, KIH, BYC, Daesang  and Taeyoung E&C) or some of the Australian mining services firms (Boom and Emeco).

 

Packer

 

Packer,

 

No HK property companies?  Or are they more shorter-term investments?

 

Thanks,

 

AtlCDore

[Packer16]

There are some interesting ones.  I have invested in Shun Ho Resources.  I think they will play out over a longer period of time that the Korean companies and the real question is what is appropriate discount to NAV and whether the appraisals supporting the NAV has some aggressive assumptions.  I like Shun Ho because it is primarily HK hotels.

 

Packer 

[yadayada]

You don't like Keck seng? Or think the $/sqm assumptions for the Macau apartments are too aggressive?

[investor-man]

I guess folks have a different take on what the best is.  Is it highest appreciation potential?  If so then the large names (IBM and AMZN) probably will not be in that group.  These are both $100b+ companies today.  Who else is going to buy these that already hasn't?  You also have some of the smartest folks on the planet analyzing these and advising big investors where the correct price is.  It's like playing tennis against a pro versus your slightly overweight neighbor.  I'll stick with the overweight neighbor stocks like some of the Korean preferreds (Lotte Chilsung, KIH, BYC, Daesang  and Taeyoung E&C) or some of the Australian mining services firms (Boom and Emeco).

 

Packer

 

I haven't seen Taeyount E&C. What's the thesis? The common is half of book, and the preferred is half the common? Looks like they had a bad year last year.

[Packer16]

Keck Seng is OK but I like Shun Ho because it has more upside at a 86% discount to appraised NAV versus about 65% for Keck Seng (adjusting for the condo sale prices in Macau).  Shun Ho is also has mostly hotels versus more of Keck Seng is development (selling condos). 

 

Taeyoung is interesting in two ways.  First is the majority owner of SBS Media Holdings, a depressed media content and TV operator and it has an architecture, engineering and design firm which has a JV with LG for water engineering.  Both of these industries have hit soft spots in there cycles but I like there economics long-term.

 

Packer

[yadayada]

Don't you have to account for non controlling interests? Discount is much smaller and more similar to Keck seng if I just take stake holders equity of the company. I also do not see dividends to regular stake holders of the company.

 

It seems a lot of these Asian companies trade on dividends. And it seems unlikely you get fat dividends here (if any)? Seems more likely with Keck seng judging by it's history. That seems to be the catalyst to close the discount usually. Otherwhise they can trade at a discount forever. It is basicly like owning a safe that has a million dollars in it, but you cannot open it.

[Packer16]

I have accounted for those interests and net book value is $7.52 but if the hotel properties are adjusted like Keck Seng's to the appraised value, the value per share increases to $18.39 based upon a 2013 appraisal.  As a test of this appraisal, Shun Ho sold its Macau hotel for HK$900m that had a BV of HK$289m and an appraised value of HK$782m. 

 

I think most of the value of these firms is going to come from appreciation not dividends.  Dividends are a signaling mechanism if you don't trust management.  I trust Shun Ho based upon another HK investor holding this company who is familiar with management and the growth it has had over the past 10 years.  I see growth as more of a catalyst than a dividend.

 

Packer

[yadayada]

I have accounted for those interests and net book value is $7.52 but if the hotel properties are adjusted like Keck Seng's to the appraised value, the value per share increases to $18.39 based upon a 2013 appraisal.  As a test of this appraisal, Shun Ho sold its Macau hotel for HK$900m that had a BV of HK$289m and an appraised value of HK$782m. 

 

I think most of the value of these firms is going to come from appreciation not dividends.  Dividends are a signaling mechanism if you don't trust management.  I trust Shun Ho based upon another HK investor holding this company who is familiar with management and the growth it has had over the past 10 years.  I see growth as more of a catalyst than a dividend.

 

Packer

 

ok thanks. The pyramid of holding companies seems weird though. Why do they do that?

 

So chairman owns 100% of Trillion Resources,

 

Trillion owns 71.2% of Shun Ho resources

 

Shun Ho resources owns 100% of Omnico

 

And Omnico owns 65% of Shun Ho technology (actually listed)

 

And Shun Ho Technology owns 71% of this one:

 

https://www.google.com/finance?q=0201&hl=en&ei=sk_rU8COEOT2wAPTzIH4BA

 

Which seems to pay the dividends? It is all a bit confusing. Valuations of these holdings seem to vary wildly, while income statements seem to look the same. The dividend paying one (Magnificent Estates, that one actually advertises the book value discount) seems to be valued more then 5x higher.

[crastogi]

I do.  and it is up today big on speculation that it will be bought out.  I just hope it is not a take under.  Insiders own almost 20%. 

 

what is your estimate of intrinsic value?

 

EDIT:  That was in response to DTEDJ post on Nevsun

[Guest Schwab711]

FICO

 

The largest market share that is never discussed and cannot be broken up. This is network effects on steroids. Ever bank/lender needs to use it. The first that doesn't will decline a member of a minority community and all hell will break loose in courtrooms. Replication costs are enormous.

 

As for micro-caps, I saw a CL posting for a guy selling ghost insurance. I think his combined ratio will probably stay fairly low... I like the business in the long-run, just wish it was listed.