matjone Posted October 30, 2014 Posted October 30, 2014 Kraven you are on fire today. Picture him pitching that process to investors. I imagine that guy had to come up with a better story than that to attract capital. I was going to post this earlier but I thought it was too far off topic, but it looks like we are well off the original topic anyway. I liked the interview with Gottfried but the thing that I noticed was him saying that everything has to line up for his investments. The thing I've realized is that many times you have a great investment where 9 out 10 factors don't line up, but there is one big factor that overshadows the negatives. For example, geico in the early 70's, early berkshire before people understood the plan, or for a lesser known example take Mexican Restaurants. In each case you had kind of a murky situation and you could sit there and name all kinds of negatives,but you could also pretty much sum up why you should buy it anyway in one sentence.
intothebreach Posted October 30, 2014 Posted October 30, 2014 Here's the question. If you don't screen for stocks how do you get a starting point of things to look at? If you say "I look for stocks in the news" isn't that a screen? Or "52 week low list" isn't that a screen? Or all Biotech stocks, isn't that a screen? Am I crazy? Crazy you definitely are not (that is, unless you hide it extremely well : ) You could even say CoBF is somewhat of a screen in itself based on curated content. Personally I maintain some fairly straightforward quantitative screens not to generate new ideas, but rather just to make sure I can catch the most illogical moves of Mr. Market such as BRK losing a third of its value a while back, and so on. However, these screens are still applied to a pre-selected group of stocks that I decided to include over time and that I have some familiarity with (started many years ago with Morningstar's wide moats, but definitely evolved into something else over time due among other things to the influence of many of the posters here). Having said this, I find that generating ideas not to be the hardest part of the investing game, especially since only a few really solid ideas are required when investing in a concentrated manner. I'm getting off topic, but for me the most challenging part is knowing when to let go of a successful investment and moving on to new ideas. (And by the way Nate, we "ran" into each other in the past: I remember writing you after your post on Solitron to share the reasons I was passing on that one. It seems to be doing fairly well for you.)
Tim Eriksen Posted October 30, 2014 Posted October 30, 2014 Kraven you are on fire today. Picture him pitching that process to investors. I imagine that guy had to come up with a better story than that to attract capital. I was going to post this earlier but I thought it was too far off topic, but it looks like we are well off the original topic anyway. I liked the interview with Gottfried but the thing that I noticed was him saying that everything has to line up for his investments. The thing I've realized is that many times you have a great investment where 9 out 10 factors don't line up, but there is one big factor that overshadows the negatives. For example, geico in the early 70's, early berkshire before people understood the plan, or for a lesser known example take Mexican Restaurants. In each case you had kind of a murky situation and you could sit there and name all kinds of negatives,but you could also pretty much sum up why you should buy it anyway in one sentence. Strange. I didn't see him saying everything had to line up at all. He in fact uses Geico in the 70's as an example of a stock that would not have shown up on a low price to cash flow or earnings screen. Some of his VIC recommendations clearly had some ugliness issues at first glance.
Kraven Posted October 30, 2014 Posted October 30, 2014 Kraven you are on fire today. Picture him pitching that process to investors. I imagine that guy had to come up with a better story than that to attract capital. I was going to post this earlier but I thought it was too far off topic, but it looks like we are well off the original topic anyway. I liked the interview with Gottfried but the thing that I noticed was him saying that everything has to line up for his investments. The thing I've realized is that many times you have a great investment where 9 out 10 factors don't line up, but there is one big factor that overshadows the negatives. For example, geico in the early 70's, early berkshire before people understood the plan, or for a lesser known example take Mexican Restaurants. In each case you had kind of a murky situation and you could sit there and name all kinds of negatives,but you could also pretty much sum up why you should buy it anyway in one sentence. Oh, I actually liked that story. Now maybe it wouldn't play well from the standpoint of attracting investors, but for an individual investor I had no problem with it at all. I firmly believe that investing comes down to just a few key variables. While I wouldn't necessarily suggest investing like this guy did it does show that simple and straightforward works.
cobafdek Posted October 30, 2014 Posted October 30, 2014 He in fact uses Geico in the 70's as an example of a stock that would not have shown up on a low price to cash flow or earnings screen. Those of us geeks familiar with Bayesian probability terminology would acknowledge that value screens probably have poor sensitivity and specificity. That is, given a large sample of value stocks, an ordinary value screen may come up with only 30-60% of those that are truly value stocks, and miss the rest. And given the remaining larger sample of non-value stocks, the same screen will mis-classify many of those as value stocks, meaning poor specificity. That's why a great stock-picker, in an interview, can easily cite a home-run value stock missed by a screen, or a value-trap falsely identified by the same or different screen. In the medical field, a laboratory test with such poor screening characteristics would be rejected as useless, possibly dangerous. But for investing, a value screening approach will find enough great stocks to beat the market.
Tim Eriksen Posted October 30, 2014 Posted October 30, 2014 He in fact uses Geico in the 70's as an example of a stock that would not have shown up on a low price to cash flow or earnings screen. Those of us geeks familiar with Bayesian probability terminology would acknowledge that value screens probably have poor sensitivity and specificity. That is, given a large sample of value stocks, an ordinary value screen may come up with only 30-60% of those that are truly value stocks, and miss the rest. And given the remaining larger sample of non-value stocks, the same screen will mis-classify many of those as value stocks, meaning poor specificity. In the medical field, a laboratory test with such poor screening characteristics would be rejected as useless, possibly dangerous. But for investing, a value screening approach will find enough great stocks to beat the market. I think you hit on the key. Screening can beat the market. The difference is that I, and I am pretty sure Guy, are not just looking to beat the market by a few percentage points. After incentive and management fees that would be average performance. If someone is looking for early Buffett like out performance of 8% or more, which I am, it doesn't seem to work. Maybe some have used it successfully, but I am 8 and a half years into running a fund (plus 7 years of investing before that) and it hasn't been necessary or helpful. It just doesn't seem to generate great stocks (stock that can beat the market by 10% or more). Maybe I am just a poor screener. I'd rather read 13-F's or good blogs.
Palantir Posted October 30, 2014 Posted October 30, 2014 Actually, I think most professional investors screen, at least in the interviews I've been to. I just bump into ideas.....wish I had a process.
Munger_Disciple Posted October 31, 2014 Posted October 31, 2014 One problem with mechanical quantitative type investing (assuming it is working in beating the indices) is that investors incur significant capital gains tax costs which do not show up in the performance numbers of most funds. After tax performance numbers still may be better but tend to be closer to the benchmark indices.
matjone Posted October 31, 2014 Posted October 31, 2014 Strange. I didn't see him saying everything had to line up at all. He in fact uses Geico in the 70's as an example of a stock that would not have shown up on a low price to cash flow or earnings screen. Some of his VIC recommendations clearly had some ugliness issues at first glance. Earlier on he's discussing how an investor in private businesses would insist on all his criteria being met, but people in public markets tend to be less selective. I can see what you mean though and he did specifically mention Geico, so that was probably a bad example for me to use.
peter1234 Posted October 31, 2014 Posted October 31, 2014 Along those same lines there was this great story. http://gemfinder.com/buffett-yeah-thatll-work/ This is a real gem. Thanks Kraven. :)
EliG Posted October 31, 2014 Posted October 31, 2014 Back to Guy Gottfried. He pitched Holloway at VIC: http://www.valuewalk.com/2014/09/guy-gottfried-radar-underfollowed-gems/ He pitched TerraVest here: http://www.marketfolly.com/2014/10/guy-gottfrieds-presentation-on-tree.html Holloway and TerraVest are the top two holdings in Clarke. Clarke owns 42% of Holloway and 28% of TerraVest. I wonder if Gottfried clones Armoyan's ideas. :)
EliG Posted November 1, 2014 Posted November 1, 2014 He also pitched SXP in 2013 Wow, what a smart guy. ;) Option A. Invest with Gottfried. Pay his management fee (2/20?) to own top 3 Clarke holdings. Option B. Buy Clarke at 30% discount to book. Gee, I don't know, that's a tough choice.
jay21 Posted November 1, 2014 Posted November 1, 2014 He also pitched SXP in 2013 Wow, what a smart guy. ;) Option A. Invest with Gottfried. Pay his management fee (2/20?) to own top 3 Clarke holdings. Option B. Buy Clarke at 30% discount to book. Gee, I don't know, that's a tough choice. H/T - top of the list now
Guest Posted November 2, 2014 Posted November 2, 2014 Hey indy, Is Gottfried's fund open? If so is it only available for Canadians and any idea the minimums?
cubsfan Posted November 2, 2014 Posted November 2, 2014 Hey indy, Is Gottfried's fund open? If so is it only available for Canadians and any idea the minimums? I spoke to him at the NYC VIC - it's open to US investors too. I actually forgot to as him about a minimum. Very impressed with Guy.
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