What are you buying today?

[Gregmal]

Remember how Twitter was regularly called worthless. All the cashflow analysis for years declared at best it was worth probably half of what it ended up getting sold for. In the end it ended up being worth $54 a share. That is what somebody with the money to acquire it, paid for it. 
 

Lesson? All these super certain declarations of what things are worth, are worth a lot less than the people declaring them, seem to think. Funny thing is the Twitter example is just one. You can do this for plenty of companies. Green Mountain Coffee, Netflix, Intuitive Surgical? Even Nvidia a few years ago had people screaming. Arrogance gets people nowhere. 

[DooDiligence]

49 minutes ago, sleepydragon said:

Bought it because wife said so, after missing out on her previous recommendations of amzn , tesla and most recently pltr (at $20)   She says reddit is interesting because a lot of people talk about consumer products there (i think she is referring to hermes bags), seems sticky to many. Iike the xiaohongshu in china 

i also has a friend who know the coo, and says she is a workaholic 

 

Probably a top 10 "why I bought" for household harmony. If it works out she gets to say I told you so (which you graciously acknowledge), and if it goes south you can silently let it hang until you need her to concede something later on. It's a win win.

 

Seriously though, isn't this about training LLM's? Wasn't Sam Altman CEO for like a week?

[Blake Hampton]

13 minutes ago, Gregmal said:

Remember how Twitter was regularly called worthless. All the cashflow analysis for years declared at best it was worth probably half of what it ended up getting sold for. In the end it ended up being worth $54 a share. That is what somebody with the money to acquire it, paid for it. 
 

Lesson? All these super certain declarations of what things are worth, are worth a lot less than the people declaring them, seem to think. Funny thing is the Twitter example is just one. You can do this for plenty of companies. Green Mountain Coffee, Netflix, Intuitive Surgical? Even Nvidia a few years ago had people screaming. Arrogance gets people nowhere. 

You are describing speculation.

[james22]

19 minutes ago, Blake Hampton said:

You are describing speculation.

 

Investing is speculation, Blake.

[Blake Hampton]

3 minutes ago, james22 said:

Investing is speculation, Blake.

[Gregmal]

40 minutes ago, Blake Hampton said:

You are describing speculation.

No, this is the market. A security is not worth some easily derived value based on a formula you read in an easily accessible textbook. It’s worth very simply what somebody is willing to pay for it. 

[cubsfan]

You have your formulas, and then you have business insights or Buffett's famous Circle of Competence.

 

Buffett talks about the insights a lot - so one dude's speculation, is another dude's insights.

 

 

[KPO]

1 hour ago, cubsfan said:

You have your formulas, and then you have business insights or Buffett's famous Circle of Competence.

 

Buffett talks about the insights a lot - so one dude's speculation, is another dude's insights.

 

 

In all fairness I think most of us can agree the greater fool investing style doesn’t work during some market periods, but we happen to be in one of those periods when a popularity contest rules the day. While it may seem unsustainable long term, it may sustain longer than one might expect.  There’s nothing wrong with sitting on the sidelines or investing in bond proxies when the world seems upside down. Live long enough and you’ll see everything.

[Eng12345]

1 hour ago, cubsfan said:

You have your formulas, and then you have business insights or Buffett's famous Circle of Competence.

 

Buffett talks about the insights a lot - so one dude's speculation, is another dude's insights.

 

 

"Reddit is popular" isn't a special insight though. 

Edited yesterday at 03:02 AM by Eng12345

[cubsfan]

10 minutes ago, KPO said:

In all fairness I think most of us can agree the greater fool investing style doesn’t work during some market periods, but we happen to be in one of those periods when a popularity contest rules the day. While it may seem unsustainable long term, it may sustain longer than one might expect.  There’s nothing wrong with sitting on the sidelines or investing in bond proxies when the world seems upside down. Live long enough and you’ll see everything.

 

Fair enough. I've lived all those periods since the mid-80's.

 

My own portfolio would likely be considered "boring"... sprinkled with a few that others would consider "speculative"  that I think I have some insights into.  

 

So most of the time - I'm close to fully invested. It's not I like a need 20 great ideas.

[villainx]

6 minutes ago, Eng12345 said:

"Reddit is popular" isn't a special insight. 

 

Hard to say.  But as regular user, I'm sure it's popularity/specialness is not common knowledge for unfamiliar/non users.

 

2 hours ago, DooDiligence said:

Probably a top 10 "why I bought" for household harmony.

 

I mentioned elsewhere that my spouse killed it against the SP500 in recent years, with partly her own stock selections.  Things that I wouldn't want to own or I'd eternally be waiting for the right price, companies like Amex, Hilton, Home Depot, Aritizia, etc.  So I kinda appreciate that she gives is curveball to our family portfolio.  She's also kinda timid with position sizing, so her losers don't end up being so harmful.  

 

[Gregmal]

9 minutes ago, cubsfan said:

 

Fair enough. I've lived all those periods since the mid-80's.

 

My own portfolio would likely be considered "boring"... sprinkled with a few that others would consider "speculative"  that I think I have some insights into.  

 

So most of the time - I'm close to fully invested. It's not I like a need 20 great ideas.

Much like @james22 sounding a whole lot like @Blake Hampton 12 years ago on this board, I am quite certain if you shared some of the details and personal experiences you had that you shared with many of us(I’ll refrain from hash-tagging like 15 COBF members here) on the yatch at the St Joe AGM, many would appreciate your journey and take that wisdom with more than a grain of salt. It was awesome and quite entertaining to say the least. 

[Dinar]

3 hours ago, Blake Hampton said:

You are describing speculation.

Blake, why do you say so?  Mark Zukerberg said that Twitter was a clown car that fell into a goldmine and could be insanely profitable if well run years before it was bought out.  Netflix and Invidia are minting money.  Clearly insight and superior analysis was required, but that must be part of investing.  Growth is a key component of value.  I understand if you find it hard to value growth, I do too.  However, if you stick to things that are clearly undervalued  based on either assets/liquidation value or current cash flows, you still need to project future capital allocation and future cash flows.  Yes, you can buy stocks today in say Hong Kong, where you getting a discount to cash, a management team that does not steal, and a business that makes money and is selling way below liquidation value.   However capital allocation is lousy.  You want it?  Keck Seng Investments - 184 HK.  Sells below cash, clearly below liquidation value.  Pays a nice dividend.  Horrible performer over the past decade.  At the end of the day, you always need to forecast something, unless you invest solely in liquidations.  I was buying stocks in Korea in 2004, at values that were comparable to what US was offering in 1970s.  However, I still had to make assumptions about managerial actions, same dynamic in Japan today.  

[Blake Hampton]

8 hours ago, Dinar said:

Blake, why do you say so?  Mark Zuckerberg said that Twitter was a clown car that fell into a goldmine and could be insanely profitable if well run years before it was bought out.  Netflix and Invidia are minting money.  Clearly insight and superior analysis was required, but that must be part of investing.  Growth is a key component of value.  I understand if you find it hard to value growth, I do too.  However, if you stick to things that are clearly undervalued  based on either assets/liquidation value or current cash flows, you still need to project future capital allocation and future cash flows.  Yes, you can buy stocks today in say Hong Kong, where you getting a discount to cash, a management team that does not steal, and a business that makes money and is selling way below liquidation value.   However capital allocation is lousy.  You want it?  Keck Seng Investments - 184 HK.  Sells below cash, clearly below liquidation value.  Pays a nice dividend.  Horrible performer over the past decade.  At the end of the day, you always need to forecast something, unless you invest solely in liquidations.  I was buying stocks in Korea in 2004, at values that were comparable to what US was offering in 1970s.  However, I still had to make assumptions about managerial actions, same dynamic in Japan today.

 

I'll start off by saying that there's a difference between the quality of a business and the price you have to pay for it in order to make an adequate return. For example, Apple is certainly one the best businesses in the world with a return on shareholder's equity of nearly 165% in 2024. For every $1 invested in the business itself, they made a return of $1.65 in earnings. But the question that we must consider is what is the correct price to pay for such a business? If you could buy in with Apple at book value you'd make an absolute windfall. The same goes at 2x book, 3x book, all the way to maybe 25 - 30x book if you really believe in the business. But their currently experiencing negative growth and they're facing fierce competition in China. I would personally not be comfortable buying into their business at their current multiple of 59x book. That's just too expensive and seems like too much risk. This same logic goes for Nvidia, Netflix, a ton of companies that I would describe as great businesses selling at awful valuations. It also doesn't help that I'm not an expert on much tech.

 

As for Hong Kong, I've been there and done that. They have companies that look extremely cheap on paper but I simply don't trust the Chinese Government. Property rights do not apply over there, especially for ADRs, and you may just well see that the cash on that balance sheet never moves. The only thing that would interest me in international equities like that would be a huge dividend yield such as what was offered at PBR. But even then I remain skeptical.

 

[73 Reds]

5 minutes ago, Blake Hampton said:

 

I'll start off by saying that there's a difference between the quality of a business and the price you have to pay for it in order to make an adequate return. For example, Apple is certainly one the best businesses in the world with a return on shareholder's equity of nearly 165% in 2024. For every $1 invested in the business itself, they made a return of $1.65 in earnings. But the question that we must consider is what is the correct price to pay for such a business? If you could buy in with Apple at book value you'd make an absolute windfall. The same goes at 2x book, 3x book, all the way to maybe 25 - 30x book if you really believe in the business. But their currently experiencing negative growth and they're facing fierce competition in China. I would personally not be comfortable buying into their business at their current multiple of 59x book. That's just too expensive and seems like too much risk. This same logic goes for Nvidia, Netflix, a ton of companies that I would describe as great businesses selling at awful valuations. It also doesn't help that I'm not an expert on much tech.

 

As for Hong Kong, I've been there and done that. They have companies that look extremely cheap on paper but I simply don't trust the Chinese Government. Property rights do not apply over there, especially for ADRs, and you may just well see that the cash on that balance sheet never moves. The only thing that would interest me in international equities like that would be a huge dividend yield such as what was offered at PBR. But even then I remain skeptical.

 

@Blake What do companies like AAPL, BRK, and even Fairfax have in common?  Answer is optionality.  My own investment thesis for each is highly dependent on what they haven't yet acquired or generated.  You are buying incredible brainpower that is nearly unlimited in what it may yet come up with.  How many companies possess this incredibly valuable variable that cannot be quantified in any valuation metric?

Edited 17 hours ago by 73 Reds
spelling

[John Hjorth]

1 hour ago, Blake Hampton said:

I'll start off by saying that there's a difference between the quality of a business and the price you have to pay for it in order to make an adequate return.

 

For example, Apple is certainly one the best businesses in the world with a return on shareholder's equity of nearly 165% in 2024. For every $1 invested in the business itself, they made a return of $1.65 in earnings. But the question that we must consider is what is the correct price to pay for such a business? If you could buy in with Apple at book value you'd make an absolute windfall. The same goes at 2x book, 3x book, all the way to maybe 25 - 30x book if you really believe in the business.

 

But their currently experiencing negative growth and they're facing fierce competition in China. I would personally not be comfortable buying into their business at their current multiple of 59x book. That's just too expensive and seems like too much risk.

 

This same logic goes for Nvidia, Netflix, a ton of companies that I would describe as great businesses selling at awful valuations. It also doesn't help that I'm not an expert on much tech. ...

 

Blake [ @Blake Hampton ],

 

Why are you even posting this here on CofB&F? - Why don't you just acknowledge that these particular investments are not for you to engage with or in? - Why don't you just move on to other places?

 

There are abolutely nobody here on CofB&F forcing you to having an opinion about them, and expressing your opinion about them as investments, based on actual prices.

 

Are you wiling to short them? - If not, please move on!

 

- - - o 0 o - - -

 

You need to understand the underlying accounting conventions, on which public accounting for such companies are based.

 

We live in a world, where public accounting for quite some time now hasen't been able to keep up with in real life technological development with regard to accounhting for a true and fair view.

 

Mr. Buffett has earlier talked about 'companies, who are able to run and evolve with no capital'. It's just dead wrong. The matter at hand is that existing accounting conventions and standards aren't able to specify, quantify and value economic value of R&D pipelines.

 

Talking i.e. about P/BV per share for Apple makes absolutely no sense - the Apple capital allocation could easily run it into indefinitely [if agressive approach applied], eventually turning it negative! [Please look at $PM].

Edited 16 hours ago by John Hjorth

[james22]

1 hour ago, Blake Hampton said:

I'm not an expert on much tech.

 

Huh.

[cubsfan]

1 hour ago, Blake Hampton said:

 

I'll start off by saying that there's a difference between the quality of a business and the price you have to pay for it in order to make an adequate return. For example, Apple is certainly one the best businesses in the world with a return on shareholder's equity of nearly 165% in 2024. For every $1 invested in the business itself, they made a return of $1.65 in earnings. But the question that we must consider is what is the correct price to pay for such a business? If you could buy in with Apple at book value you'd make an absolute windfall. The same goes at 2x book, 3x book, all the way to maybe 25 - 30x book if you really believe in the business. But their currently experiencing negative growth and they're facing fierce competition in China. I would personally not be comfortable buying into their business at their current multiple of 59x book. That's just too expensive and seems like too much risk. This same logic goes for Nvidia, Netflix, a ton of companies that I would describe as great businesses selling at awful valuations. It also doesn't help that I'm not an expert on much tech.

 

As for Hong Kong, I've been there and done that. They have companies that look extremely cheap on paper but I simply don't trust the Chinese Government. Property rights do not apply over there, especially for ADRs, and you may just well see that the cash on that balance sheet never moves. The only thing that would interest me in international equities like that would be a huge dividend yield such as what was offered at PBR. But even then I remain skeptical.

 

 

Given that, you ought to look at FMC @Blake Hampton

 

Trailing P/E of 4, forward of 9, moat around the business, temporay problems due to patent expirations. Durable, durable business.

 

There you go, now just find 9 more like this. 

 

IF you can't find them here, with ALL the great minds - then you are overthinking this...

Edited 16 hours ago by cubsfan

[73 Reds]

17 minutes ago, cubsfan said:

 

Given that, you ought to look at FMC @Blake Hampton

 

Trailing P/E of 4, forward of 9, moat around the business, temporay problems due to patent expirations. Durable, durable business.

 

There you go, now just find 9 more like this. 

 

IF you can't find them here, with ALL the great minds - then you are overthinking this...

Or he can look at some of the Big Tobacco companies for dividends.  The dividend is all but recession-proof and certainly beats cash.

[cubsfan]

Just now, 73 Reds said:

Or he can look at some of the Big Tobacco companies for dividends.  The dividend is all but recession-proof and certainly beats cash.

 

Exactly, a few years ago, bought a lot of IMBBY, Imperial Brands, 11% dividend, PE was around 6-8, no growth business, but CEO committed to shareholder returns with a real plan. Stock was $18.50, now it's $33, Dividend is around 7%.  So turnaround plan worked on no growth business. Again - temporary problem on business with a serious moat. Still hold it even though it's fully valued - if I get a dividend bump - we'll go up again.

 

On this board - there has been fantastic analysis of BTI - which I also own. And MO.

 

Boring, boring, boring stuff that the ESG crowd refused to own.

[73 Reds]

1 minute ago, cubsfan said:

 

Exactly, a few years ago, bought a lot of IMBBY, Imperial Brands, 11% dividend, PE was around 6-8, no growth business, but CEO committed to shareholder returns with a real plan. Stock was $18.50, now it's $33, Dividend is around 7%.  So turnaround plan worked on no growth business. Again - temporary problem on business with a serious moat. Still hold it even though it's fully valued - if I get a dividend bump - we'll go up again.

 

On this board - there has been fantastic analysis of BTI - which I also own. And MO.

 

Boring, boring, boring stuff that the ESG crowd refused to own.

Yeah, the tobacco companies are a lot like Trump; you throw everything at them and they keep coming back stronger.

[james22]

Informational advantage is the only advantage an investor has.

 

Not the application of value metrics available to anyone. (And applying  without company/sector expertise likely misses more than it reveals.)

 

If you don't have any informational advantage, diversify (indices, BRK).

[james22]

10 minutes ago, 73 Reds said:

Or he can look at some of the Big Tobacco companies for dividends.  The dividend is all but recession-proof and certainly beats cash.

 

Perfect example.

 

Do you know Biden's FDA would likely have banned menthol?

 

https://thehill.com/policy/healthcare/5105771-trump-fda-menthol-cigarettes-ban/

 

That's not captured in any metric.

[cubsfan]

3 minutes ago, james22 said:

 

Perfect example.

 

Do you know Biden's FDA would likely have banned menthol?

 

https://thehill.com/policy/healthcare/5105771-trump-fda-menthol-cigarettes-ban/

 

That's not captured in any metric.

 

Yeah, that's the risk you took. But analysis says they print money, the earnings are almost 100% cash earnings, all it took to be a decent boring performer was healthy dividend & stock buybacks.

Plus the international business was huge and foreignors love to smoke.  So the downside looked like dead money or opportunity cost.

 

But if anything good happened -- well, you were off to the races.

 

Like Steve Romick says "Good things happen to cheap stocks"

[73 Reds]

2 minutes ago, cubsfan said:

 

Yeah, that's the risk you took. But analysis says they print money, the earnings are almost 100% cash earnings, all it took to be a decent boring performer was healthy dividend & stock buybacks.

Plus the international business was huge and foreignors love to smoke.  So the downside looked like dead money or opportunity cost.

 

But if anything good happened -- well, you were off to the races.

 

Like Steve Romick says "Good things happen to cheap stocks"

Not so sure that a menthol ban would not have been a plus in bolstering sales of NGPs  (heads I win, tails you lose).