ERICOPOLY Posted April 9, 2016 Posted April 9, 2016 I do wonder how well buybacks will do in the future since we're at/near all time highs from what I can see. Defensive holdings (huge amounts of cash to return) should (in theory) outperform the market when purchased towards the end of bull markets so long as you get out of them when the market is at the bottom of a following bear cycle. It's the sketchy companies that do the worst heading into a recession -- and then the sketchy ones that have survived the ordeal then lead the way out of the recession.
Guest Posted April 10, 2016 Posted April 10, 2016 Eric, I'm assuming you mean that defensive companies are those that are buying back stock? If so, I just checked PKW vs the market and it dropped almost the same as the market from Oct 2007 to March of 2009 (PKW was down 48.99% vs 51.7% for SPY). I was surprised by this but I believe companies that are doing buyback don't tend to do the buybacks during bear markets. I do agree that defensive stocks on average should hold up better in a down turn. My concern though is that a ton of companies are issuing a lot of debt in order to buy back stock. They're buying at (possibly) high prices and aren't really increasing market share.
ERICOPOLY Posted April 10, 2016 Posted April 10, 2016 My concern though is that a ton of companies are issuing a lot of debt in order to buy back stock. They're buying at (possibly) high prices and aren't really increasing market share. I suppose if the stock is expensive then what management does from there (buy stock or not) is only a secondary concern. The primary concern is that one shouldn't even own the stock in the first place. So management's actions on this subject aren't really an issue IMO if you are selling holdings as they get "too expensive". The debt level, if too high, is also a reason to sell the stock (no matter what the debt is used for). That solves that issue. Too high is too high.
Picasso Posted April 10, 2016 Posted April 10, 2016 Only issue I have with that buyback logic is the buyback can actually *make* the stock expensive. As an example, WPG is a REIT with 78% B-malls and 22% strip malls. The stock is trading at nearly half of NAV. The CEO even acknowledges that. But if they use their free cash to primarily repurchase shares, the core business will deteriorate over time and buying up shares at $10 would be a mistake. They need to reinvest their cash flows in the business. If they use their free cash to move closer to 50/50% B-malls/strips and grow NOI, then the stock will look cheap in hindsight and buybacks aren't necessary. A lot of these share cannibals are doing it at the expense of the long-term operating business. There's a difference between OUTR repurchasing shares versus say GOOG or AAPL. I'm curious how Pabrai will distinguish between that.
ERICOPOLY Posted April 10, 2016 Posted April 10, 2016 Why not, instead, focus on dividend payers? Or both at the same time? Those are the two ways to return excess cash. It's probably less likely for a company to issue debt in order to pay a dividend -- so perhaps it"s truly "excess" cash. Is there any evidence that cannibals outperform dividend payers?
KCLarkin Posted April 10, 2016 Posted April 10, 2016 Why not, instead, focus on dividend payers? Or both at the same time? Those are the two ways to return excess cash. http://www.osam.com/pdf/commentary_mar12.pdf
Munger_Disciple Posted April 10, 2016 Posted April 10, 2016 I haven't been following Dhandho closely so this may seem like a silly question. Why is Dhandho/Pabrai selling ETFs? Why do they think they can add value in this field? I thought the original Dhandho plan was to buy an insurer (which they did) and grow by investing float in securities and by expanding insurance biz. I understand they can charge fees to general public that buys ETFs but it seems like a dilution of focus (going from concentrated value investing of float/owner equity to selling ETFs to public).
Partner24 Posted April 11, 2016 Posted April 11, 2016 I admire what he has done so far, but this indeed seems like some "diworsification" like Peter Lynch might call it so. Cheers!
NomadicRiley Posted April 11, 2016 Posted April 11, 2016 Looking at the "Holdings" http://www.dhandhoetfs.com/junoon/fund The three biggest holdings (AZO, ANTM and TRV) account for over 45% of the fund.
Picasso Posted April 11, 2016 Posted April 11, 2016 Man, I've been waiting years for the right indicator to short AZO. Monish putting 17% of the ETF in AZO after they already maxed out pricing power, face stiff competition from the likes of ORLY, and whittled book value negative to repurchase 85% of the outstanding shares is about as good as you're going to get.
randallchsu Posted April 11, 2016 Posted April 11, 2016 Where is a complete list of funds under the category of select value manager holdings? I didn't find it in the prospectus.
adesigar Posted April 11, 2016 Posted April 11, 2016 Beware of Geeks bearing Formulas. --- Warren Buffett.
Guest Posted April 11, 2016 Posted April 11, 2016 I do find it odd that none of the ETF's top holdings are in his hedge fund.
vinod1 Posted April 11, 2016 Posted April 11, 2016 ETF business has pretty attractive economics and starting it now is like starting a .com in 1999 - lot of easy money to be made from selling overpriced companies to shareholders willing to buy any company with a .com in their name. So this is just take advantage of the current rush to ETF's. No need for any competitive advantage, even if by just luck the ETF performs well, it would attract assets that pay fees for a long time. Heads I win.... (from Dhandho Holdings perspective, not the ETF investors). I would think a strategy like this would depend on diversification to some extent, say top 5 holdings to be about 15% to 20% or so. But given the concentration it looks more like a straight up coin toss - performance would be either be good or bad and unlikely to be close to indexes, regardless of "patent pending algorithms". Vinod
premfan Posted April 11, 2016 Posted April 11, 2016 ETF business has pretty attractive economics and starting it now is like starting a .com in 1999 - lot of easy money to be made from selling overpriced companies to shareholders willing to buy any company with a .com in their name. So this is just take advantage of the current rush to ETF's. No need for any competitive advantage, even if by just luck the ETF performs well, it would attract assets that pay fees for a long time. Heads I win.... (from Dhandho Holdings perspective, not the ETF investors). I would think a strategy like this would depend on diversification to some extent, say top 5 holdings to be about 15% to 20% or so. But given the concentration it looks more like a straight up coin toss - performance would be either be good or bad and unlikely to be close to indexes, regardless of "patent pending algorithms". Vinod Quite a shift in business philosophy. Heads I win and I don't care if naïve investors I don't know lose. Instead of Heads I win and worse case I lose other peoples money that trust me.
hunterny Posted July 11, 2017 Posted July 11, 2017 http://www.businesswire.com/news/home/20170615006403/en/Dhandho-Funds-Close-Liquidate-Dhandho-Junoon-ETF Dhando Junoon ETF liquidating
Guest Cameron Posted July 11, 2017 Posted July 11, 2017 ETF business has pretty attractive economics and starting it now is like starting a .com in 1999 - lot of easy money to be made from selling overpriced companies to shareholders willing to buy any company with a .com in their name. So this is just take advantage of the current rush to ETF's. No need for any competitive advantage, even if by just luck the ETF performs well, it would attract assets that pay fees for a long time. Heads I win.... (from Dhandho Holdings perspective, not the ETF investors). I would think a strategy like this would depend on diversification to some extent, say top 5 holdings to be about 15% to 20% or so. But given the concentration it looks more like a straight up coin toss - performance would be either be good or bad and unlikely to be close to indexes, regardless of "patent pending algorithms". Vinod Quite a shift in business philosophy. Heads I win and I don't care if naïve investors I don't know lose. Instead of Heads I win and worse case I lose other peoples money that trust me. If there was ever a panic and ETF investors got scared and sold out of their position in a fund, its going to a blood bath, it will also be a reoccurring cycle, ETF's inflate the prices of not just good companies but also the bad.
CorpRaider Posted July 11, 2017 Posted July 11, 2017 I don't get that concern (about ETFs generally). I tried to buy the shit out of VIG when it was quote at (40%) or whatever during the flash crash. I would do the same if it happens again. I mean they can't they create and liquidate units to correct somewhat durable discounts to NAV. Mutual funds can blow up too if the underlying isn't liquid. See Third Avenue Interesting that Cambria was running this ETF. I didn't know that. Never liked this particular ETF. Especially the "great investors top holdings" portion.
Vish_ram Posted July 11, 2017 Posted July 11, 2017 http://www.businesswire.com/news/home/20170615006403/en/Dhandho-Funds-Close-Liquidate-Dhandho-Junoon-ETF Dhando Junoon ETF liquidating Wow. Not surprising when he had AZO at double digit percentage. The algos were all looking back. AZO had a remarkable run with huge buy back. It is a shame that the algos didn't consider the slowdown in revenue growth. Pabrai has underperformed all indices last 10 years. His main fund account that has bulk of assets has underperformed all indices since inception (2003). It just goes to show how far a person can go by uttering Buffett's name and giving his quotes nonstop. A+ in marketing C- in investing.
investmd Posted July 12, 2017 Posted July 12, 2017 http://www.businesswire.com/news/home/20170615006403/en/Dhandho-Funds-Close-Liquidate-Dhandho-Junoon-ETF Dhando Junoon ETF liquidating Wow. Not surprising when he had AZO at double digit percentage. The algos were all looking back. AZO had a remarkable run with huge buy back. It is a shame that the algos didn't consider the slowdown in revenue growth. Pabrai has underperformed all indices last 10 years. His main fund account that has bulk of assets has underperformed all indices since inception (2003). It just goes to show how far a person can go by uttering Buffett's name and giving his quotes nonstop. A+ in marketing C- in investing. There is a recurrent sentiment on this Board re: Pabrai's "A+ marketing" skills and salesmanship that I don't understand. No denying that 10 year returns have been subpar (although YTD up 30%). However, Pabrai Funds has been mostly closed to new money for years. Why would he focus on "marketing" if he is not accepting new investors? This does not seem to be a Ponzi scheme with him getting rich off others or am I missing something?
racemize Posted July 12, 2017 Posted July 12, 2017 The board turned on him three years ago. For the most part, only one view is being presented, but there's not much point in arguing about it as we will know the answer in time.
cubsfan Posted July 12, 2017 Posted July 12, 2017 The board turned on him three years ago. For the most part, only one view is being presented, but there's not much point in arguing about it as we will know the answer in time. +1 ...yup
investmd Posted July 13, 2017 Posted July 13, 2017 The board turned on him three years ago. For the most part, only one view is being presented, but there's not much point in arguing about it as we will know the answer in time. +1 ...yup I'm curious. What was the inciting event causing the Board to turn on Pabrai? Did it have to do with HorseHead Holdings?
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