Newsletter

Dear Reader,

We’ll be developing this newsletter as a platform to share our learning and interesting books/videos/articles/media which you may find useful in your investment journey.

List

Attached is our latest list of apparently cheap stocks generated from basic value screens (low p/e, ev/ebitda, debt/equity, etc.), which don’t meet our investment standards - and our reasoning.

This may help you avoid a few ‘value traps’ and/or stocks that aren’t sufficiently attractive compared to the opportunities available today.

For reports of stock ideas that pass our quantitative and qualitative standards, join at the link below:

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Red Roulette

We recently finished reading ‘Red Roulette’, which is a fascinating account of an ambitious couple rising in China’s business environment during the boom period of the 2000s.

The book reveals the political machinations behind the scenes required to get projects done – mostly involving lots of wining and dining of CCP bigwigs as well as local bureaucrats (and copious amounts of Moutai).

Eventually, the couple backed the wrong political faction within the CCP and got on the wrong side of Xi Jinping. That was the end of their rise.

So, what implication does this have on your investments?

Political greasing is part of the system in most countries – that’s how the US was built. (We recommend HBO’s Boardwalk Empire – though fictionalized, it isn’t far removed from the political culture of the day; and is likely to still exist in the US – though better concealed.)

The risk of course is that more is dependent on the whims of one man in China than before, when there were more powerful competing factions. We don’t think this has major implications for secondary industries – just nationally strategic ones.

BUT, the hard return to communist roots and US saber rattling with the CCP over Taiwan and other issues do concern us. A repeat of Russia-style sanctions is not impossible. As historian Niall Ferguson remarked, when war begins, things can change in a hurry. So, assumptions about unimaginable pain on both sides don’t mean much when conflict begins.

Just something worth thinking about on your HK stock exposures and other businesses with China exposure.

Bookmaking and punting

Stock investing is very similar to intelligent bookmaking and punting. We recommend the insights of experienced operators in the gambling world. Below is a Youtube short of Rob Waterhouse, a shrewd bookmaker in Australian racing.

Value is key:

Donald Yacktman

One approach to selecting stocks from a sensible investor that you may find useful:

John Spears

Enjoyed this new and relatively long interview with John Spears of Tweedy Browne with lots of interesting segments.

Link starts with his views on Tweedy Browne’s empirical research made famous in their article: “What has worked in investing”

Article:

What Has Worked in Investing.pdf

Download PDF • 162KB

Until next time, Cheers!