Jan 6, 20233 min read

Newsletter - January 6th, 2023

Updated: Mar 24, 2023

Dear Reader,

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’ 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:

Join Here

Quality Value - Tom Russo

Tom Russo's investment style differs from our own - part of the reason we love listening to his insights. His approach is to make concentrated bets in quality companies, and he's done well.

Though four years old, this talk is packed with valuable anecdotes on:

- the benefits of low portfolio turnover (savings on capital gains taxes): 4:55

- paying for long-term independence (Richemont avoiding the mafia when setting up business in Russia): 40:14

- lack of shareholder orientation in his Japanese investments coming through in his interactions with them; the Asahi beer episode is revealing: 48:00

- Heineken buying value disregarding consensus Wall Street thinking (business offered to them for $5b bought up for $720m four years later): 29:45

The talk also impressed upon us the need to consistently monitor M&A deal activity to understand perceptions of current business values - we did this when working in corporate finance but it may be useful to incorporate that discipline even as individual investors.

Press the bet - Soros

Important reminder to press the bet when your conviction is high, a hallmark Soros move. He considered timid allocation as bad as being wrong on a trade - and he has an excellent point.

As quoted by his protégé Druckenmiller (28:20):

Pabrai checklist reveal

Though Pabrai has his own investment style, he has excellent native business intelligence and he's done well growing his portfolio from $1m to $150m over 30 years. No doubt a lot of it is good Karma with his work on the Dakshana foundation.

He's referred a lot to his personal investment checklist, which he goes through before committing capital - some of it revealed here at 29:44:

Useful pointers on leverage, management ownership, correct assessment of competitive advantages, lack of labor unions, etc.

Also Pabrai's read of Buffett's error with IBM: undue reliance on management forecasts.

Xi's Communism

This one quote from Xi in the following Peter Thiel interview did give us pause following our read of 'Red Roulette' presented last week.

Xi in 2013: "Capitalism is bound to die out."

Food for thought. It's important to know the mindset of the leader if you're investing in Hong Kong stocks or companies doing business in China. It is up to each investor what policy he wants to adopt on this - we'd prefer a world with frictionless trade and hate to miss out on Chinese growth, but the world of the 1990s and 2000s we grew up in may no longer exist.

Courage - Irving Kahn

We end this newsletter with a still under-viewed video of a Wall Street legend who helped Ben Graham in his research work, Irving Kahn who passed away at age 109 (!) in 2015.

Paraphrasing Kahn: As long as bad news isn't permanent, courage will be rewarded. (14:30)

Echoes of Ben Graham's last piece of advice in the 'Intelligent Investor': In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.

That last section still gives us goosebumps 16 years after we first read it.

Until next time, have a great week.

Newsletter - January 6th, 2023

Dear Reader,

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’ 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:

Quality Value - Tom Russo

Tom Russo's investment style differs from our own - part of the reason we love listening to his insights. His approach is to make concentrated bets in quality companies, and he's done well.

Though four years old, this talk is packed with valuable anecdotes on:

- the benefits of low portfolio turnover (savings on capital gains taxes): 4:55

- paying for long-term independence (Richemont avoiding the mafia when setting up business in Russia): 40:14

- lack of shareholder orientation in his Japanese investments coming through in his interactions with them; the Asahi beer episode is revealing: 48:00

- Heineken buying value disregarding consensus Wall Street thinking (business offered to them for $5b bought up for $720m four years later): 29:45

The talk also impressed upon us the need to consistently monitor M&A deal activity to understand perceptions of current business values - we did this when working in corporate finance but it may be useful to incorporate that discipline even as individual investors.

Press the bet - Soros

Important reminder to press the bet when your conviction is high, a hallmark Soros move. He considered timid allocation as bad as being wrong on a trade - and he has an excellent point.

As quoted by his protégé Druckenmiller (28:20):

Pabrai checklist reveal

Though Pabrai has his own investment style, he has excellent native business intelligence and he's done well growing his portfolio from $1m to $150m over 30 years. No doubt a lot of it is good Karma with his work on the Dakshana foundation.

He's referred a lot to his personal investment checklist, which he goes through before committing capital - some of it revealed here at 29:44:

Useful pointers on leverage, management ownership, correct assessment of competitive advantages, lack of labor unions, etc.

Also Pabrai's read of Buffett's error with IBM: undue reliance on management forecasts.

Xi's Communism

This one quote from Xi in the following Peter Thiel interview did give us pause following our read of 'Red Roulette' presented last week.

Xi in 2013: "Capitalism is bound to die out."

Courage - Irving Kahn

We end this newsletter with a still under-viewed video of a Wall Street legend who helped Ben Graham in his research work, Irving Kahn who passed away at age 109 (!) in 2015.

Paraphrasing Kahn: As long as bad news isn't permanent, courage will be rewarded. (14:30)

Echoes of Ben Graham's last piece of advice in the 'Intelligent Investor': In the world of securities, courage becomes the supreme virtue after adequate knowledge and a tested judgment are at hand.

That last section still gives us goosebumps 16 years after we first read it.

Until next time, have a great week.

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