Newsletter - April 17th, 2023

Dear Reader,

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

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Notes from 2017 Berkshire AGM below:

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2017 Berkshire AGM

Notes at timestamps below:

29:30 Reviewing Holdings

When reviewing holdings periodically, assessing the presence of durable competitive advantage is key. Once bought undervalued, bad news is expected and not the sole factor in considering disposal - in fact, selling may be foolish in these situations; price is important.

1:02:00 The one future statistic you need to know

Is what interest rates will be for the next 20 years - all-important factor in valuation.

1:15:00 Even with a lot of money...

People can worry about running out of money. Having the correct financial setup and adopting a psychological frame emphasizing peace of mind is worthwhile. Stickability to an investment policy is key.

1:20:45 Speculation provides opportunities

Instead of being disheartened by rampant speculation, remember this is fertile field for investors - key point is not to succumb to envy. We should be immensely grateful for this setup in life - it's as easy as it gets. Maximize the runway.

1:37:00 High RoE but not growing

Interesting to listen to Buffett commenting on his high roe businesses that aren't growing - didn't stop him from requiring it in his criteria. Even without growth, high roe indicates capital efficiency, which is desirable in itself.

1:38:15 Mellon on Google

Buffett thinks the trend of light-capital, fast-growth businesses will continue long into the future. May need to adapt tangible asset requirements - less reliability, but future cash generation is all-important.

1:49:30 USG equity in bankruptcy

Didn't pay much attention to Buffett buying USG equity shortly before it declared bankruptcy, which is a rare sight. Munger just remarks that it was very cheap. It turned out to be below par. What is interesting is how Buffett sticks to the leaders in their fields when buying equity.

2:15:15 Retained earnings factor in options

Relatively little discussed subject but retained earnings should be factored into option pricing - particularly when awarded to management/employees. It increases the value of options and it's in management's interest not to pay dividends or buy back shares to increase the value of their options - exactly opposite to shareholder interests.

2:47:15 Bonds at 100x earnings

Important to view bonds similarly to stocks when considering them as an alternative. Usually for small investors, and even under current conditions, it's absurd to buy high-grade bonds particularly when the coupons can never go up.

3:26:45 AI Dangers

There was an article on the FT weekend magazine on the dangers of AI, which is advancing at breakneck speed in terms of capability without enough attention to the values programmed into it. Concerning.

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