Aug 2, 20242 min read

Newsletter - August 2nd, 2024

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, below tangible equity, etc.) but don’t meet our investment criteria - and our reasoning.

This may help you avoid some ‘value traps’, and stocks that aren’t sufficiently attractive compared to opportunities available today.

For reports of stocks that pass our quantitative and qualitative standards:

Join Here

David Tepper: Carnegie Mellon University

David Tepper is an investor we admire, and consider among the best in the world.

His background is in distressed debt/junk bond trading at Goldman Sachs before founding Appaloosa Management (he chose the name to be first on fax mailing lists).

Some notes below:

1:15 Keep pushing forward

Tepper's first job after graduation was at the Treasury department of Republic steel - going through bankruptcy. What seemed a bad career choice was an excellent learning experience in bond financing.

3:45 Honesty

Never compromise your integrity for your boss or anyone else - it's never worth it.

7:30 Do what you like

Pursuing a career you like puts you ahead of your competition - as you will naturally learn and move faster.

14:00 Projections

Projections are practically worthless in finance - they rarely account for the inevitable cyclical (or secular) downturns.

14:30 Junk bonds - Equity component

Junk bonds have an equity component due to the potential for significant capital appreciation.

Our approach to investing in distressed common stocks is similar to junk bonds: We expect losses in individual cases (naturally we can't tell them in advance), but an overall profit on the group that's worthwhile.

24:45 Machine trading

Though algorithmic trading takes the emotion out of trades, the programmers' bias is built into the system.

Tepper recalls the option pricing model at Goldman being just wrong. (Black-Scholes produces nonsensical results for long-term options beyond three years.)

28:00 Cryptocurrencies

Though we find no intrinsic value in cryptocurrencies, we admire Tepper's ability to find a trading angle to cryptos.

He views crypto like gold, whose value isn't much more than the cost of mining them. He also thinks that cryptos with the fastest transaction processing times (as an efficient means of exchange) will be more valuable.

35:00 Education and a Margin of Safety

Tepper emphasizes the value of education to deal with change.

Similarly, we emphasize a margin of safety in investing to deal with future adversities.

For reports on the best investment values in stocks worldwide:

Join Here

Wish you an excellent week ahead.

Newsletter - August 2nd, 2024

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, below tangible equity, etc.) but don’t meet our investment criteria - and our reasoning.

This may help you avoid some ‘value traps’, and stocks that aren’t sufficiently attractive compared to opportunities available today.

For reports of stocks that pass our quantitative and qualitative standards:

David Tepper: Carnegie Mellon University

David Tepper is an investor we admire, and consider among the best in the world.

His background is in distressed debt/junk bond trading at Goldman Sachs before founding Appaloosa Management (he chose the name to be first on fax mailing lists).

Some notes below:

1:15 Keep pushing forward

Tepper's first job after graduation was at the Treasury department of Republic steel - going through bankruptcy. What seemed a bad career choice was an excellent learning experience in bond financing.

3:45 Honesty

Never compromise your integrity for your boss or anyone else - it's never worth it.

7:30 Do what you like

Pursuing a career you like puts you ahead of your competition - as you will naturally learn and move faster.

14:00 Projections

Projections are practically worthless in finance - they rarely account for the inevitable cyclical (or secular) downturns.

14:30 Junk bonds - Equity component

Junk bonds have an equity component due to the potential for significant capital appreciation.

Our approach to investing in distressed common stocks is similar to junk bonds: We expect losses in individual cases (naturally we can't tell them in advance), but an overall profit on the group that's worthwhile.

24:45 Machine trading

Though algorithmic trading takes the emotion out of trades, the programmers' bias is built into the system.

Tepper recalls the option pricing model at Goldman being just wrong. (Black-Scholes produces nonsensical results for long-term options beyond three years.)

28:00 Cryptocurrencies

Though we find no intrinsic value in cryptocurrencies, we admire Tepper's ability to find a trading angle to cryptos.

He views crypto like gold, whose value isn't much more than the cost of mining them. He also thinks that cryptos with the fastest transaction processing times (as an efficient means of exchange) will be more valuable.

35:00 Education and a Margin of Safety

Tepper emphasizes the value of education to deal with change.

Similarly, we emphasize a margin of safety in investing to deal with future adversities.

For reports on the best investment values in stocks worldwide:

Wish you an excellent week ahead.

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