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Newsletter - August 5th, 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:



 

Mason Hawkins

 

Mason Hawkins Talk


Notes on his talk at Ivey Business School below:


13:00 Screening Metrics/New lows/13Fs


Another successful investor scouring the new low list in addition to various fundamental screens he outlines.



28:45 You never have to invest


You're only judged on the investments you make - you can be as selective as you want. Over time we've become very selective in our quantitative metrics - fishing worldwide yields enough ideas for diversification.



34:00 British flag


Good policy to only invest in countries with a culture of respecting property rights, and that protect outside passive minority shareholders like us. This cannot be assumed in several large economies around the world.



38:00 Perils of service businesses


Hawkins invested in Saatchi & Saatchi (S&S) in 1991 and lost money when its two biggest airline clients cut back ad spend during the Gulf War. Then the management consultants S&S acquired with debt wanted to buy back their stakes at one-third of what they sold for.


When the value resides in personnel, ensure you've got long-term employment contracts and non-competes.


Also watch out for operating leverage in asset-light businesses.



1:04:00 Reinvestment in equities


Bond yield-to-maturity calculations assume reinvestment of all coupons - otherwise, realized yields are much lower.


Equities are the only asset class with an automatic reinvestment component, which is where compound interest works its magic.



1:21:30 Enron/Worldcom cashflows


Enron and Worldcom's cash flow statements were bleeding well before they went under. It is possible to avoid troubles with rigorous financial analysis, which is what we strive to do in the ideas we present.

 

Until next time, Cheers!

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