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Newsletter - January 14th, 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:

 

Benjamin Franklin Autobiography



We finally got around to reading this 232-year-old classic cover to cover though it lay around our study for several years.


A lot of it is now ingrained common sense in the West but there’s something magical reading it in Franklin’s own words – as if he’s talking directly to you; the humanness of this legendary figure. And there is no substitute to reading it yourself – anecdotes will strike each reader differently.


His methodical attempt at moral perfection is probably best known. He focused on developing 13 virtues by concentrating on one a week - and discovered he had to break bad habits and establish good ones before he could attain his goal. (Reminds us of Buffett's pre-talk 'sermons'.) Self-control truly is mastery.


His key character trait that echoed to us is diligence. With level-headedness and industry, he accomplished much.


Being well-read when most weren’t, and engaged in the printing business running the best newspaper in town turned him into a wealthy and influential man from relative obscurity.


One section sums up his mindset: “… I was not discouraged by the seeming magnitude of the undertaking, as I have always thought that one man of tolerable abilities may work great changes, and accomplish great affairs among mankind, if he first forms a good plan, and, cutting off all amusements or other employments that would divert his attention, make the execution of that same plan his sole study and business.”


Echoes Buffett and Gates attributing their success to "Focus" – applies to any endeavor, particularly active investing.




Poor Richard's Almanack



Also got around to reading this short pamphlet written by Franklin under a pseudonym – apparently this was the most read item in Philadelphia after the Bible.


“A penny saved is two pence clear”

“One To-day is worth two To-morrows”

“Drive thy Business, let not that drive thee”

“So rather go to bed supperless than rise in Debt”


The key ideas that resonate throughout is the value of industry and frugality; most of it is lifted from Proverbs in the Bible and adapted with Franklin’s wit. It’s a good reminder to walk the way of wisdom in any calling, including investing.




Playing the capital structure: Milken Conference


Michael Milken’s credit discussions are insightful – relatively under-viewed videos.


The following video highlights the value of looking across the corporate and capital structure for value following the fundamental analysis – the holding company or operating company, debt or equity - and to go long or short.



It’s a market of stocks not a stock market.


There’s a world of opportunity out there – passive indices don’t stand a chance if you do the work.




Great Power Politics: USA vs. China


We’ve been overdosing on Professor Mearsheimer’s lectures in the last week. He seems an original thinker and thorough historian. He’s got a basic theory of great power politics, which seems to us to correspond to reality. This particular section highlights the theory:


This theory has explained US behavior since WW2. The implication is that the US has its gun sights on China, and will do everything in its power to prevent its rise.


After defeating four challengers in the 20th century and binning them to the scrapheap of history - Imperial Germany, Imperial Japan, Nazi Germany, and the Soviet Union – there seems little doubt in our minds that a US/China showdown is inevitable.


Investors beware and act as necessary.




"Never Bet Against America"


The above point reminds us of Buffett’s repeated quip: “Never bet against America.”


[Saul Goodman: If he had a time machine, he’d go back to May 10, 1965 and invest in Berkshire Hathaway]

When a friend pointed out Buffett's recent investment in TSMC (Taiwan Semiconductor Manufacturing Company) last month, it reminded us of his investment in Korea in 2004. At the time he acknowledged the risk of a nuclear strike by North Korea but he added that in investing, you have to take some risk.


But knowing his proclivity to minimize risk, we read his action as follows:


“Never bet against America” also means Never bet against the US Military.


Smart investing strategy. Worth thinking about.

 

Until next time, Cheers!

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