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Newsletter - July 8th, 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:


Tweedy Browne's John Spears


John Spears Interview

Notes below:

21:00 Debt Capacity Bargains

Figure out real-world business valuations of stocks with low leverage - and buy at a large discount.

Sometimes, you may find stocks with borrowing capacity > its market capitalization

These are the type of stocks we look for and report on - trying to obtain the low-risk features of a safe bond alongside the appreciation potential of a common stock.

26:00 Insider Buys

Cheapest stocks on P/E ratios with insiders purchasing exceeded market returns; many by >1000 bps/year - a trait we give weight to.

44:15 Schloss Portfolio Structuring

Walter Schloss once had 25% of his portfolio in one stock (Hudson Pulp) with the rest splattered among 100+ stocks - interesting and somewhat eccentric, but he stuck to an approach he was comfortable with (buying stocks below tangible book value).

Stick to your knitting.

46:45 Comparables

Figure out business valuation from different angles - acquisition value, liquidation value, "highest-and-best" value. Review comparable transaction multiples of ev/ebit, ev/ebitda - i.e. perform "investment banking-type" appraisals.

We incorporate this in our analysis of peers - a more conservative approach in depressed industries.

50:00/53:15: Earnings-based valuations/High quality compounders

Graham wrote at a time when the economy was geared towards tangible assets; moreover, accounting standards were practically non-existent and earnings weren't comparable - hence, his focus on book value.

When buying at or above tangible book value, assess the durability of competitive advantages, look for lots of free cash flows, and incorporate conservative growth assumptions when appropriate.

59:15 Hard to forecast growth...

And hang your hat on it when investing your own money.

Or invest in bargains where you're getting current value for your money - our stock ideas generally fall in this group.

1:01:45 Multi-year underperformance

With a value approach, you have to be able to handle the pain of underperforming the market for multi-year periods.

Just own a group of stocks that are worth a lot more than you're paying for them - focus on the operating results and dividends, and let the market price take care of itself.

1:08:30 Not a horse race

As individual investors, you don't have to adopt the market as your benchmark.

There is wisdom in adopting the goal of earning satisfactory returns in a low-risk manner over your lifetime - without reference to what others do, or say, or think.

1:13:30 Frugality

Spend less than you earn; result: happiness

Spend more than you earn; result: misery

1:18:00 Diversification

Tweedy's top 20 stocks comprise 55% of its international value fund, and it holds a total of 99 stocks - sometimes letting its winners run.

Adopt the law of large numbers when you're using a statistical value approach - the more stocks you have that possess a margin of safety, the better your odds of generating profits. At the same time, you might want to allocate more money into stocks with greater safety margins.


Until next time, Cheers!


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