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Newsletter - June 10th, 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:



 

Sam Zell Redux

 

Sam Zell


Missed posting notes of the following interview in our last Sam Zell edition:



40:00 Competition


Zell operated in smaller cities where competition was non-existent - the "single-most" important consideration for an investor. That's where he earned exceptional returns of 16-25%.


The goal is to find situations where you can operate with an edge i.e. the margin of safety we look for in all our stock investments.



44:00 Cash Yields


Zell looked at cash-on-cash return - and his first deal yielded 19% when his father was earning 4% on his deals.


Even after adjusting the numbers conservatively, his father's friend calculated an 8% return on that deal - the margin of safety at play here.



48:45 6x Cash Flow


Zell wouldn't get involved below a 16% return. Maintain a minimum threshold.



54:00 Downside


Jay Pritzker on risk: What could go wrong? Where's the vulnerability? Zero in on the assumption that has to be right for the investment to work.



1:26:00 Marginal Supply


Zell on Wework: If you're the marginal supplier (of office space) when things are good, you'll be the first to suffer when demand softens.


WeWork's competition was a plug at Starbucks. Moreover, Wework's expansion spawned numerous competitors. There were few barriers to entry


Also, its cash was coming from VCs (Softbank) without a discipline for profitability.


An unsustainable cocktail of factors.

 

Until next time, Cheers!

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