Newsletter - June 22nd, 2024

AuditorInvestor
Jun 22, 2024
2 min read

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, 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

Pabrai at University of Nebraska

Some insightful points below:

4:15 Valuing Berkshire

Buffett's valuation of Berkshire is likely below 2x book value (the optimistic end). Beyond this valuation level, Buffett has issued shares in the past for cash or acquisitions (B-shares, BNSF purchase, etc.).

15:30 Holding periods

Buffett's holding period for publicly traded stocks is ~4 years, and lower for Ted Weschler and Todd Combs - not indefinite like Berkshire's controlled businesses.

Also, only a small fraction of Buffett's decisions had a significant impact on his portfolio (20:15). Investors should expect some losses going in - the goal is to make more on your winners than you lose on your losers.

17:30 Loyalty in business (and life)

Pabrai mentions Ken Langone's philosophy (Home Depot) of valuing loyalty in business and life - that has served him well. Such qualitative factors endure over time, which quantitative factors can't cover.

26:45 Intangibles

Understanding intangibles takes a long time - usually after extensive study and experience over many years. It's not as simple as Ben Graham's approach with a greater focus on tangible assets - the primary area we concentrate on.

28:00 Unit volumes

Coca Cola's unit volumes never went down over 70 years - valuable data in Buffett's willingness to pay up for the stock.

29:00 Public information

There's enough public information (particularly in the annual report) to make intelligent investment decisions. Talking to management may influence your decision in ways that don't matter for an objective investment judgment.

49:30 Consol/Ipsco downside protection

Buying stocks at low multiples of earnings with some visibility is enough to take your chances on the medium/longer-term future. Once your downside is protected, your alternatives are good. These are the type of stocks we write about.

58:15 Perennial undervaluation

You own the cashflows of your stocks. These cashflows show up as dividends or increases in corporate value for investors.

As long as cash generation is satisfactory, you can pay as little attention as you please to the stock market - this is an important psychological mindset to adopt when operating in stocks (Mr. Market analogy).

For reports on the best investment values in stocks worldwide:

Join Here

Wish you an excellent week ahead.

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, 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:

Pabrai at University of Nebraska

Some insightful points below:

4:15 Valuing Berkshire

Buffett's valuation of Berkshire is likely below 2x book value (the optimistic end). Beyond this valuation level, Buffett has issued shares in the past for cash or acquisitions (B-shares, BNSF purchase, etc.).

15:30 Holding periods

Buffett's holding period for publicly traded stocks is ~4 years, and lower for Ted Weschler and Todd Combs - not indefinite like Berkshire's controlled businesses.

Also, only a small fraction of Buffett's decisions had a significant impact on his portfolio (20:15). Investors should expect some losses going in - the goal is to make more on your winners than you lose on your losers.

17:30 Loyalty in business (and life)

Pabrai mentions Ken Langone's philosophy (Home Depot) of valuing loyalty in business and life - that has served him well. Such qualitative factors endure over time, which quantitative factors can't cover.

26:45 Intangibles

Understanding intangibles takes a long time - usually after extensive study and experience over many years. It's not as simple as Ben Graham's approach with a greater focus on tangible assets - the primary area we concentrate on.

28:00 Unit volumes

Coca Cola's unit volumes never went down over 70 years - valuable data in Buffett's willingness to pay up for the stock.

29:00 Public information

There's enough public information (particularly in the annual report) to make intelligent investment decisions. Talking to management may influence your decision in ways that don't matter for an objective investment judgment.

49:30 Consol/Ipsco downside protection

Buying stocks at low multiples of earnings with some visibility is enough to take your chances on the medium/longer-term future. Once your downside is protected, your alternatives are good. These are the type of stocks we write about.

58:15 Perennial undervaluation

You own the cashflows of your stocks. These cashflows show up as dividends or increases in corporate value for investors.

As long as cash generation is satisfactory, you can pay as little attention as you please to the stock market - this is an important psychological mindset to adopt when operating in stocks (Mr. Market analogy).

For reports on the best investment values in stocks worldwide:

Wish you an excellent week ahead.

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