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Newsletter - March 9th, 2024

Dear Reader,

Attached is our latest list of stocks passing value screens (low P/E, low EV/EBITDA, etc.), which 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:



Global and UK Equity Income: Laura Foll (Janus Henderson) Interview

Some notes below:

4:00 Dividends cut to zero

Companies that have recently cut their dividends (even to zero) tend to offer good investment value. However, permanently non-distributing companies are in a different category in our view.

6:30 Distinguishing Recoveries

Forthright acknowledgement of business problems by senior management may distinguish promising cases. Recoveries may also be accelerated by changes in senior leadership, who are incentivized to clean up shop.

Is the business in 3-5 years something you want to own?

14:00 Dividend track record

Most continuous dividend track records were broken during the 2020 Covid crisis. In our view, examining a company's record of recent aggregate distributions is more useful in appraising payouts.

19:30 Red Flags

Cases of over-distribution/unsustainability of dividends can be spotted by examining earnings and cash flow statements over a period of time.

An analyst's primary focus is on the earnings and asset values of a business - dividends are dependent on them, and therefore, a secondary consideration.

21:30 Signaling

Some prominent non-dividend payers argue that dividends create a signal/expectation of stable/consistent payouts. We think this is a bogus argument, which sacrifices quantum of dividends for illusory stability (that's usually and conveniently dropped during bad years).

Maximum payouts of annual earnings regardless of earnings volatility is ideal for smaller investors - similar to privately owned businesses. An investor can solve his volatility problem simply with adequate diversification.

26:00 Disappearing small-caps

10% of small-cap companies have disappeared in the last year due to takeovers and/or other de-listings. These haven't been adequately replaced by IPOs or new listings due to high compliance costs.

This shrinking list appears to be a systemic issue in Western capital markets that's worth noting, and investors have to accept - unless compliance costs are reduced in the future.

Also, it may necessitate a policy of holding valuable stocks indefinitely lest the investor gets locked out of the (shrinking) stock market.

32:30 Diversification

Diversification is especially important when you're dependent on your portfolio.

To quote a trite aphorism: If you want to finish first, you must first finish.

You don't want to be taken out - or get set back significantly - with a few bad bets. Errors are part of the investing process (though we try to minimize them). Live to fight another day.

35:15 Takeovers

The best values tend to get taken over.

Further, acquisitions by peers tend to fetch higher prices than private equity.

Focus on value - not the market price.


For reports on the best investment values in stocks worldwide:


Wish you an excellent week ahead.


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