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Newsletter - May 27th, 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:



 

Ackman's 'easiest' investment, Ajit Jain's operating style, and more:

 

[Heartily recommend this movie Croupier (1998) - one of our favorites]

 

Ackman's fastest analysis


1:30 Deal


Wachovia Corporation: During the 2008 financial crisis, Citigroup acquired the Wachovia subsidiaries on September 29th but left the holding company.


The holding company held cash, investments, and tax losses worth $11-14/share financed by non-cumulative perpetual preferred stock - and the stock was selling for $1.84.

 

Getting Overpaid for Risk


Pabrai's basic thrust in this presentation is to double down on good performers.


22:00 Relentlessness of good businesses


Surprising to note that even after buying the Nifty 50 at the 1972 peak, a few of the winners enabled the group to match the S&P500 to 2023 (even excluding Walmart).



25:30 Don't water the weeds


Point taken though Walter Schloss kept topping up his laggards. From our limited experience, letting the few winners run matters - it's difficult to count on making many good decisions.



53:00 Ajit Jain


Never heard/read about Ajit Jain's underwriting style but Pabrai discloses a couple of deals:


1) Insuring two Chinese satellites into orbit: Berkshire charged a premium of $800mn for $2bn of exposure when the risk of failure was 10-15%.


2) California earthquake 8.0+: Charged ~4x the risk.


Jain extracted premiums well in excess of the risk (3x or more) because of Berkshire Insurance's competitive strength.


Getting overpaid for the actual risk you take is the game in investing as well.

 

Until next time, Cheers!

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