Newsletter - November 25th, 2023

Dear Reader,

Attached is our latest list of stocks passing value screens (low EV/ebit, high returns on invested capital, 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:

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Pabrai/Notre Dame

Notes on a recent interview below:

16:30 Buffett's Japanese bet details

Buffett borrowed $5bn+ in yen at 0.50%/year and invested the sum in five Japanese trading companies with average dividend yields of 8%. These grew to $12-13bn with doubled dividends. He intends to hold these even though they don't neatly fit the box of 'great compounders'.

Key part of his thesis was that the odds of losing money was low, which is what we emphasize in our stock selection.

21:00 Hack to find compounders: the Peter Lynch approach

Make a list of all the brands that you are a customer of - and consider why you prefer those brands over competitors.

26:30 Psychology of human misjudgment

Pabrai refers to Munger's 'mental models' such as association tendency, reciprocation, etc. - several elaborated in the talk below:

36:45 Cloning

People have an aversion to cloning - one of the simplest ways to succeed is to observe what works and copy it. In investing, learn from the best investors (and their investments) - and apply the lessons as they suit you.

50:15 Bridge/Hairy Investments

Numeracy seems strongly correlated with investing competence.

Bridge and investing requires thinking about probabilities. Promising investment prospects will always have some "hair" on them - judging their merits is a probabilistic exercise.

To get ideas where the odds are skewed in your favor:

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Wish you an excellent week ahead.