Nov 92 min read

Newsletter - November 9th, 2024

Dear Reader,

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

Terry Smith Latest

Notes on a recent interview of Terry Smith below:

4:15 High predictability / Risk of high growth stocks

Smith looks for businesses with a "high degree of predictability", and "high certainty of a good result, not a chance of a superb result".

This is similar to our approach looking for safe doubles (or more) over time - rather than hitting the ball out of the park.

8:15 Proximity to the consumer

Businesses closest to the consumer suffer less in an economic downturn than their suppliers.

However, B2B businesses in a downturn are likely to be undervalued, and can prove to be good investments. We just want to buy stocks selling considerably below their worth to a private owner.

18:15 Good capital allocation

Investment managers should view management teams as subcontractors of capital. Capital efficiency (high returns on equity) is important in determining investment value - though they can be offset by very low purchase prices in our view.

22:30 Share buybacks

Share buybacks/repurchases are valuable only when shares are bought below intrinsic value. Otherwise, continuing shareholders are getting a bad deal. Since we focus on undervalued companies, repurchases are especially valuable.

25:30 Diversify globally

It doesn't matter where a company is listed as long as minority shareholders are adequately protected. You can get more bargains and better bargains if you venture beyond your home country.

32:30 Irrational criticisms

Buy stocks that are irrationally criticized - a fertile ground for investment bargains (an area we focus on).

36:00 Sell discipline

Smith talks about his mistakes in selling too early and too late.

This isn't the simplest of decisions when purely evaluating fundamentals - but we think Sir John Templeton's advice to sell only when you have a much better bargain to buy is the best practical advice for investors.

40:00 Controlling shareholders/families

Smith talks about the benefits of controlling shareholders who build businesses for the longer term. Though it's difficult for outsiders to change incompetent managements or attitudes towards minority shareholders, there are substantial long-term benefits of value creation - once these concerns are mitigated.

For reports on the best investment values in stocks worldwide:

Join Here

Wish you an excellent week ahead.

Newsletter - November 9th, 2024

Dear Reader,

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

Terry Smith Latest

Notes on a recent interview of Terry Smith below:

4:15 High predictability / Risk of high growth stocks

Smith looks for businesses with a "high degree of predictability", and "high certainty of a good result, not a chance of a superb result".

This is similar to our approach looking for safe doubles (or more) over time - rather than hitting the ball out of the park.

8:15 Proximity to the consumer

Businesses closest to the consumer suffer less in an economic downturn than their suppliers.

However, B2B businesses in a downturn are likely to be undervalued, and can prove to be good investments. We just want to buy stocks selling considerably below their worth to a private owner.

18:15 Good capital allocation

Investment managers should view management teams as subcontractors of capital. Capital efficiency (high returns on equity) is important in determining investment value - though they can be offset by very low purchase prices in our view.

22:30 Share buybacks

Share buybacks/repurchases are valuable only when shares are bought below intrinsic value. Otherwise, continuing shareholders are getting a bad deal. Since we focus on undervalued companies, repurchases are especially valuable.

25:30 Diversify globally

It doesn't matter where a company is listed as long as minority shareholders are adequately protected. You can get more bargains and better bargains if you venture beyond your home country.

32:30 Irrational criticisms

Buy stocks that are irrationally criticized - a fertile ground for investment bargains (an area we focus on).

36:00 Sell discipline

Smith talks about his mistakes in selling too early and too late.

This isn't the simplest of decisions when purely evaluating fundamentals - but we think Sir John Templeton's advice to sell only when you have a much better bargain to buy is the best practical advice for investors.

40:00 Controlling shareholders/families

For reports on the best investment values in stocks worldwide:

Wish you an excellent week ahead.

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