Newsletter - October 14th, 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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Todd Combs Interview

Todd Combs is one of Buffett's two investment managers at Berkshire - notes on a rare recent interview below:

https://www.joincolossus.com/episodes/14034172/combs-todd-combs-investing-the-last-liberal-art

7:30 Weakest link

Investing is an art - "You have to be pretty good at a lot of things because you're only as good as your weakest link and your blind spot."

10:00 Qualities Required

Curiosity, grit, common sense.

"You rise to your level of complacency."

People create their own limiting factors. They underestimate how far they can push themselves - it's mental. Improving even a little every day goes a long way.

18:00 Simple, not easy

Life and investing is simple but not easy. As long as your north star is aligned, the long-term is simpler.

21:45 Downside/Upside

"How do I protect my downside and take a shot at the upside?"

In the stocks we seek, we're looking for downside protection in earning power and/or asset value, while retaining as much upside as possible (via strong earnings accruals, low-cost/efficient growth, etc.).

35:00 Short selling pros and cons

Can get burnt selling short; and you'd have to be more correct than if you're long.

Buffett said it best: "If you have enough ideas on the long side, you don't need to short."

45:30 Running own investment firm

Poring through securitization documents to identify the tranche that was going to get blown through (the "fulcrum" class). Figure out the puzzle.

Focus on the process, the rest falls into place.

56:00 Doing what you love

It's hard to compete with someone who loves what they do.

1:07:45 Investing with Buffett

Think through relative competitive strengths, consider various scenarios, evaluate upside/downside, and be intellectually honest.

Other notes:

8:00 Experience as a regulator investigating insurance fraud

14:15 Capitalism rewards early specialization but generalists plateau later

22:30 Insurance doorway to the Tiger cubs

25:30 Specialty finance night courses after MBA to "tear apart credit card securitization", "militant diligence" as an investor

28:00 Compounding can be better in non-traditional fields; instead of being siloed

48:00 The Big Short role/Shorting against Bear Stearns' securitization group

51:00 Marsh McLennan short/Fannie Mae accounting fraud

1:03:30 Munger conversation and Buffett introduction

1:11:45 Work Buffett did on the cable industry in the 60s ("rows and rows of files")

Peace until next time.

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:

Todd Combs Interview

Todd Combs is one of Buffett's two investment managers at Berkshire - notes on a rare recent interview below:

https://www.joincolossus.com/episodes/14034172/combs-todd-combs-investing-the-last-liberal-art

7:30 Weakest link

Investing is an art - "You have to be pretty good at a lot of things because you're only as good as your weakest link and your blind spot."

10:00 Qualities Required

Curiosity, grit, common sense.

"You rise to your level of complacency."

People create their own limiting factors. They underestimate how far they can push themselves - it's mental. Improving even a little every day goes a long way.

18:00 Simple, not easy

Life and investing is simple but not easy. As long as your north star is aligned, the long-term is simpler.

21:45 Downside/Upside

"How do I protect my downside and take a shot at the upside?"

In the stocks we seek, we're looking for downside protection in earning power and/or asset value, while retaining as much upside as possible (via strong earnings accruals, low-cost/efficient growth, etc.).

35:00 Short selling pros and cons

Can get burnt selling short; and you'd have to be more correct than if you're long.

Buffett said it best: "If you have enough ideas on the long side, you don't need to short."

45:30 Running own investment firm

Poring through securitization documents to identify the tranche that was going to get blown through (the "fulcrum" class). Figure out the puzzle.

Focus on the process, the rest falls into place.

56:00 Doing what you love

It's hard to compete with someone who loves what they do.

1:07:45 Investing with Buffett

Think through relative competitive strengths, consider various scenarios, evaluate upside/downside, and be intellectually honest.

Other notes:

8:00 Experience as a regulator investigating insurance fraud

14:15 Capitalism rewards early specialization but generalists plateau later

22:30 Insurance doorway to the Tiger cubs

25:30 Specialty finance night courses after MBA to "tear apart credit card securitization", "militant diligence" as an investor

28:00 Compounding can be better in non-traditional fields; instead of being siloed

48:00 The Big Short role/Shorting against Bear Stearns' securitization group

51:00 Marsh McLennan short/Fannie Mae accounting fraud

1:03:30 Munger conversation and Buffett introduction

1:11:45 Work Buffett did on the cable industry in the 60s ("rows and rows of files")

Peace until next time.

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