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Newsletter - October 21st, 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:



Ted Weschler Interview

Ted Weschler is Buffett's other investment manager at Berkshire - notes on one of his rare interviews below:

24:45 Peer Comparisons

Compare peers in an industry and once in a while, you'll find a company that stands out - these are the type of stocks we work on.

25:15 Twenty Punches

Buffett advised investors to imagine having only 20 ideas to invest for a lifetime - that mindset forces you to think harder about businesses, it's a standard worth striving to.

Weschler literally applied this philosophy and ended up with a 19/20 success record.

27:00 Private Equity Mindset

Weschler applied a private equity mindset to public securities i.e. think like a business owner buying the whole company instead of trading in the market.

We try to apply this mindset in our evaluation - to find pieces of businesses (stocks) available at ridiculously low prices relative to their worth; prices no intelligent business owner would sell you of his free will.

30:00 No pressure to bid

There is no pressure to bid on public securities - there are over 40,000 stocks available on public markets. Large institutional investors can practically invest in only about 10% of those whereas small investors have the whole playing field.

Just pass on ideas till you find one that fits your criteria . This is one of the most underrated advantages of operating in stocks.

We systematically filter through every stock to bring you the best ideas that pass our rigorous financial criteria and basic qualitative tests.

31:45 Connecting the dots

Read widely. Get different perspectives. Investing is about connecting the dots and getting a "variant perception" on an idea - different from the market and profitable.

Weschler reads obscure material for insight - similar to Todd Combs (last week's newsletter) - Furniture Today and Uranium Weekly (!).

40:15 Covid investing

Interesting to hear Weschler say Berkshire had a lot of "very good information" but "no relative edge" in how investments would play out. Of course, the Federal reserve stepped in early, which minimized Berkshire's opportunity set for negotiated investments.

44:45 Inflation

Weschler considers inflation's impact worth thinking about along with US$ strength, and China-US relations. You need a "little bit of background knowledge" for the right lens to look at opportunities.

Re inflation, we try to find businesses with above-average profitability and pricing power, which should perform well in an inflationary environment.

53:15 Endlessly interesting

Investing is a broad and fascinating field - stay curious, and enjoy the ride.

Other notes:

10:00 Warren's courtship style and getting what he wants

11:30/29:00 Bankruptcy work on a single case for 13 years (!) - 100,000+ lawsuits against it for asbestos exposure

21:00 LBO/private equity experience and starting own hedge fund

52:00 Benefits of running and thinking about investing


Peace until next time.


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