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Newsletter - October 7th, 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:


 


 

Josh Friedman Interview


Josh Friedman is an established distressed debt investor - notes on one of his interviews below:



13:45 Mispriced credits


Good credits selling at low prices.


During the savings and loan crisis in the late 80s/early 90s, bad lending in real estate eventually resulted in fire-sales of loans at distressed prices by the Resolution Trust Corporation (government agency). It was like "shooting fish in a barrel".


We look for similar situations in stocks using credit analysis plus qualitative sense checks.



16:00 Core investment philosophy


The anchor was value - distressed, convertible and risk arbitrage, stressed total return debt, complicated disliked/complicated new issues - which didn't fit normal boxes where conventional players were more likely sellers than buyers - and with defined exits.



23:45 Rule of Law


Predictability of rule of law is crucial and can't be relied on in many countries.



28:45 Dry years


There are times when you have to wait - and resist investing in sub-par opportunities. As Buffett said, opportunities tend to come in chunks.



54:15 Skewed upside


Distressed/stressed debt offers upside optionality and limited downside - similar to the stocks we look for.



58:30 Counter-cyclical investing


Think and act like a contrarian though it may be difficult - step up when capital is fleeing (and the facts warrant it). Practically all stocks we invest in requires this quality.

 

Wish you Peace until next time.

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