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Newsletter - September 16th, 2023

Dear Reader,


Attached is the latest list of stocks generated from basic value screens (low p/e, ev/ebitda, debt/equity, etc.), which don’t meet our investment criteria - and our reasoning.


This may help you avoid a few ‘value traps’ or stocks that aren’t sufficiently attractive compared to opportunities available today.


For reports of stock ideas that pass our quantitative and qualitative standards:



 

Steven Romick - Part II

 

Wealthtrack - Steven Romick (Part II)


The interview is packed with insight - We covered Part I few weeks ago, notes on part II below:


2:00 What can go wrong?


Look at downside risk from a competitive angle - what are the competitive threats that could destroy the business?



5:30 Look forward a few years


Not just low multiples of earnings and book value - but make an effort to look out a few years - what's the business going to look like in five years? How might the business be disrupted?


The value of the business can offer great protection with respect to a margin of safety (beyond the current figures).



10:15 Loss aversion


Value investing suits those naturally inclined to avoid losses - not quotational loss but permanent impairment of investment value.



11:30 Look across the capital structure


Search across the capital structure - debt, preferreds, equity, etc. for value. The essence of the analysis is the same - common stock analysis, as we practice it, is an extension of bond analysis.



14:15 - Dislocation of better businesses


Look for better quality businesses that are dislocated in some way for good opportunities.



14:45 Determine the strategy that works for you and stick to it


We seek a clear and convincing margin of safety on the basis of earning power and/or balance sheet value. This involves extensive stress tests on multiple aspects of the financial statements.


In addition, we look out for qualitative indications contrary to the past record i.e. a sense check based on study of the footnotes.


If you're looking for such stocks, our service may be an appropriate fit for you.



16:00 Don't run with the crowd


Sit back and evaluate what makes sense for your portfolio. Investing is arbitrage between market perception and reality.



21:30 Grayscale


Nothing is permanent, businesses are vulnerable. Investing involves an intelligent assessment of probabilities and betting when the odds are in your favor.

 

Wish you peace until next time.

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