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Newsletter - September 23rd, 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:



 

Bill Ackman latest

 

Bill Ackman Interview


Some notes on his recent interview below:


1:30 Principal investing


Even Harvard doesn't teach you how to invest, which is why reading Ben Graham and learning from sound investors is valuable.



3:00 Advantage


Focus on businesses where you have an advantage - in Ackman's case, it was real estate knowledge and experience.


We don't compromise on a quantitative margin of safety, which is easier found among smaller companies that bigger investors can't invest in fully.



4:00 Wells Fargo conservatism


Wells Fargo in the early 90s was one of the most conservative lenders. It wouldn't lend to developers without "massive" amounts of equity - the margin of safety principle important to all investing.



6:00 Ideas are scarce


We like Ackman's attitude when he sourced capital: "Capital is a commodity, good investment ideas are rare assets".


Our financial criteria are demanding and we end up with a very limited set of ideas from the universe of investable stocks - around 100-150 stocks out of 42,000+ at a given time.



10:45 Incentives


Examine management incentives to predict their behavior.



14:30 Compounding in life


Consistent compounding works in life as well as investing - doggedness, persistence, daily progress.



18:45 Commandments


Ackman's eight investing principles:


1) Simple and predictable businesses

2) Free cash flow generative

3) Dominant market position

4) Big barriers to entry

5) High returns on capital

6) Limited exposure to extrinsic risks management can't control

7) Strong balance sheet

8) Excellent management and good governance



We look for similar stocks on the quantitative elements to get substantial value for money in earning power and assets - with qualitative factors that don't detract materially from the quantitative margin of safety.



44:45 AI in investing research


Some areas of investing require detailed study regardless of AI.


We think reading the footnotes is crucial - it requires work and we do that for you.

 

Wish you peace until next time.

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