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Some links

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  • The Undervalued Shares blog has started an interesting “Behind the scenes” series A good summary from A16Z on how moats develop Ben Thompson with some deep thoughts on platform business models (Shopify) A good summary of the crazy things in the capital markets that happened in the last few months An interesting in depth story on the Luckin Coffee fraud (WSJ, paywall) Deep Dive on stock based compensation Alternative data use for predicting asset prices is booming

Is The Recession Over?

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  • The jobless claims report in the week of May 23 rd improved from the prior week as there were 2.123 million initial claims which fell from 2.446 million.
  • This improvement could be from data
    adjustments or irregularities.
  • It looks like the federal government might drop the extra
    $600 weekly unemployment benefit at the end of July.

Why We’re Ignorant of Our Own Ignorance

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  • Of course, we are not incompetent in everything we do in life and thus the Dunning Kruger Effect does to torment us all the time.
  • So if the Dunning Kruger effect is invisible to those experiencing it, what can you do to find out how good you actually are at various things?
  • The more knowledgeable we become, the less likely we are to have invisible holes in our competence.

May 2020 – wild times

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  • Today wraps up another month in the markets.
  • Indeed, something very rare is that my usually very concentrated portfolio has been flattened like the COVID-19 curve – today I count 18 separate issuers that I own either equity or debt positions in (some more concentrated than others).
  • Finally, here is an un-testable prediction – on Saturday at 12:22pm Pacific Time, you can watch Elon Musk’s SpaceX launch a couple astronauts into space .

Exited position in Asta Funding

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  • Their largest outside investor, RBF Capital, announced that they thought that the going private offer of $11.47/share was significantly too low and that they would oppose the deal.
  • The stock is now trading at $12.50/share, but given that 61.8% of the outstanding shares are owned by Asta Funding insiders this proposal has a very low chance of becoming reality.
  • Alternatively RBF Capital could just be posturing for an eventual appraisal case that would offer no free ride for other minority investors.

Stock In Focus – TAM Stock Screener – Points International Ltd. (NASDAQ: PCOM)

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  • As part of a new series here at The Acquirer’s Multiple, we’re providing a new feature called ‘ Stock in Focus ‘ where we focus on one of the stocks from our Stock Screeners .
  • The company’s operating segments are Loyalty Currency Retailing, Platform Partners, and Points Travel.
  • Operating Earnings: $18 Million

Ken French: How To Evaluate Your Investment Decisions

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  • Now presumably I made a great decision based on the information I had when I made the decision but the realization, what actually happens, is going to be dominated in most situations by the part of the information I never had.
  • That’s too bad but I don’t say, oh wow how crazy could I have been to invest in that portfolio.
  • I look back and I say no that was a perfectly sensible portfolio I invested in three weeks ago.

This Week’s Best Investing Articles, Research, Podcasts 5/29/2020

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  • Here’s a list of this week’s best investing reads:
  • This week’s best investing research reads:
  • This week’s best investing podcasts:

The State Of Value Address – Is Value A Value Trap?

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  • During their recent episode of the VALUE: After Hours Podcast, Taylor, Brewster, and Carlisle discussed Tobias’ article titled – Is Value A Value Trap?
  • But basically, what I did to workout whether these things are cheap or expensive, it’s hard.
  • The question about whether the portfolios are unusually levied or not, I think is answered by EV/EBITDA and EV/EBIT.

What happens to Core Molding (CMT) from here?

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  • In any case, as I say, I expect that the debt will be refinanced and when an extension of the forebearance is announced, that the stock will rise further, and with a refi, that the stock will return to something approaching book value.
  • Better for a firm like CMT to know that you will get between 40 and 60% of the business than 0 or 100%.
  • CPI was a deal that was entirely debt financed, though, I am not sure that it earns an equity rate of return.

Updated Look At The Economic Recovery

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  • It has improved modestly in the past few weeks, but don’t expect the unemployment rate to fall in June.
  • As you can see from the chart below, the yearly decline in job postings on Indeed was 39% in the first week of May.
  • The economy is improving as expected.

Give Your Investment Ideas Some Legs

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  • Last year I connected a few dots when I noticed that Vishal walked more than 3200 km in a single year.
  • Walking can promote quality thinking, which can also improve your investment process over time.
  • John Huber of Saber Capital writes in his post on walking, thinking, and investing –

All German Shares Part 24 (Nr. 501-525)

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Net Current Asset Value: What, Why and How

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  • He uses Net Net Hunter's high performance net net checklist to identify his stocks.
  • He called these companies net nets, as current assets are “netted” against current liabilities, and the remainder is then netted against long-term liabilities (and preferred shares).
  • In addition to this, for a business to trade at a discount to its net current asset value, it would have to experience a serious drop in its stock price.

Net Current Asset Value: What, Why and How

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  • He uses Net Net Hunter's high performance net net checklist to identify his stocks.
  • He called these companies net nets, as current assets are “netted” against current liabilities, and the remainder is then netted against long-term liabilities (and preferred shares).
  • In addition to this, for a business to trade at a discount to its net current asset value, it would have to experience a serious drop in its stock price.

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