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David Einhorn: “Right Now The Market Is Telling Us We Are Wrong, Wrong, Wrong About Nearly Everything”

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  • Even if it isn’t the whole explanation, the environment for value investing has been tough.”
  • (But just so you know, love ain’t cheap and rarely lasts forever, at least when it comes to growth stocks.
  • But every day you come to work and the market tells you you are wrong, you are wrong, you are wrong.”

Howard Marks: Very Few Investors Consistently Know When A Stock Price Is Wrong, And By How Much, And In Which Direction

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  • He added that increasing the number of analysts to their firm does little to add value to their analysis saying:
  • Unless those 160 analysts are more astute than the average investor, they’ll contribute nothing.
  • As you know, I believe most markets are relatively efficient, and that certainly includes the mainstream stock market.

Evaluating management: Bayesian reasoning and fallacy of obviousness

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  • Let’s move to the point of how to evaluate management quality in light of poor behavior?
  • I would highly recommend reading this article.
  • The key is to start without an assumption (50-50 probability for both scenarios or equal priors) and look at the meaningful (and not trivial) evidence to come to a conclusion.

The Best of the Aleph Blog, Part 36

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Xero

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Investing in Small Cap Stocks: Russell 2000 Analysis

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  • Russell 2000 Valuation across Time
  • They usually outperform A-graded companies when investors are in a speculative mood at the end of a market cycle, but later tend to underperform A-graded companies significantly during most other market environments.
  • F-graded companies, particularly in the Health Care and Information Technology sectors, have outperformed the A-graded companies in 2017 and 2018 year to date.

Aerocentury Internalizes Management – ACY

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  • Aerocentury focuses on aircraft worth $10-25 million and attempts to lease them for periods of 3-7 years.
  • Aerocentury is in the process of buying Jetfleet and fully internalizing its management.
  • The resulting increase in profitability might convince investors to value Aerocentury shares closer to book value.

Questions I’d be Asking If I Owned Tesla Stock

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  • However, if the market loses confidence in Tesla and Musk, Tesla is done.
  • Such requests are made by companies looking for Hail Mary solutions to significant financial problems.
  • Tesla is Elon Musk.

Warren Buffett: “The Worst Deal That I’ve Made”

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  • So at the time of the purchase, he paid $433 million in stock for Dexter Shoes, all in shares of Berkshire Hathaway.”
  • If we go back to the 2007 Berkshire Hathaway shareholder letter, Buffett describes a couple of his biggest mistakes, including the worst deal he ever made – Dexter Shoes.
  • About the time of the See’s purchase, Tom Murphy, then running Capital Cities Broadcasting, called and offered me the Dallas-Fort Worth NBC station for $35 million.

The Value Premium: What This Indicator Is Telling Us About The Business Cycle

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  • He’s discussing a recent paper titled The Value Premium and Expected Business Conditions, which illustrates the correlation between the value premium and the economic cycle and what this may mean for investors saying:
  • Growth stock expected returns are supposed be more sensitive to business conditions than those of value stocks.
  • If weak economic conditions make growth stocks riskier than value stocks, then investors may demand a higher relative expected return to hold growth stocks during economic downturns.

4 Stocks for Your Retirement Portfolio

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  • 5 YEAR DIVIDEND GROWTH: 58.49%
  • 5 YEAR DIVIDEND GROWTH: 18.52%
  • 3 YEAR DIVIDEND GROWTH: 2.56%

Don’t Get Caught In A Net Net Value Trap

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  • If inventory assets depreciate, this can lead to an asset write-down and a net net value trap.
  • If I were to look at these two companies and they both had exactly the same inventory value and inventory turnover, I would value the leather goods company higher.
  • In the case of these fast fashion net nets, it's important to look into how many years their inventory has increased in a row.

Atlantic Power – Terrible industry, cheap stock

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  • The mantra at the time: They paid huge dividends!
  • Of course, I didn’t buy any of it – the business was not a utility, it was in the independent power generation industry, which relies upon power purchase agreements to sell power to either industrial or regulated utilities.
  • Management projects $170-185 million for FY2018.

10 Most Overvalued Stocks of the S&P 500 - July 2018

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There are a number of great companies in the market today, but there are also a number of companies that are vastly overvalued by the market. By using the ModernGraham Valuation Model, I've selected the ten most overvalued companies of the S&P 500 recently reviewed by ModernGraham.

150 Of The Best Investing Blogs On The Planet (2018)

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  • It’s that time of the year again when Tobias and I sit down to pick out one hundred of the best investing blogs on the planet.
  • This year, with so many great blogs, we’ve extended the list to one hundred and fifty.
  • If you think we’ve missed a great investing blog, stick it in the comments section below.

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