Category Archives: Uncategorized

Valuing Growth

gravity

 Valuing growth is an art.  The readings below will help you think about how to assess growth in your valuation.

Greenwald_2005_Inv_Process_Pres_Gabelli in London This lecture places valuing growth in the overall context of value investing.

Greenwald-Class-Notes-5-Liz-Claiborne-Valuing-Growth-2  See pages 10 through 14 for a discussion on valuing growth.

Growth Stocks and the Petersburg Paradox

St Petersburg Paradox and Tech Stocks 2000

Ben_Graham_and_the_Growth_Investor_Bryant_College_041008

A Method of Valuing Growth Stocks

Newer Methods for Valuing Growth Stocks_1962_Security Analysis  Ben Graham tackles a tough subject.

Comments on the 15 Growth Illusion

When Growth Stalls

Deep Value Master, Walter Schloss

W Schloss

Walter Schloss had a phenomenal track record over many decades.  His accounts returned profits almost every year, so the amount he managed stayed small.  His approach is a good one for individual investors. he would buy cheaply and average down. However, now might be a difficult time to practice his approach with many sectors of the market lacking a margin of safety unless you delve into (horrificly cyclical) certain mining companies, oil-drillers, and community banks.  But if you are interested in the deep value approach, you must study Schloss.  Does your personality match his approach?

The Superinvestors of Graham and Doddsville by Warren Buffett

Schloss_May_8_2008

schloss_lecture

Profit_Guru_Walter_Schloss_interview

graham_reminiscence

14136584-walter-schloss-barrons-19851

16 Investing Rules from Walter Schloss

Walter Schloss – OID Interview

Walter Schloss Lecture: http://youtu.be/v-7e_97icWY

Learning from Schloss (excellent review) http://youtu.be/5KM9eY7BbzA

What do YOU think? 

The Last Bear Commits Suicide

suicidal-bear

Marry Rich!

Reality show

I researched scams, frauds and penny dreadfuls (penny stocks) many moons ago, so I am on every scam list. Periodically, I will share some of the better con jobs so as to refresh ourselves with the psychology of sociopaths and cons.   

Anyone wish to marry rich (or receive 40% of $8.5 million)–here is your chance. A Cinderella story gone horribly wrong!

 FROM: joy.kipkalya@yandex.com, 

 
Re: PLEASE MY DEAREST ONE I NEEDS YOUR HELP.

 

My Dearest,

I know you will be surprise to receive this email, but Before I go further I will like you to understand that, I am writing this mail to you With due respect trust and humanity, I appeal to you to exercise a little patience and read through my letter I feel quite safe dealing with you in this important business, honestly i am writing this email to you with pains, tears and sorrow from my heart, i will really like to have a good relationship with you and i have a special reason why i decided to contact you, i decided to contact you due to the urgency of my present situation here in the refugee camp. My name is Miss. Joy Kipkalya Kones, 25yrs old female and I from Kenya here in Africa; my father was the former Kenyan road Minister. He and Assistant Minister of Home Affairs Lorna Laboso had been on board the Cessna 210, which was headed to Kericho and crashed in a remote area called Kajong’a, in western Kenya. The plane crashed on Tuesday 10th, June, 2008.

After the burial of my beloved father, my stepmother and uncle conspired and sold all my  father’s properties to an Italian Expertrate which they shared the money they sold from the properties among themselves and live nothing for me. Unfortunately to me I fined my father’s briefcase and when I opened it I found a document which my Father used to deposited amount of money in one bank here in Burkina Faso, with my name as the next of kin. I travelled to Burkina Faso here I am, to withdraw the money for a better life
so that I can take care of myself and start up a new life and also further my education, when I arrival to the bank, the Bank foreign Operation Department Director whom I meet in person told me that my father instruction to their bank is that the fund would only be release to me when I am married or present a trustee/partner who will help me and invest the fund overseas after the transfer, and the bank ask me to go and look for a foreign partner, that was why  am contacting you, which I believe that you are going to be honest and reliable person that will help me and stand as my trustee/partner, so that I can present you to the Bank for the release and transfer of the inherited fund into your bank account in your country.

I have chosen to contact you after my prayers and I believe that you will not betray my trust. But rather take me as your own wife. Though you may wonder why I am so soon revealing myself to you without knowing you, well I will say that my mind convinced me that you will be the true person to help me. Moreover, I will like to disclose much to you if you can help me to relocate to your country because my stepmothers have threatened to assinate me. The fund my Father deposited into the bank, is ($8.5 USD) Million United State Dollars, and I have confirmed from the bank here in Burkina Faso, on my arrival, You will also help me to place the fund in a good profitable business venture in your Country, However you will also help by recommending a nice University in your country so that I can further my education. It is my intention to compensate you with 40% of the total money for your services and the balance shall be my capital in your establishment. Now my dear as soon as I receive your positive response showing your interest and wiliness to help me, I will put things into action immediately. In the light of the above, I shall appreciate an urgent message indicating your ability and wilingness to help me and also handle this transaction sincerely. Awaiting your urgent and positive response. Please my dear I want you to keep this as a top secret only to your self for now until the bank will release and transfer my inherited fund to you as my appointed trustee/partner. I beg you once again not to disclose this to any body until i come over your country because I am afraid of my weeked stepmother who has threatened to kill me and have my inherited fund alone. I thank you very much and am expecting to hear from you soonest.

Yours Sincerely
Joy Kipkalya Kones.

P.S. You gotta love the mis-spellings combined with the multiple tragedies. I give a less than 0 probability of the email being even remotely true.

How to Steal from Banks Through Accounting Fraud

Now What

 

Robbing Banks

http://www.zerohedge.com/news/2014-05-25/bill-black-robbing-banks-inside-weapon-choice-accounting

Keys to A Few Value Vaults

Click on VIEW FOLDER and there are many books, cases, and more. Let me know if you wish more posted. Here are a few vaults.

Books View Folder
VV_CS_Inv View Folder

 

UPLOAD_Contributors View Folder

20 Lesson Course in Value Investing

2014-03-18-dollar-decline

The results above of the Fed’s ability to maintain stability of the U.S. Dollar

 

“Studies of everyday reasoning show that the elephant is not an inquisitive client. When people are given difficult questions to think about—for example, whether the minimum wage should be raised—they generally lean one way or the other right away, and then put a call in to reasoning to see whether support for that position is forthcoming. For example, a person whose first instinct is that the minimum wage should be raised looks around for supporting evidence. If she thinks of her Aunt Flo who is working for the minimum wage and can’t support her family on it then yes, that means the minimum wage should be raised. All done. Deanna Kuhn, a cognitive psychologist who has studied such everyday reasoning, found that most people readily offered “pseudoevidence” like the anecdote about Aunt Flo. Most people gave no real evidence for their positions, and most made no effort to look for evidence opposing their initial positions. David Perkins, a Harvard psychologist who has devoted his career to improving reasoning, found the same thing. He says that thinking generally uses the “makes sense” stopping rule. We take a position, look for evidence that supports it, and if we find some evidence—enough so that our position “makes sense”—we stop thinking.” Course on Plato.

Investing Course

I don’t know the quality of these lessons, but beginners can learn from Sanjay Bakshi’s attitude and approach.  Let me know if you find the lessons worthwhile.

http://www.safalniveshak.com/value-investing-sanjay-bakshi-way-2014-part1

Gold Stock Analysis Question

Anyone want to submit an industry map of gold mining company before I do. Best map wins $2,000 prize equivalent (rare investment book).

CS on Critical Reading Skills; Sealed Air Video

 

ECRI-Weekly-LEI-Growth

CASE STUDY ON CRITICAL READING

OK, you are working for this guy: Video: http://youtu.be/R8y6DJAeoloHe walks into your office and drops this on your desk early in the morning before you have had a chance to slurp your coffee and gobble your jelly-donut: Case Study Critical Reading_Bubbles. He wants a full report. He wants to know what causes bubbles and busts.

What do you tell him about the report he gave you? How long before you reached your conclusion? What evidence do you present for your conclusion?  Time is precious.

What do you suggest should be the next step to gain an answer for your hedgie boss?

How efficient are you at getting to the essence of the document? Stuck?

Ask Hannibal Lechter:

 Case Study “Response”

In its report Globalization and Monetary Policy Institute Working Paper No. 167, entitled “The Boy Who Cried Bubble” by authors Yasushi Asako and Kozo Ued.

The article is 44 pages long. In the opening paragraph on page two in the Introduction, the authors state “History is rife with examples of bubbles and bursts. A prime example is the recent financial crisis that started in the summer of 2007; However, we have limited knowledge of how bubbles arise and how they can be prevented.” (Right there–you have your conclusion. These guys have no clue how bubbles occur. Secondly, seeing any higher level math means ignorance and folly. How can human action be quantified with mathematical precision–the fatal conceit).  Tell your boss that the paper is useless or even misleading. 

One could safely stop reading right at that point knowing full well that what follows cannot possibly be anything but self-serving platitudes and incomprehensible mathematical gibberish.

And that is precisely the case. The mathematical gibberish starts on page five and continues for the entire remainder of the document.

Here is a quick sample from page seven.

Math 1

All the remaining pages are equally incomprehensible to all but the geekiest of geeks. Here is another example from page 39.

Math 2

Hiding Behind Nonsensical Math

I am quite sure there are some academic geeks who understand the formulas presented by Yasushi Asako and Kozo Ued.

Regardless, it’s all mathematical nonsense in light of their ridiculous conclusion stated upfront “We have limited knowledge of how bubbles arise and how they can be prevented.”

Ben Graham argues, “higher-level math implies a level of precision that does not exist in the real world.” (p. 259 of The Intelligent Investor)

Read more at  http://globaleconomicanalysis.blogspot.com/2014/01/bubblicious-questions-what-causes.html#ueRA5dx1OFAvUKC9.99

SEALED AIR CASE STUDY

Video https://www.hightail.com/download/elNLTG01MHczeUp4Tk1UQw    Link Expires May 24 2014

Case Materials:

Greenwald_Class_Notes_6_-_Sealed_Air_Case_Study

Sealed Air 1998 10-K

Sealed Air Case Study_Handout

The History of Trading in the Pits; Much More

Trading Pits

The successful investor is a master of paradox. He expects the unexpected, distrusts the experts and loves what the majority hates. He believes that, in markets as in heaven, the first shall be last and the last shall be first.

There’s fool’s gold–pyrite–and then there’s fools’ gold owned by idiots who will trade it for worthless dollars.

History of the trading pits: http://www.tradingpitblog.com/ Great blog!

What is money? What is money_ TTMYGH_17_Feb_2014

Assessing Long-Term Account Performance

http://www.tocquevillefunds.com/insights/secular-lessons

Hard wired for bubbles (Dan Ariely)

http://www.peakprosperity.com/podcast/84804/dan-ariely-why-humans-hard-wired-create-asset-bubbles?

Thinking properly about “cash sitting on the sidelines.” Or how to think properly. http://www.acting-man.com/?p=28594

Rick Rule on Gold Miners and Gold (Of course, when you ask a barber if you need a haircut…..But, he has a lot of experience in these markets.  Survival is proof enough of competence in the miners!

AUDIOhttp://kingworldnews.com/kingworldnews/Broadcast/Entries/2014/2/16_Rick_Rule_files/Rick%20Rule%202%3A16%3A2014.mp3

Rick Rule: We’ve said on your interviews, ‘You’ve suffered through the pain, why not hang around for the gain?’  I think we’re in the beginning of the gain session.  Your readers and listeners, at least those who are new to the sector, need to understand that we are in a rising channel, but we are in a rising channel that is going to have higher highs and higher lows….

It’s going to be volatile.  You are going to see 15% declines, and you are going to see 20% gains for seemingly no reason.  The important thing to note is that I certainly believe the precious metals sector and the precious metals shares have bottomed and they are moving up.

We’re tempted to say that the bottom was reached and the recovery in the junior shares began in July of last year.  Certainly, November, December, and January have seen pretty good rises — 40% share price escalations have not been uncommon.

It is not uncommon for well-constructed portfolios in a precious metals market recovery to experience five-fold or ten-fold gains.  So for those people who went through the downturn and are now beginning to experience the upturn, firstly, congratulations.  And second, keep your seatbelt on.  It’s going to be very volatile but I think we are higher, probably substantially higher from here.” 

 

Eric King:  “William Kaye, the outspoken hedge fund manager from Hong Kong, was telling King World News that demand (for gold) out of China is just ‘insatiable.’  Your thoughts on the physical demand we’ve seen around the globe — it’s been quite stunning.”

Rule:  “He would know better than I with regard to Hong Kong demand, but certainly we’ve seen very strong physical demand from around the world.  A lot of the physical demand has taken place right here in the United States.

What’s interesting about his (Kaye’s) statement is the dichotomy between the private physical markets and the long-term markets.  I can’t help going back to an announcement about 12 months ago, when the Germans wanted to repatriate their 1,500 tons of gold, and they were told by the US government that it would take seven years (to get back only 300 tons of gold) that was theirs.

At the same time, over 30 days, in the physical market, Chinese retail buyers bought and took delivery of 1,120 tons of gold.  One of the things that this points out is the very, very odd dichotomy between central bank and multilateral institutional holdings of gold, and the paper gold market on one side, and the honesty of the physical market on the other side.  

My suspicion is that the physical market is prevailing and will continue to prevail over the paper market.  And the subtext of this is that the documented large (gold) short positions that exist in the paper market may get their long awaited religious experience as they are unable to deliver against futures obligations.”

from www.kingworldnews.com

Seth Klarman on investing vs speculating:

Mark Twain said that there are two times in a man’s life when he should not speculate: when he can’t afford it and when he can. Because this is so, understanding the difference between investment and speculation is the first step in achieving investment success.

To investors stocks represent fractional ownership of underlying businesses and bonds are loans to those businesses. Investors make buy and sell decisions on the basis of the current prices of securities compared with the perceived values of those securities. They transact when they think they know something that others don’t know, don’t care about, or prefer to ignore. They buy securities that appear to offer attractive return for the risk incurred and sell when the return no longer justifies the risk.

Investors believe that over the long run security prices tend to reflect fundamental developments involving the underlying businesses. Investors in a stock thus expect to profit in at least one of three possible ways: from free cash flow generated by the underlying business, which eventually will be reflected in a higher share price or distributed as dividends; from an increase in the multiple that investors are willing to pay for the underlying business as reflected in a higher share price; or by a narrowing of the gap between share price and underlying business value.

Speculators, by contrast, buy and sell securities based on whether they believe those securities will next rise or fall in price. Their judgment regarding future price movements is based, not on fundamentals, but on a prediction of the behavior of others. They regard securities as pieces of paper to be swapped back and forth and are generally ignorant of or indifferent to investment fundamentals. They buy securities because they “act” well and sell when they don’t. Indeed, even if it were certain that the world would end tomorrow, it is likely that some speculators would continue to trade securities based on what they thought the market would do today.

Speculators are obsessed with predicting – guessing – the direction of stock prices. Every morning on cable television, every afternoon on the stock market report, every weekend in Barron’s, every week in dozens of market newsletters, and whenever businesspeople get together, there is rampant conjecture on where the market is heading. Many speculators attempt to predict the market direction by using technical analysis – past stock price fluctuations – as a guide. Technical analysis is based on the presumption that past share price meanderings, rather than underlying business value, hold the key to future stock prices. In reality, no one knows what the market will do; trying to predict it is a waste of time, and investing based upon that prediction is a speculative undertaking.

Market participants do not wear badges that identify them as investors or speculators. It is sometimes difficult to tell the two apart without studying their behavior at length. Examining what they own is not a giveaway, for any security can be owned by investors, speculators, or both. Indeed, many “investment professionals” actually perform as speculators much of the time because of the way they define their mission, pursuing short-term trading profits from predictions of market fluctuations rather than long-term investment profits based on business fundamentals. As we shall see, investors have a reasonable chance of achieving long-term investment success; speculators, by contrast, are likely to lose money over time. www.shortsideoflong.com

A True Contrarian: John M. Templeton


 

What is your investment approach? John Templeton, “I search for bargains.” “Buy at the point of maximum pessimism. Go where the outlook is the worst.”

The above video is worth viewing if you want to understand how important personality and values are for the type of investor you become. Templeton’s thrifty ways and contrary streak were embedded in his approach. He is seldom studied. Too bad. 

The Templeton Way A book synopsis

Templeton on Investor Attitude

Criticism is the fertilizer of learning. –John Templeton.