Search Tool to use words in OTC filings
Search Tool to use words in OTC filings
A READER’S QUESTION
Just wanted to shoot you a quick email applauding you for putting together the “Ultimate Investor Checklist.” investment_principles_and_checklists_ordway This may be the most valuable word document I have on my computer.
Quick question, I’m a huge fan of Charlie Munger (currently am reading Poor Charlies Almanack)- In the checklist when he describes being a business owner Charlie says:
http://www.mymentalmodels.info/charlie-munger-reading-list/ (Search through this link on Munger’s Mental Models.
If Charlie Ignores modeling and forecasting, how does he go about estimating Intrinsic Value? I know Charlie has said in the past that he has never seen Warren Buffett use DCF, so how do they go about estimating Intrinsic Value?
John Chew: A good question. First, a model is not reality but a metaphysical description of reality. You probably should build a simple spread-sheet of sales, capex, taxes, etc. to understand the economic model of the business you are looking at–we are not all geniuses like Buffett or Munger.
But rather than have me say what I think Buffett would say, read the source. Note his analysis of Coke and Sees Candies:
Buffett_Lecture_Fla_Univ_Sch_of_Business_1998 Hope that helps!
Arbitrage by Buffett_Research (just for Buffaholics)
https://fundooprofessor.wordpress.com/ Book Mark this site (Risk)
There has been a good discussion on the search process from several members of the Deep-VAlue Group at Google Groups. Join so you can learn and share with them. http://csinvesting.org/2015/01/14/deep-value-group-at-google/ then follow the link in that post.
Here is part of the discussion
There’s more than one way to skin a cat, so I’m curious how others decide on where to focus their initial research efforts.
Do you start with an industry you’re familiar with or have an interest in? Do you go off of recent news? Do you look at 52 week lows and go from there? Do you look at insider trades first and go from there?
This is a great question. I’m an amateur (who hopes to someday go pro!). I usually get my initial ideas from other investors. I spend a lot of time reading investment theses. If I like the company and its competitive position, I add it to my watch-list, then perform my own regular research updates. Blogs, investment pitches for conferences, podcasts, magazine articles – all are great resources to discover new companies which have attractive economic characteristics.
An example is Input Capital, a canola streaming company based in Canada. I initially heard about the company from reading a blog article, approximately 18 months ago. The article piqued my interest, and from there I begun to conduct my own research. Over the course of the 18 months, I gained an understanding for the business and drivers of value. Then, in Nov. 2015, the price dropped over 40% in one day when it was revealed that 3 contracts were defaulted upon. I updated my research over the weekend, talked to management, then made it my largest position.
The danger of sourcing ideas on other’s work is that you may not do your own. But I think it can be a greater starting point for sourcing ideas, especially smaller, boring companies with little news or analyst coverage. Just make sure you resist the temptation to get lazy. I’ve gotten burned on that when I began investing in companies and not just ETFs. It was JC Penny. My investment was based on reading far too much into Ackman’s thesis and doing far too little of my own research. I made the mistake of confusing the number of slides with the quality of research. Not once did I, or Ackman for that matter, ask if JC Penny’s customers LIKED used coupons and buying items on sales. Neither of us did the necessary “scuttlebutt” of actually *GASP* talking to JCP customers. Lesson learnt: retail investing is a lot like political campaigning, it’s all about the ground game.
This is a great thread. I do a lot of what Ian talked about, but recently have started feeling that just reading investment pitches all day long isn’t the best idea. Not saying it shouldn’t be a serious tool in your arsenal, just I feel I need more balance. The old fashion way of just researching companies and industries where one can remain unbiased by outside opinion helps me recalibrate. Being able to maintain independence of thought is critical in investing. This might be obvious to some, but I figured I’d put it out there to see what the group thought.
We also need to a thread on investment process, a subject that is really fascinating to me. It’s an very individualized process that still can be honed by ideas from other investors.
Mr. Munger/Mr. Buffett would suggest that you start with the A’s and white-knuckle yourself through the 2,500 companies in Value-Line and Small-cap Value-Line. Any major library in the USA should have it online. Better yet, page through the hard copy at the library. The_In-Depth_Guide_to_Reading_a_Value_Line_Research_Report Now, many overseas readers may not have access to such a database, but some stock exchanges provide lists of companies.
Search is tied in intimately with your investment process which should contain:
Starting out with Value-Line is a great idea for a new investor. Eventually, you will have about 150 companies that are worth watching.
You can eliminate (with practice) many within seconds, but you will
A full discussion is here: THE SEARCH PROCESS
Go where it is cheapest:http://mebfaber.com/2016/02/25/ranking-global-stock-markets-on-valuation/
DEVELOP YOUR OWN STYLE LIKE CHARLIE WATTS
For you non-drummers out there–did you pick up the Charlie Watts pattern?
HAVE A GREAT WEEKEND!
We pick up from we were last: http://csinvesting.org/2016/02/11/analyst-quiz-part-ii/
Analytical point #1: CPI is a meaningless measure to determine the future dollar price of gold. CPI is an arbitrary government statistic. You are comparing gold in US Dollars (apples) with an index of oranges, grapes, raisins, etc.)
You must have mentioned this to stay employed at Ackman’s hedge fund.
CPI vastly understates monetary debasement Think Differently About Purchasing Power
The practical problems with price indexes such as the CPI are the issues of which prices are to be measured and what “weights” will be assigned to what goods. Another problem is deciding what to do about changes in quality. For example, what do you do when Apple introduces a new and improved iPhone at the same price as the previous version?
To deal with this, government statisticians systematically increase the weights for goods that are going down in price and reduce the weights of things are going up in price. If the quality of a good goes up, the statisticians “hedonically” reduce the price of the good.
Those sorts of adjustments do not seem fair to most normal people. If you are eating more ramen noodles and fewer lamb chops you can take little comfort in the fact that that the CPI is staying inside the Fed’s target range. Moreover, under the system of hedonic adjustments, every time entrepreneurs and engineers come up with better products for consumers at lower prices, the Fed takes credit for keeping inflation under control.
Why hasn’t the CPI picked up since 2008? https://mises.org/library/problems-cpi
The first thing to keep in mind is that the CPI is not an economic variable. It is a statistic that at best gives an inaccurate picture of an economic phenomenon: inflation. To calculate the monthly CPI, the US Department of Labor takes a weighted average of prices of various things that consumers purchase, and then its statisticians try to figure out the various proportions of different items in a “mythical” household budget. For example, the statisticians may hold that housing costs are 30 percent of household expenditures, food costs 20 percent, gasoline another 15 percent, and so on.
Analytical point #2: Gold maintains its purchasing power over
L O N G periods of time. Gold is the “golden constant” (Jastram). Look at research over the past 600 years: : RoyJastram-TheGoldenConstant
Jastram arrived at four conclusions:
In contrast in the late twentieth and early twenty-first century it was the market price of old which adjusted so that the purchasing power of gold relative to general prices returned to a constant.
Other main points to glean are:
In choosing the title The Golden Constant, Jastram did not imply that there was an absolute mathematical rule to which the purchasing power of gold adhered, but rather that gold exhibited the qualities of constancy in a wider sense. The fact that gold is almost immune to corrosion, rust or decay is one element of this. The metal has an enduring attraction for humankind. Also, the purchasing power of gold, while in fluctuation, returns over the centuries and in different countries to a broadly stable level is testament to all these elements of its constancy. How many grams of gold to purchase cattle in Rome vs. today in Cedar City, Utah? Not much difference despite the thousands of years of time and the different local.
You then advise Ackman that if investors lose faith in Central Banks’ ability to manipulate both credit and investors, then gold might be a safer place to hold wealth than dollars. You then instruct Mr. Ackman to carefully view this video.
In all seriousness, you should have learned two concepts:
Be careful in comparing data sets. CPI is useless.
If you choose to research an asset or money, then study ALL its history. Don’t look at just the most recent past.
The key to booms and busts https://mises.org/library/malinvestments-and-interest-rates
HAVE A GOOD WEEKEND!
DKAM-ROE-Reporter-January-2016 High ROE Companies in Canada
Screening_Weed out the losers
So that is the thinking behind my style of deep value investing: swimming against the earnings obsessives to pluck out liquid-asset-rich companies with nimble service-focused business models. Then buying them when no one else will, and selling them when everyone else wants them. –Jeroen Bos
Deep Value Investing – Jeroen Bos A great series of case studies of balance-sheet investing
Deep_Value_Investing_Appendix The financials to supplement the book of cases above.
valuewalk-article1_1 His deep value approach has severely LAGGED the small-cap index AS YOU WOULD EXPECT in the latter stages of a bull market.
At a minimum you will learn more about how to analyze balance sheets.