My BEST DAY EVER!

 

Crowded Pit

My Best Day Ever.

No, I am not talking about today, though all my stocks are rising like soybean futures in an August drought.  Why?

http://www.economicpolicyjournal.com/2013/02/s-500-off-to-best-start-since-97.html

I don’t know what the future will bring, but I do know risks are rising. Values are out there, but with more uncertainty attached.  Experience has taught me to deal with excruciating pressure such as whether to buy the yellow Lamborgini Yellow

or the red Ferrari. Red

I am thinking of putting in a fur-lined sink or is that too much? How about I finally do something for the boy scouts. Boy Scouts I’ll hire a bus to New York City for a visit here:

Back Twenty-Four Years Ago in Chicago

But I remember the best day of my life 24-years ago back when I was a young pit trader on the Chicago Open Board (Mid-Am Exchange) doing this, Chicago Pit

when–within 24-hours--I went broke, my fiancé nixed our wedding day, and my suicide attempt failed. Oh, and the Cubs lost again.

Never would adversity teach so much to an arrogant, ignorant, selfish, and insane twenty-two year old.  To be continued………………

Have a Great Weekend!

PS: Three-minute kindergarten course on investing. It is never too late to get started.

Video Lecture Course on Security Analysis and The Intelligent Investor

Blogger

http://www.buffettsbooks.com/value-investing-introduction.html

This course may be a good review for beginners, but I also will enjoy viewing these when I have time to breathe. Let me know if you find these lessons of value.

Introductory Lessons to Value Investing

Course 1 Lesson Plan

In this Course, you’ll learn these three course objectives:

  • Unit 1 – Intro to Value Investing – Stocks
  • Unit 2 – Intro to Value Investing – Bonds
  • Unit 3 – Intro to Value Investing – Mr. Market

Intermediate Lessons to become an Intelligent Investor

             Course 2 Lesson Plan

Course 2 Lesson Plan

In this Course, you’ll learn these five course objectives:

Unit 1 – How Intelligent Investors manage risk

Unit 2 – How Intelligent Investors pick bonds

Unit 3 – How Intelligent Investors pick stocks

Unit 4 – How Intelligent Investors pick preferred shares

Unit 5 – How Intelligent Investors pick manage cash flow

Advanced Lessons to Security Analysis

Course 3 Lesson Plan

In this Course, you’ll learn these five course objectives:

Unit 1 – When does Warren Buffett Sell

Unit 2 – Understanding the importance of Return on Equity

Unit 3 – Understanding the importance of Volume

Unit 4 – How to calculate and find financial terms

Unit 5 – How to use stock screeners

Unit 6 – What is Goodwill

Unit 7 – What is Owner’s Earnings

 

 

 

Is this Acceptable?

Backstab

http://www.tilsonmutualfunds.com/reports.html

A reader sent the above link. Click on it and then download the Annual Report for the Tilson Focus Fund, See pages 10-12 discussing the year’s results.

also: TILFX-Fact-Sheet. Why has the fund generated this performance?  What would you advise a client who is in this fund? Note that the money manager has said that he admires Warren Buffett’s letter to shareholders. Compare and contrast his letter with Buffett’s past letters.  Do you understand the results achieved and why?  Can you describe what principles are used to construct such a portfolio.  Note the portfolio!  Comments?  Anything hit you in the face?

I will pay anyone their asking price to give me a cogent explanation how this is acceptable.

Glenn H. Tongue – Portfolio Manager, Tilson Focus Fund

Mr. Tongue is a general partner and co-manager of the Advisor and is the co-manager of the Tilson Growth Fund, LP, the Tilson Offshore Fund, Ltd. and the T2 Qualified Fund, LP. Prior to becoming a general partner and comanager of the Advisor on April 1, 2004, Mr. Tongue spent seventeen years working on Wall Street, most recently as an investment banker at UBS where he was a Managing Director and Head of Acquisition Finance. Before joining UBS, Mr. Tongue worked at Donaldson, Lufkin and Jenrette (“DLJ”) for thirteen years, the last three of which he served as the President of DLJdirect, an on-line brokerage firm. During his tenure there, he oversaw both DLJdirect’s IPO and ultimate sale. Prior to DLJdirect, Mr. Tongue was a Managing Director in the Investment Bank at DLJ, where he worked on over 100 transactions aggregating more than $40 billion. Before working on Wall Street, Mr. Tongue managed sales, marketing and certain operations at Blonder-Tongue, Inc., a manufacturer of pay television and cable television distribution equipment.

Mr. Tongue received an MBA with Distinction from the Wharton School of Business and received a Bachelor of Science in Electrical Engineering and Computer Science from Princeton University. He serves on the Board of All Souls School, an early childhood educational facility, and lives in New York, New York.

Valuation Case Study HVAC

Supporting Role

The study of the psychology of speculators is as valuable as it ever was. I think the clearest summing up of the whole thing was expressed by Thomas F. Woodlock when he declared:”The principles of successful stock speculation are based on the supposition that people will continue in the future to make the mistakes that they have made in the past.” –Jesse Livermore

What Would You Pay for This Business? (Thanks to a Reader)

HVAC

or read this pdf and think about valuing this business. What is the source of the competitive advantage for this business? Lessons for other businesses?
Then if you want more perspective go read the comment section to learn more.
There are case studies all around us.
…So what price would you pay and why?
I have Hired A New Portfolio Manager

I must spend time searching and researching, but someone has to manage the account while I’m away. Pray for me.

ValueUncovered Philosophy; Treat Everything as a Case Study

Invesment-Strategy-Blog11

Treat Everything as a Case Study (Thanks to a reader)

I was driving past a Volkswagen dealer during a 15-hour drive from Miami to New Orleans when my 9- and 10-year-old kids excitedly pointed out the old Beetle that was parked alongside a row of brand-new models. Ah, yes, I said, a clear case of brand reinforcement through product differentiation: The odd thing stands out. At another point in the trip, their $8 headsets broke at the plug. We analyzed this as a case of defective design, probably the result of poor cost analysis.

The sight of gas pumps whose nozzles were covered with bags was a case of poor demand forecasting within the supply chain. Then we got talking about the odometer on my Nissan Pathfinder: Is a car that can go 300,000 miles a case of over-engineering or TQM excellence? It was a debate worth at least 40 miles.

It might be obvious by now that I had been playing HBR podcasts practically nonstop on that journey. If you listen to 50 consecutive business podcasts, as we did, everything starts to look like a business case study. Your way of seeing is transformed forever. You develop the Case Method third eye.

You start to question everything, and your questions start to disconcert people, just as Socrates’s questions upset the targets of his inquiries. But you must persevere. Questions help you connect the dots.

The security-company technician who was troubleshooting an alarm at my house discovered that the system wasn’t reliably transmitting to the local cell tower and needed to be replaced. I questioned him: Why wasn’t it connecting? The signal was too weak, he said. Then the zinger: Why did the company not measure the signal strength before installing the alarm in the first place?

A well-known furniture company with a nationwide network of showrooms said a chair I had ordered would take 12 weeks to arrive. Why so long, when it takes just four hours to build a car?

A colleague was setting up a PowerPoint presentation at work. Why PowerPoint? Why not Prezi or Keynote or SlideRocket or some other solution with potentially greater impact?

These questions hung in the air, unanswered, as do most of those I find myself asking during the course of a day, either to myself or whoever is with me: Why don’t all phone companies use the same frequency bands so business users can take their phones abroad? Why, with the advent of in-memory big data and high-frequency trading, can’t banks clear my personal stock trades instantly?

Often, the questions lead to debates. Just ask my kids: We debated everything (and still do). Is it better to amass frequent-flier miles or use them as you collect them, in case the carrier goes out of business? Is a supermarket’s “Buy one get one free” promotion a loss-leading marketing exercise or a tactic for achieving necessary volume? Can a product placement in a movie undermine brand credibility — eg, would James Bond really drink Heineken?

Ideally, the debates lead to imaginative problem solving.

Do this on your own for a while, or with your kids, and pretty soon you’ll sharpen up your questioning and debating and imagining skills. By adopting the “Everything is a case study” mindset and seeing the world through the Case Method third eye, you’ll learn to filter out the disinformation that life throws at you and uncover startling insights.

You’ll also increase your effectiveness at questioning your company’s strategies, processes, procedures, and methods of data collection. You’ll be able to grow in your ability to think about what you don’t know, rather than accepting the business-as-usual mentality.

This will help you assist your company in finding innovative solutions. And it might be good for your career. After all, CEOs hate canned, staid, boring, predictable answers to business problems (just as business professors hate canned, staid, boring, predictable responses to business cases). They crave creative, adaptive, innovative thinking.

Would the “Everything is a case study” view of the world have helped Eastman Kodak executives think through digital technologies earlier? Would it have prevented leaders in the British motorcycle industry from ignoring the commuter-moped market in the 1970s? Would it have stopped Xerox managers from showing off the company’s innovative technologies to the world before commercializing them?

Maybe. It certainly would have made their family car trips a lot more fun.


Original Article: http://feeds.harvardbusiness.org/~r/harvardbusiness/~3/w95-3LZKmRE/treat_everything_as_a_case_study.html

Managing Your Time

Distract

The additional rise of this stock above the true capital will be only imaginary; one added to one, by any rules of vulgar arithmetic, will never make three and a half; consequently, all the fictitious value must be a loss to some persons or other, first or last. The only way to prevent it to oneself must be to sell out betimes, and to let the Devil take the Hindmost –Anonymous from the book by Edward Chancellor.

My portfolio is on fire. Every stock up 1/4% to 2% today. Thank you Mr. Bernanke for the manipulated boom and punishing war on savers! I wish my IQ was rising as fast. This is every investor’s nightmare, you might have to sell as full value is reached and your cash hoard piles up. Meanwhile clients are begging you to put more money to work.  I miss the dark days of 2009 when clients would sob into the phone, “Will my stocks EVER go up?”  Now I beg, “Will fear EVER return.” These are grim days for the value investor.

I look and look so I need HELP in managing my time:

http://abetterlife.quora.com/How-to-master-your-time-1

 

Value Quant Investing; Herbalife; Apple; Reader’s Question

NERD

I have started reading this book mentioned here:
 
I can’t recommend the book yet, since I have a long way to crawl through it. The reading is dense with many statistical studies and numbers.
Herbalife is a Fraud, Right?

right?

http://turnkeyanalyst.com/2013/01/herbalife-hlf-is-it-a-fraud-not-likely/

 

ackmanfight
One set of tools we describe in our book Quantitative Value, is how to apply statistical tools to identify manipulators, frauds, and/or potential by I Want This”
“More money…has been stolen with the point of a pen than at the point of a gun.”
— Warren Buffett, Chairman’s Letter, 2000.
Three basic categories of risk for permanent impairment of capital
  1.    Financial Statement Manipulation  – financial statements fail to tell the whole truth about a company’s financial health/condition.
  2. Fraud – misrepresentation made that may result in unauthorized benefits to an individual, the firm, or a third party.  Affected by opportunity and pressure.
  3. Financial Distress or Bankruptcy – when a firm has difficulty or cannot meet its obligations to creditors.
Tools actually applied:

What do the quant models say?

As of December 31, 2012, the quant model recommended purchasing Herbalife. The firm is very high quality and became excessively cheap after Ackman came out with his “short news.” My guess is Loeb bought our book over the holidays, read it, and then was determined to by I Want This”
How did the Fraud/Manipulation/Bankrupty models stack up?

  Accrual measures relative to universe of stocks

  • Accrual Anomaly: 81 percentile
  • Net Operating Asset Anomaly: 18 percentile
  • Average: 49.5% percentile–basically, no issues
  • Manipulation prediction model:  Less than a 1% probability of manipulation; no red flags on any single  manipulation metric
  • Bankruptcy prediction model: The absolute probability of HLF going bust is low, but HLF scores at around the 89% percentile on this metric relative to the universe analyzed (stocks over $1.4B). This is something to watch, but the absolute probability of this occurring is very low (<1%)
Overall, the statistical results indicate that Loeb’s position is a better bet than Ackman’s position. Of course, this is in reference to the 12/31/2012 HLF stock price. As of yesterday, HLF is no longer included in the quantitative value screen because it has become too expensive.
APPLE
   APPLE BIG
 
I am not an expert on Apple (AAPL) but it makes a great case study on investor expectations. The price has fallen 38% from its all-time high in Sept. 2012 and now is at $450 or so. Apple has about 137 billion of cash equivalents with 69% of it overseas.  Adjusted for taxes, cash works out to $110 per share. The dividend is $10.60 per shares. Assume a cost of capital of 10% (Apple trades at a 10 pe) with a growth rate of 2%, the NPV of those dividends –$10.60 divided by (10% – 2%) or $132. Add that to the $110 and you have almost half the current price. The market doesn’t expect much from Apple.
If you learn anything from this post, it is this–avoid glamour and high expectations and seek out low expectations within your circle of competence.   A money manager on CNBC last Friday said he sold his Apple stock because the future product pipeline was uncertain.  Whoa!  And six months ago, it wasn’t?  Yet, people like him are running billions. Are you surprised that there has been a $300 billion change in valuation despite no to slight fundamental change in the company over the past 4 months?
 
A Reader’s Question
Would it be possible for you to share ‘Grant Interest Rate Observer’ publications on the blog or by email?
Have already spent enough money on MBA and partly on CFA also, can’t afford to spent hefty amount once again at this point in time.
My reply: I must obey the wishes of Grant’s copyright, plus you have to have a special PDF viewer.  I suggest that you sue your Graduate business school and the CFA Institute to get your money back. Why get a CFA AND an MBA?
Good luck.
Look: Harvard Money Manager:
Tilson Focus Fund
 

A Reader’s Question on Case Studies

Fall from Grace

On my good days, I think of Wall Street as one large promotion machine and on my bad days, I think of Wall Street as a den of thieves.–Jean-Marie Eveillard

Capitulation everywhere (risks rising): http://www.hussmanfunds.com/wmc/wmc130128.htm

A Reader’s Question on Cases

Hi John: Do you have a compilation of case studies that you’ve found extremely instrumental in learning from, that you’ve collected over time?

I got a lot out of reading your notes on Greenblatt’s classes, so thanks for
that. Last night I read a great small case study from Einhorn and I realized
that the few pages I read was far better than all the time spent studying for my CFA exams. Any good compilation you have would be amazing.
My reply:  Good question. Besides a relentless curiosity, learning how to learn is critical for your development. I believe subscribing to Grant’s Interest Rate Observer then downloading ALL 30 years of his letters while also downloading the SEC filings of any company he mentions over the past 30 years will repay you many times more than any MBA, CFA–if YOUR GOAL IS TO BECOME A BETTER INVESTOR.  You will learn financial history, valuation, about market psychology, business cycles. This is what I am currently doing. I have downloaded 1983 to 1993 newsletters. Now I just need the time to finish reading them!
OK, you don’t want to do that–shell out $990 or whatever–then go here:

Take the first link. Download a research report, look at the name of the company and date, then download the financials for the company mentioned and try to analyze the company BEFORE reading the report.   What do you see? If you don’t understand something, look it up in your finance or accounting textbook that you keep by your side. Then read the report–what did you learn or miss?   Note what you need to learn, then learn it, then go on to the next report.

Yes, this takes hard work, doggedness, and discipline, but you can do it. Not many will, so there is your chance to become great.

Spend time doing this rather than listening to CNBC. Yes, we all laugh when we hear Icahn call Ackman a loser (I was appalled and saddened), but how will THAT help you become a better invesstor?

I will post a link to more case studies tomorrow.   Good luck.

PS: I haven’t forgotten my reply to an investor seeking an answer on what to do with his/her money.

Improving Your Skills as an Investor (Reading about Apple), Indian Investor

Service Call

Reading Skills: Apple Case Study

Besides reading about great investors or pouring over your finance text books, you should broaden your perspective and read about industries and business founders. This reading–if done critically–will develop a more nuanced analysis of investments. I don’t know if AAPL is a buy or sell, it is in my too hard pile, but I found the two posts below from The Brooklyn Investor very informative. Do not underestimate the power of a genius. This case offers you a way to see how one investor applied his reading for greater understanding. A broad perspective of the world will help your investing. Remember that if you read the same sources, think the same way, then your returns will be at best average.

Comparing Apple’s leadership to Polaroid’s Founder

Interview with an Indian Investor

chetan_parikh

http://www.safalniveshak.com/value-investing-chetan-parikh-way-part-1/

http://www.safalniveshak.com/value-investing-chetan-parikh-way-part-2/

PS: Money Supply Aggregates are humming along at about a 11% clip. Bernanke is on fast cruise control.

MONEY SUPPLY GROWTH RATE HITS CRUISING ALTITUDE (www.economicpolicyjournal.com)
For the third week in a row, 13-week chained money supply (M2-nonseasonally adjusted)has come in at 11.4%. We, thus, may have hit a cruising altitude as far as annualized money printing.
Here’s the climb over recent weeks.
5.1%, 5.6%, 6.6%, 7.1%, 7.5%, 7.8%, 8.2%, 8.4%, 8.7%, 9.0%,
9.3%, 9.6%, 9.9%, 10.7% 11.4% 11.4% 11.4%

Sentiment: The Temperature is Rising……

Addiction

I made a wrong mistake! –Yogi Berra

What the #$%^@! Happened? http://performance.morningstar.com/fund/performance-return.action?t=TILFX

I am still working on my advice to an investor. Also, I am having to sell stocks that have reached my targets (ORI, NVS, MMM, etc.) so cash builds up and finding opportunities takes more digging.

The Bull Case: http://blog.haysadvisory.com/2013/01/it-takes-3-years-to-make-us-believers.html

http://scottgrannis.blogspot.com/2013/01/economic-fundamentals-drive-equities.html

Bears throwing in the towel–Will the market EVER go down:http://www.cnbc.com/id/100401616  (CNBC Video/Article)

And the scary Bear Case:  http://www.hussmanfunds.com/wmc/wmc130122.htm

http://seekingalpha.com/article/1134651-it-feels-like-the-dotcom-craze-all-over-again

The Bear Market of 2009 felt like this:

Doesn’t feel like that now does it?  My self inflicted advice is to look from the bottom-up, but do not become complacent. I am not calling a top, just realize that risks rise when fear declines. Maintain your standards.

Be careful out there!

Switch Sides:http://www.cnbc.com/id/42459309

Sentiment Survey Results as of 1/23/2013
The AAII Investor Sentiment Survey measures the percentage of individual investors who are bullish, bearish, and neutral on the stock market for the next six months; individuals are polled from the ranks of the AAII membership on a weekly basis. Only one vote per member is accepted in each weekly voting period.

Survey Results

Sentiment Survey
ResultsWeek ending 1/23/2013 Data represents what direction members feel the stock market will be in the next 6 months.
Bullish 52.3%
up 8.4
Neutral 23.4%
down 5.3
Bearish 24.3%
down 3.1
Note: Numbers may not add up to 100% because of rounding.


Change from last week:
Bullish: +8.4
Neutral: -5.3
Bearish: -3.1

Long-Term Average:
Bullish: 39.0%
Neutral: 30.5%
Bearish: 30.5%