Tag Archives: Value Vault

Value Vault Videos and Book Folders

ARROW Oct 23

 

VALUE VAULT VIDEOS AND BOOKS

 
Books

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Bruce Greenwald Valuation and VI Videos 2005

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Bruce Greenwald Value Investing Class Videos 2010

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                     Bruce Greenwald Videos Part two

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Greenblatt Videos

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Corp. Finance

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Distressed_1

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VV_CS_Inv

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HAVE A GOOD WEEKEND!

Plenty here to keep anyone busy. Post your notes/thoughts/questions.

 

INVESTING BOOKS & More from the VALUE VAULT

BOOKS

 Click on books and download as you wish
Books
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Accounting, Investment Banking and Business Analysis books.

But don’t forget to do your reading on history, economics and politics to round out your education. A monkey can do a NPV, but figuring out the assumptions–now that takes a lifetime of study.

Value Vault Books on Distressed Investing

DISTRESSED

Just Click on the Link Below and Download.

Moyer’s book is my recommendation.

Distressed_1
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VALUE VAULT Distressed Investing; Readers’ Questions

Readers’ Questions 

As I rush to help a friend evacuate from coastal Connecticut, I will reply in terse fashion to readers’ questions.

Q1: When to sell?

A: If I only knew the answer to that….  The standard answer is when you can replace the investment with a cheaper one (bigger discount to intrinsic value).   But no one size fits all. If you buy a cigar butt, you will have to sell as fast as you can when it reaches your intrinsic value range. Time is not on your side. If you own a compounder, then be patient as value grows and the company continues to have reinvestment opportunities.  Each investor has their own psychological profile. I cry during cartoons, so I need more security. I will sell on a scale up so I have fewer regrets. I give up some upside for less downside.  There is no one key to selling.   Also, note you have to consider taxes and reinvestment risk.

Q2: What am I reading?

Cycles and Crises by W. Ropke which provides a history and analysis of the past hundred years of boom and bust (A Jim Grant favorite).  How to Make Money with Junk Bonds by Robert Levine (Rec. by Greenblatt). Very basic, but a good short primer on Junk Bonds patterned after The Little Book that Beats the Market, I don’t think intermediate or advance investors would gain as much from reading this book. Moyer’s book in the Value Vault (see below for link) is the best, IMHO.

My recommendation for students of business development, management, competitive advantage and history is:

The Great A&P and the Struggle for Small Business in America
Marc Levinson

Q3: What do I think of Investing in Dolby (DLB)?

I don’t give investment advice because it would violate the spirit of this blog which is to be independent. My opinion won’t matter; only the clarity and accuracy of your analysis and grasp of the facts.  Yes, investing can be lonely and uncertain, but we must embrace our ignorance.  Go through your checklist and write down your reasons for why you have an edge against the sellers. Obviously DLB has a patent cliff it is facing so what does the market price currently imply? Why are insiders selling? Is that unusual based on past history? Can you normalize this business?  Excess cash is good but what will mgt. do with it? Find out what the short sellers and those who are selling have to say (Scour the Yahoo message boards). Can you refute their arguments with evidence. If you can’t, just walk away.

VALUE VAULT for Distressed Investing

Distressed_1 (You can only download contents from this folder)
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The Graham Folder-Example of New Organization of the VALUE VAULT

Reorganization

The word reorganization is a euphemism to anyone who has visited the VALUE VAULT. What organization?  I rushed to place as much material and readers’ contributions into the VAULT for others.  But with more new material, I must organize the material for faster  and EASIER access.

I will organize in the categories of SEARCH, VALUATION, PROCESS, INVESTORS, and YOU.

Within the INVESTORS folder, there is a folder, GRAHAM. The contents are listed below.  I will slowly be reorganizing the VAULT folder by folder while adding new material. Thoughts are welcome.

INVESTORS
Graham
The Intelligent Investor by Ben Graham and Ed by Jason Zweig
Security Analysis_First Edition_1935
Security Analysis_Second Edition_1940
Security Analysis_Sixth Edition_2010
Rediscovered Graham Lecture, Supplement to 1940 Sec. Analysis
Interpretations of Financial Statements by Graham
Graham Concepts Superinvestors of Graham and Doddesville
How to Think Like Ben Graham and Invest Like Warren Buffett
Building a Profession
Chapter 20 of Intelligent Investor: Margin of Safety
Beta vs. Margin of Safety_Mauboussin
A Study of Market History Through Graham and others
Lessons_Ideas of Benjamin Graham_AIMR Pub
Tweedy The Little Book of Value Investing
Mizrahi How to Get Started in Value Investing

Suggestion

If you only had an hour to learn “value” (the hunt for bargains) investing, you should read Chapters, 8 and 20 on “Mr. Market” and “Margin of Safety” in The Intelligent Investor by Ben Graham.  If you wish to go further, then absorb the book. Graham’s book on the Interpretations of Financial Statement is a good primer for you to read alongside the annual reports of companies that interest you. For the hardcore, tackle Security Analysis. Beginners can step back and read the books from Chris Browne (Tweedy) and Charles Mizrahi. Graham’s star student, Warren E. Buffett, who further refined the value investing approach has a separate folder in the Value Vault.

Warren Buffett speaks about his mentor, Benjamin Graham, http://www.youtube.com/watch?v=HCZMs01W0KM

Marty Whitman on Graham: http://www.youtube.com/watch?v=YDXQwlOpUBE

Intrinsic Value: http://www.youtube.com/watch?v=2SL37GwA6Sc. You should be able to explain The Intelligent Investor to a group of students if you read the book carefully.

Best of Value Investing: http://www.youtube.com/watch?v=2SL37GwA6Sc

Housekeeping; Analyst Position and Finding an Analyst’s Position

We’ve had cloning in the South for years. It’s called cousins.–Robin Williams

Housekeeping

Once the Value Vault has been reorganized, I will send an email with a key to all who have received a key before. Meanwhile, I will send out keys to the people who have requested entry into the video vault for 2010 Greenwald Lectures. Thanks for your patience.  Also, I will fix the comment section per a reader request so it is easier to follow a discussion.  The blog will become better organized as we move forward.

Tilson Posted a Job Opening for an Analyst’s Position

Don’t forget to visit www.tilsonfunds.com to see his writings on value investing. To read his funds’ investment letters–username:tilson and password: funds.   The Tilson Fund has had a difficult year (-20% or so) in 2011. Hopefully, 2012 will bring sunshine.

From Whitney Tilson:

A friend of mine who’s really knocking the cover off the ball is looking for an analyst:

Greenwich-based hedge fund seeks an analyst who is smart, hard-working, honest and eager to learn and contribute. The candidate should be able to efficiently analyze businesses across multiple industries and have done so professionally for three or more years. He or she should have an MBA or have earned their CFA designation. The candidate should also have a personal or professional track record that demonstrates strong analytical and stock-picking ability.

Our firm employs value-based, event-driven strategies with a macro overlay. The Fund has had a strong start, rising over 400% in its first three years since inception in 2009. Our company is seeded by a well-known and highly-respected hedge fund icon.

Please direct inquiries to analystposition99@gmail.com

Finding An Analyst Job

A reader sent the following email seeking advice:

Here is the situation in a nutshell: my goal since high school has always been to break into some fund where I can do research every day but due to a lapse in judgment and practical financial needs, I took a job as a management consultant right out of college. I’ve been working at this job for two years now and while it has given a ground-level perspective of how some large businesses are run, it has been predominantly a waste of time (pleasing clients, building pretty power points, etc.) and I am very eager to get out.

However, I have found it very difficult to break into the investment management/hedge fund world. I am trying to figure out how to land an entry-level research role at a fund, preferably value-oriented.

OK, readers may have their own suggestions and ideas which I am happy to post.  There are many ways to get to heaven (become a good investor) so working at a fund is not the only way. But I will return with some ideas later after I post the Coors case study and new case study this afternoon.  Let’s think about a good approach to finding a job as an analyst to help this reader.

VALUE VAULT; Moats, Coors CS Question, FDR & Obama, Grace under Pressure, Go Back

Reality is just a crutch for people who can’t cope with drugs.–Robin Williams

I attribute my success to seeing the world as it is, not the way I would like it to be–Warren Buffett (attribution by a friend)

Housekeeping

In the VALUE VAULT I split up the videos into two major sections—the VALUE VAULT does NOT include the 2010 Greenwald Value Investing Class Lectures. Those 21 videos (1 semester) are in a separate folder. If you want the key to THAT folder then email aldridge56@aol.com and ask for 2010 Videos. When someone new asks for keys to the VALUE VAULT, I will automatically send keys for all separate folders. The vault will become better organized, manageable, and easier to access. The next step will be to categorize this blog.

Buffett and Moat Investing

I do not recommend this book since I have not read it, but want you to be aware of this video on Moats and the book about Berkshire Hathaway Businesses Competitive Advantages http://www.youtube.com/watch?v=kizM8UaqF_4

If anyone reads and likes the book, please post your comments. Thanks.

The author of the Moat book lectures on valuation models: http://www.youtube.com/watch?v=tp3FLQxcbws&feature=related

Valuation in a nutshell: http://www.youtube.com/watch?v=rSNNBrt-XfE&feature=related.

Of course, perfect in theory and difficult-to-impossible in practice. The point is to remind us why we are studying strategy—to understand the competitive advantages or lack thereof in the companies we hope to value.

Coors Case Study

Would anyone like to comment on what you learned? What numbers jumped out at you from Coors’ operations as it expanded nationally?  If you saw those numbers of competitors’ market share, what would you do as the management? What is the structure of the industry now and who has the dominant Economies of Scale or “EOS”?  What did management lose sight of?

By Wenesday, I will post the short write-up.

More on strategy

Why companies aren’t investing

Profits are strong, interest rates low, and bargains abundant, yet many companies aren’t investing. Uncertainty—about the economy, markets, and economic policy—no doubt ranks high among the reasons. But decision biases play a surprisingly important role.

http://www.mckinseyquarterly.com/newsletters/chartfocus/2012_01.htm

Comparing FDR and Obama

Our Economic Past | Burton W. Folsom Jr.

Comparing the Great Depression to the Great Recession

June 2010 • Volume: 60 • Issue: 5 •

Interesting parallels to FDR and Obama. The author doesn’t mention that our fractional reserve banking system is inherently unsound. The government policies (actions of the Federal Reserve) exacerbate the boom and resulting bust while the government actions to alleviate the downturn simply prolong and deepen the agony. The mal-investment has to clear and the structure of production has to have time to adjust to changed time preferences of the consumer.

President Obama has often remarked that the Great Recession (2008–10) is the greatest economic crisis since the Great Depression. It’s interesting to study the many parallels between the Great Recession and the Great Depression.

Causation. The main causes of both crises lie in actions of the federal government. In the case of the Great Depression, the Federal Reserve, after keeping interest rates artificially low in the 1920s, raised interest rates in 1929 to halt the resulting boom. That helped choke off investment.

The seeds of the Great Recession were planted when the government in the 1990s began pushing homeownership, even for uncreditworthy people, with a vengeance. Mortgage-backed securities built on dubious mortgage loans became “toxic” when the housing market took a downturn, and many American banks verged on collapse. The government’s urgent desire to bail out various banks and corporations created uncertainty and instability, and this may have widened the recession.

Massive federal spending. Presidents Roosevelt and Obama responded similarly to the crises. They talked about balancing the federal budget, but instead resorted to massive spending. Earlier presidents, like Cleveland and Harding, cut spending when the nation was threatened with economic hardship. Hoover was the transition president, running deficits with record spending on public works, the first federal welfare program, and the first large-scale federal farm program. The results were budget deficits and 25 percent unemployment.

President Roosevelt became Hoover on steroids. FDR and his advisers, despite some early moves to cut spending and control the deficit that Hoover left behind, decided that ever-larger federal spending would trigger economic expansion and pull the country out of its economic slump. Thus Roosevelt began the Agricultural Adjustment Act (AAA), which paid farmers not to produce, and then expanded Hoover’s Reconstruction Finance Corporation, which provided bailout money to large banks and corporations. He also expanded spending on public works and targeted large subsidies to various special interests.

President Obama, who often cites FDR, followed his example of targeting spending to interest groups. He signed into law a $787 billion stimulus package that sent tax dollars to various cities and voting groups across the nation. He later supported an expensive “jobs bill” that would send money into key congressional districts. The President also campaigned for a cap-and-trade bill and universal health coverage, both of which promised to increase the federal debt substantially. In fact, the increase in federal debt under Obama and Roosevelt is similar. The national debt more than doubled in Roosevelt’s first two terms, and it is projected to double again in eight to ten years.

Spending fails. After the large increases in federal spending under Roosevelt and Obama, unemployment remained high. In the 1930s unemployment fluctuated, but recovery never occurred. In April 1939, toward the end of Roosevelt’s second term, unemployment was almost 21 percent. Treasury Secretary Henry Morgenthau complained, “We are spending more than we have ever spent before and it does not work.” Nonetheless, almost all of FDR’s programs continued—usually with annual budget increases.

When Obama took office unemployment was at 8 percent, and in the next year it steadily increased to over 10 percent before falling back just under that mark. He and his advisers were puzzled that large spending increases did not slash unemployment, and he argued that his spending was saving jobs that would otherwise have been lost.

Critics of Roosevelt and Obama insisted that it was impossible to spend our way out of a recession. During the New Deal, economics writer Henry Hazlitt observed that public-works spending destroyed as many jobs as it created. “Every dollar of government spending must be raised through a dollar of taxation,” Hazlitt emphasized. If the Works Progress Administration builds a $10 million bridge, for example, “the bridge has to be paid for out of taxes. . . . Therefore for every public job created by the bridge project a private job has been destroyed somewhere else.”

Tax rates raised. During the Great Depression Roosevelt raised both income and excise taxes. In 1935, with FDR’s push, the top marginal tax rate hit 79 percent. Few paid that rate, but thousands of Americans were in the 50-percent bracket. Entrepreneurs had to hand over more than half of any income above a certain level. Facing disincentives to make capital investments, many entrepreneurs used their wealth cautiously—investing in tax-exempt bonds, art collections, and foreign banks. Little wealth went into creating jobs, so high unemployment persisted. During World War II FDR raised taxes further, to 94 percent on all income over $200,000.

Most of the tax hikes under Obama are planned for the future. Thus far we have seen proposed tax hikes on products such as cigarettes, liquor, plane tickets, and soft drinks. He wants the tax cuts enacted under President Bush to expire. That will mean a spike in the capital gains tax, the income tax, and the estate tax. As FDR showed, tax hikes eventually follow large spending increases.

Scapegoats. The sequence of massive federal spending followed by a lack of recovery plus tax hikes is poison for a politician. Therefore Roosevelt sought scapegoats to explain his failure. Wall Street bankers were his favorites. He called them “economic royalists” and blamed them for causing the Great Depression. He also blamed America’s top businessmen for instigating a “capital strike”—they were refusing to invest in order to make him look bad. FDR then launched IRS investigations of key Republicans and used the newspapers to encourage hostility toward these targets.

Obama has followed FDR’s playbook of attacking Wall Street bankers and various corporate leaders. He condemns the raises these bankers sometimes receive and the profits earned by some large oil companies and health insurance companies.

Such emphasis on “class warfare” may be an inevitable part of redistributing wealth from one group to another. Perhaps Roosevelt and Obama believed that by increasing envy and resentment toward some Americans, they could capture the votes of larger groups of Americans and thereby win reelection (in FDR’s case there is evidence of this). True, this strategy guarantees that many wealthy Americans will attack any president who uses class warfare, but the campaign for redistribution will always supply large amounts of money to subsidize favored groups.

When Roosevelt was reelected in 1936 Senator Carter Glass, Virginia Democrat, admitted, “The 1936 elections would have been much closer had my party not had a 4 billion 800 million dollar relief bill as campaign fodder.”

Obama may be hoping his “stimulus” package and his health insurance bill will generate similarly large support among Americans receiving federal benefits and that these voters will go to the polls to overwhelm those who are paying the bills.

Grace Under Pressure

The FAA has released the audio tapes and transcripts of the radio communications between Flight 1549, the US Airways jet that crash-landed in the Hudson River on Jan. 15, 2009 and the various air traffic controllers in the area on the afternoon of the accident.

Lesson for investors: Focus on what YOU can control in an often uncertain and random world. http://www.youtube.com/watch?v=YAD5xBgPTWQ&feature=related

I Wanna Go Back (Eddie Money on Sax)

High interest rates, the 1980s, let’s go back in time: http://www.youtube.com/watch?v=EbkowHt45yg

Technical Solution for Value Vault

A reader sent me this from the yousendit.com

Technical Staff:

Hi,
I am sorry I did not get back to you sooner. This issue is still being looked into, the initial investigation shows slowness and we are trying to track down the root cause of the problem. This folder has been shared with several users and contains massive amount of data (9.5GB) and that could be one of the reasons for this slowness. While this is being investigated, would it be possible for you to contact the sender and request them to split the content in different folders and share them separately?

Let me know if you have additional questions or concerns.

Regards,
Priya YouSendIt Technical Support

OK! I will work on this. I already suspected that the Value Vault was getting too big especially after uploading 21 videos last night.  Let me find out how small the folders should be, etc., and I will post again when the reorganization has taken place. I will do my best to have this done by Monday as long as my Cuban coffee holds up.

Thanks for your patience. Don’t worry, all the videos will be available.

After all this, I agree with Dwight:http://www.youtube.com/watch?v=zWiEGE1UKEs

VALUE VAULT ACCESS ISSUES

What happens if you get scared half to death twice? Steve Wright

Problems Accessing Value Vault

Several of you like this reader have had problems opening the folders to the value vault.

A Reader:  I hope you are doing well.  I find your blog extremely useful.   I was a student of Prof. Greenblatt’s at Columbia, but I completely agree when you say you can only become a better investor with constant practice, and that just going to an MBA program won’t make you a better investor.

I have had trouble accessing Value Vault for more than 3 weeks now.  I contacted them and they told me that they were working on the fix.  Several other people have begun posting the same problem on their community threads, so hopefully they will take notice and fix it soon.  I have been so desperate to access the files (as I am in between jobs and want to make full use of my time), that I have often waited for several hours to see if the files eventually show up.

Would you be able to check with them and express displeasure on behalf of all us who read your blog and are having problems accessing the files?  Hopefully, they can fix it soon.

My reply: I am so sorry for these problems. My access seems to be fine, but others have had the same problem and have been told that the problem is on www.yousendit.com’s end. They are in search of a fix.

What I am doing now is waiting for them to call me back. If I don’t hear by this evening, I will call again and find out the status of the fix.  Either one of two things will happen within the next week or so:

  • The problem gets resolved through www.yousendit.com. Perhaps for the hardcore users, I could set up an email list to send links to all the videos and for any updates–I will need to research this over the weekend.

or

  • I move all the videos and files to another service; I just want to make sure that I am not moving from one problem (access issues) to another.

Hopefully, this will be resolved shortly. I will push from my end.

Update on VALUE VAULT; Questions from a Reader; Apple and Strategic Logic

A lot of companies have chosen to downsize, and maybe that was the right thing for them. We chose a different path. Our belief was that if we kept putting great products in front of customers, they would continue to open their wallets.

A lot of people in our industry haven’t had very diverse experiences. So they don’t have enough dots to connect, and they end up with very linear solutions without a broad perspective on the problem. The broader one’s understanding of the human experience, the better design we will have.

Again, you can’t connect the dots looking forward; you can only connect them looking backwards. So you have to trust that the dots will somehow connect in your future. You have to trust in something – your gut, destiny, life, karma, whatever. This approach has never let me down, and it has made all the difference in my life.

An iPod, a phone, an internet mobile communicator… these are NOT three separate devices! And we are calling it iPhone! Today Apple is going to reinvent the phone. And here it is.

And it comes from saying no to 1,000 things to make sure we don’t get on the wrong track or try to do too much. We’re always thinking about new markets we could enter, but it’s only by saying no that you can concentrate on the things that are really important.
–Steve Jobs

Update on the VALUE VAULT

(contact: Aldridge56@aol.com with VALUE VAULT in subject line for the key)

I uploaded 21 videos of 2010 value investing lectures into a sub-folder in the VALUE VAULT.  The VAULT seems cluttered so unless anyone objects, I will place non-videos into folders with sub-categories for easier searching. I will choose a quiet time to work on the vault—probably Sunday.

If you are having trouble opening the folder, please contact www.yousendit.com customer service at 888-535-9442 or (outside the USA) 1-408-385-8491 and email me if the problem has or hasn’t been fixed.  I will #$%^&*! find out the problem. I am having no issues accessing the folder or videos so far.

If anyone has an idea for a more accessible storage option, let me know.

Question from a Reader

I’ve just started digging into the Competition Demystified PDF (in VALUE VAULT) and came across this passage (also mentioned in the “Strategy is Local” PDF) and couldn’t help but wonder what’s changed:

“Apple’s experience stands in stark contrast. From the start, Apple took a more global approach than Microsoft. It was both a computer manufacturer and a software producer. Its Macintosh operating system anticipated the attractive features of Windows by many years— “Windows 5 = Macintosh 87,” as the saying goes. Yet its comprehensive product strategy has been at best a limited and occasional success, especially when compared to Microsoft’s more focused approach.”

This strategy of controlling everything (operating system, hardware, software licenses/developers, content delivery, etc.) is, according to Greenwald, a competitive liability, yet today, as Apple is the most valuable company in the world and the most successful tech company, it is the very reason given for their massive success, and the “special genius” of the recently departed Jobs.

What gives? Is Apple just a fad? Is Greenwald making stuff up? Or is there some other piece of this puzzle I am not considering?

The Reader follows up with: “I thought of another strategic element for Apple. I read this somewhere a few months ago, don’t remember where, but Apple basically made exclusive contracts with its various suppliers such that they guaranteed them large volume up front in return for them not taking orders from competitors, essentially (some arrangement like that).

This resulted in two things:

First, conferred a competitive advantage in supply to Apple because they were able to achieve lowest cost in production.

Second, accomplished the strategic goal of totally denying their competitors access to suppliers of similar quality/cost. This meant that the only way a competitor could create something of Apple quality would be to pay (and charge) a lot more for it. But Apple commanded a brand premium in the market place while the competitors did not. This would be a good example of the Jarillo principle of the premium company charging less than they could, forcing competitors who don’t command a premium to price near cost.

I think normally the issue of “what suppliers do we use and how do we contract with them?” would be tactical. But because Apple interfered with their competitors’ ability to compete by working with suppliers the way they did, this seems to be a strategic consideration as well.

My reply: Like a lecturer before an audience, I was hoping no one would notice that my fly was unzipped. The reader is mentioning the elephant in the room–did Steve Jobs read Prof. Greenwald’s Competition Demystified and just do the opposite–Apple has a closed system for hardware and software. Has Apple been successful?

There are a number of possible answers:

  1. Prof. Greenwald has missed something in his approach to strategy.
  2. Apple may be using elements of strategic logic to be successful like economies of scale, customer captivity, network effect, and patents.
  3. Steve Jobs may be a genius who invented an industry or product beyond the immediate scope of strategic analysis. In other words, you can’t analyze the reasons for success of someone who invents the cure for cancer or a process that turns an element into a resource. You can’t predict genius.

Who said strategic thinking would be easy. Let’s take our time to look at a problem from all sides and go through our strategic logic process. We will soon discuss the Coors case study and then move on to Chapter 6: Compaq and Apple in the Personal Computer Industry or pages 113-136 in the book. Once we have finished the book and all the cases, let’s circle back and study Apple’s current success.

One question that should slap you in the face, ”Why does Apple have such a low multiple of earnings and cash flow?” Perhaps the market does not believe that Apple can have real growth and/or the genius of Steve Jobs will no longer drive Apple’s future.

Should the government tell you how to live?

Freedom of choice: http://www.youtube.com/watch?v=A6a9549ZeqQ&feature=g-vrec&context=G22064f2RVAAAAAAAABA

Personal Prejudices

We all have our prejudices. Here is how to deal with them.

Prejudice: http://www.youtube.com/watch?NR=1&feature=endscreen&v=9aVUoy9r0CM

Sensitivity Training: http://www.youtube.com/watch?v=iliNaspGVDg&feature=related

More posts to follow…………