tag:blogger.com,1999:blog-2149523431587168680.post8825540706413610565..comments2024-01-16T00:12:23.220-05:00Comments on Oddball Stocks: What's the upside?Nate Tobikhttp://www.blogger.com/profile/05660387777171986124noreply@blogger.comBlogger15125tag:blogger.com,1999:blog-2149523431587168680.post-8207392490986964322013-02-12T13:53:33.011-05:002013-02-12T13:53:33.011-05:00With KO, something you're missing is that Buff...<br />With KO, something you're missing is that Buffett obtains benefits that other investors don't: for example, his board membership, his friends on the board, and now his son on the board. Buffett has de facto controlled KO.<br /><br /><br /><br /><br />NRnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-19689952408448802492013-02-11T20:49:14.284-05:002013-02-11T20:49:14.284-05:00"What's odd to me is most value investors...<em>"What's odd to me is most value investors are attracted to the complex situations and shun the simple investments. I believe most of this is due to a pride factor, there is a lot more pride in being able to understand AIG or some complex balance sheet verses Logan Clay Products. Ultimately for myself I don't care about pride, I want the highest returns for the least amount of time."</em><br /><br />I have wondered about this attraction of many investors to complex investments as well. Perhaps it develops because some investors are at first mainly interested in a certain subject or industry, like mining, rare earth minerals or biotech. Only later on do they end up investing in a company in that industry.<br /><br />Also I think many investors are just convinced that in order to achieve great returns you need to "find the next Microsoft" or find some spectacular turnaround. Surely it can't be done if it is not complicated?<br /><br />It might also be that investors copy well known value investors like Buffett and Klarman. Most of the stuff they do I don't understand at all. But like you already mentioned in the post, size dominates their choices. I don't think copying Buffett's current strategy is the best idea for a small investor. To use the analogy of "The Snowball": Buffett is at the bottom of the hill and his snowball is huge, while many investors are at the top of the hill with a tiny snowball. A completely different situation that calls for a different strategy. Buffett talks about hunting elephants and that his elephant gun is reloaded. Someone on the Corner of Berkshire & Fairfax forums once posted after raising cash levels in his portfolio that his pea shooter was now reloaded. I thought that was both funny and a good way to think about this issue.<br /><br />Nice post! I never really thought of it in terms of the time value of research.Paulhttp://www.valueinvestingblog.net/noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-82315052549431034092013-02-11T19:45:45.101-05:002013-02-11T19:45:45.101-05:00I don't think it's necessarily just pride;...I don't think it's necessarily just pride; it's more that you want to be looking at the places that no one else is. Complex balance sheets are one such place where there are going to be a lot of people who just throw up their hands and walk away. Small obscure companies trading on the pinks and only distributing financials to shareholders are another. To me, tracking down financial reports of obscure unlisted companies sounds like a lot more work than reading the footnotes of AIG.<br /><br />Often I'll look at a really complex oppportunity even if I know I won't touch it just to stretch my skills a bit. I've found that if you look at the really hard stuff once in a while, the kind-of-hard stuff gets a lot easier. There is also something exciting about diving into a mess of a 10K and coming out with the realization that the company is drastically misunderstood and undervalued. Personally, I read financial reports as a hobby rather than to generate alpha (my account value is not large enough to justify the time I spend). While I'm not against picking up a vanilla net-net from time to time, it does tend to get a little boring after a while.Keithnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-45330754167031591922013-02-11T18:59:42.754-05:002013-02-11T18:59:42.754-05:00I have a stock pick for you.
American shipping co...I have a stock pick for you.<br /><br />American shipping company.<br /><br />www.americanshippingco.com<br /><br />It is a shipping company with 10 Jones act ships rented out to OSG. The rental deal is giving the company steady income and there are a profit sharing component which might kick in sometime in 2013. <br /><br />If it does it should skyrocket.<br /><br />Current MCAP is about 13M USD...<br /><br />It might be worth a look at the bookvalue of the ships and the current rates and the deal with OSG. <br /><br />Just a tip!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-76387681852718864022013-02-11T16:19:14.562-05:002013-02-11T16:19:14.562-05:00If I am blessed with the choice of selling KO at a...If I am blessed with the choice of selling KO at a 60+ P/E, I'll make that decision EVERY SINGLE TIME.<br /><br />Holding something that is so clearly overpriced is like buying property in the property bubble. "If you don't buy now, you might be priced out forever!"<br /><br />It does not matter what your original cost basis was. Clearly WB will never be able to get into KO for that. The question is, is KO fully valued? Is KO overvalued?<br /><br />To say that "I will hold this stock FOREVER" is a foolish thing to do.<br /><br />CLEARLY, selling KO was one of Buffet's huge mistakes...<br /> <br />15+ years later, AND THE STOCK IS AT A LOWER PRICE.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-71168991001833189032013-02-11T11:53:37.155-05:002013-02-11T11:53:37.155-05:00I've seen that store analogy before... possibl...I've seen that store analogy before... possibly on Corner of Berkshire and Fairfax? I like your art collector analogy though. I haven't quite decided which type of GARP investor I am.Mikazohttps://www.blogger.com/profile/02248101760142904816noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-56337609532598950062013-02-11T11:52:20.933-05:002013-02-11T11:52:20.933-05:00True, but who knows if you'll be able to buy b...True, but who knows if you'll be able to buy back into a company at the same cost basis you originally had... it turns into a question of whether you want to take profits now, at the expense of possible future peaks in price and/or future dividends Mikazohttps://www.blogger.com/profile/02248101760142904816noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-72525638617518509062013-02-11T11:23:34.266-05:002013-02-11T11:23:34.266-05:00I would like to comment on Buffet's "fore...I would like to comment on Buffet's "forever" holding period...<br /><br />I think this is a GRAVE mistake and has led him to MANY errors.<br /><br />The most prominent one I can think of is that of KO in the late 90's...<br /><br />Coke was trading at something like a 60 P/E or more...<br /><br />I will grant that KO is a great, TREMENDOUS company, but trading at a 60+ P/E on normalized earnings? For a multi-billion MEGA cap company? That can only end one way...in tears...<br /><br />15 years LATER KO is still lower than what it was in 1998.<br /><br />There have been other examples of this in Buffet's portfolio, but this is the easiest example I can recall.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-35465058437183017822013-02-11T10:47:10.927-05:002013-02-11T10:47:10.927-05:00Interesting piece which I hadn't really consid...Interesting piece which I hadn't really considered before.<br /><br />I suppose one of the benefits of larger companies is their liquidity and therefore the bid/ask spread is narrower. There are also tax advantages to the Buffett style investor over a Graham style.<br /><br />Have to confess to being more of a Buffett investor myself but probably due to me being more naturally drawn to companies with competitive advantage and doing well.Strivernoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-62574959766642699242013-02-11T10:07:26.183-05:002013-02-11T10:07:26.183-05:00Maybe? Even for a company I want to own for a whil...Maybe? Even for a company I want to own for a while I have a hurdle 10-15% compounded, and I can calculate an expected return based on that. The question I have for the Buffett GARP investors is do you ever sell? What if the great business becomes overvalued in three years, do you sell it or just hold on?<br /><br />To steal an analogy from a friend...I look at investing in a similar manner to owning a small store. Stocks are the inventory, I buy my inventory at reduced prices and then have them sit on the shelf (my portfolio) until a buyer comes along offering a fair price. Some of the inventory might sit for years, and sometimes while it's sitting it becomes more valuable and throws off dividends. But if a buyer comes in and offers a fair price I'm always willing to sell. The inventory is eclectic as well, some asset based purchases, some low earnings, a few fallen angels, but all purchased at a discount waiting for a buyer. I'm always on the hunt for new inventory and always willing to sell what I have.<br /><br />A different analogy is how I think of some of the Buffett followers. They're like art collectors who are buying these famous paintings at prices which they think are attractive and then go hang the pictures on the wall and never sell them. Eventually some of those pieces might be worth a ton. The difference is the art collector is attached to their art pieces, the store owner isn't attached to their inventory.Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-13964003609247285152013-02-11T10:01:22.497-05:002013-02-11T10:01:22.497-05:00Thanks for the comment, it seems bankprobe launche...Thanks for the comment, it seems bankprobe launched a week ago, so maybe you're a beta user?<br /><br />I'm glad you posted that, I'm actually working on a site that's very similar, I'm hoping to launch it in the spring.Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-66335686184980548642013-02-11T08:55:25.874-05:002013-02-11T08:55:25.874-05:00From a "franchise value investor" standp...From a "franchise value investor" standpoint (i.e. Warren Buffet style), the return on invested research time could be inestimable. If you research a great franchise company for 10 hours but hold that company forever, the returns on those 10 hours over decades would be enormous.<br /><br />It sounds to me like in the case of an "asset value investor" such as yourself, you expect there to be one or a couple value-unlocking events, at which point you sell off and profit. In this case, it makes sense that the return on invested research time comes into play.Mikazohttps://www.blogger.com/profile/02248101760142904816noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-75742089956627985262013-02-11T08:40:41.707-05:002013-02-11T08:40:41.707-05:00I disagree that research time is a sunk cost. My ...I disagree that research time is a sunk cost. My point, and maybe it wasn't clear is that if I need to research every competitor, and know industry trends to feel comfortable with an investment it's probably not cheap enough. In a lot of cases it's important to understand the industry dynamics because that might be leading to the undervaluation, but if I can't get comfortable without all that extra information the company isn't silly cheap.<br /><br />You have a good point about keeping an eye on companies. I'm not the type of person who will research something first then see if the price is right for an investment. I hunt out cheap companies first then consider if they're worth investing.Nate Tobikhttps://www.blogger.com/profile/05660387777171986124noreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-91456729121826860532013-02-11T08:38:29.078-05:002013-02-11T08:38:29.078-05:00oddball i agree your take on banking i have been d...oddball i agree your take on banking i have been doing it for a while, bankprobe.com has really help me go through over 7000 banksAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-2149523431587168680.post-81550036458111623782013-02-11T01:01:02.552-05:002013-02-11T01:01:02.552-05:00Isn't the time taken to research a sunk cost? ...Isn't the time taken to research a sunk cost? (at least after the research is done) Of course you could make a guess on the time required beforehand but can't be 100% sure. <br /><br />Even if an annual report is slim, you may still need to spend extra time understanding the industry, competitors, customers, etc. <br /><br />I'll take a company that every value blog knows (CNRD) as an example. Even though the business is relatively simple, there were some nuances to figure out that added to time to invest. How does the oil spill effect CNRD, how does the Jones act protect the company (and any chance of it being suspended and/or appealed), and is there growth in the barge fleet or just replacement (I think both but the tax change in the early 80s stopped new builds).<br /><br />Since a good chunk of time was spent understanding the industry, you might be able to capitalize on another firm tody or in the future. In this case, I was able to get up to speed faster on TRN then I could have otherwise.<br /><br />Another factor in research is being prepared. Many times I have done research on a company, said to myself this stock is a screaming price at x, only to look at the chart and see it was there 6 months ago. Keeping up on research gives the potential for opportunities down the road. Joshhttps://www.blogger.com/profile/12028228587020987588noreply@blogger.com