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Stingy News: Value Investing The death of small cap 11/19/23 Value Investing "small caps currently trade at a 40% discount relative to large caps in the US, so its plausible the decline in small cap quality is reflected in lower multiples. But this still leaves the question of why US small caps trade in line with Europe and at a premium to Japan despite lower GP/A." Terminal valuation multiples 11/12/23 Value Investing "In short, TEV multiples should revert toward 12.0x, and an analyst should assume that a company retains 60% of its premium or discount to that multiple." International value 10/07/23 Value Investing "While value stocks have provided higher returns than growth stocks, like all strategies that invest in risky assets, value investors experience long periods of underperformance. Such periods test investor discipline. Sadly, it is my experience that while economists know that when it comes to risk assets, returns over periods of 10 years or even longer are likely to be just 'noise,' most investors think that three years is a long time to judge performance, five years a very long time, and ten years an eternity. That belief leads them to sell after periods of underperformance. This is even though such periods generally result in asset trading at historically cheap levels." What Works in Banking 09/24/23 Value Investing "A strategy that buys cheap, high-quality banks with conservatively managed loan and asset books can be expected to deliver excess returns in the majority of market environments." More bang for your buck 09/10/23 Value Investing "Europe offers higher profitability among firms trading at deep discounts." Seth Klarman on Security Analysis 08/13/23 Books Value Investing "An avid coin collector as a kid, Klarman would read everything he could about his hobby. In 1965, the U.S. mint stopped using silver in dimes and quarters, and reduced the amount in half dollars, as the price of silver rose. In 1971, when Klarman was 14 and riding the New York City buses, he befriended the driver, who let him swap a current quarter for the more valuable pre-1965 pure silver coins in the bus's fare box. He was buying the proverbial dollar at a discount." The Albert Bridge factory 07/23/23 Value Investing "despite the many short-term headwinds most 'value' investors have experienced over the last few years, that is where we'll have long-term tailwinds." Alternative value metrics 07/09/23 Value Investing "The researchers showed that these alternative value metrics indirectly exposed the profitability premium and a sector allocation closer to the U.S. market. For example, the hypothetical P/B portfolio had an allocation to the financial sector of 27%, more than twice as much as the U.S. market. On the other hand, the hypothetical portfolio formed on P/CF had a weighting to financials of 16% compared with the market's 13% weighting." Value and profitability are complementary 07/02/23 Value Investing "While sharing a common trading philosophy, we believe the characteristic differences between value and quality mean that they are complementary in a portfolio because they work in different ways and at different times. Both strategies can offer a return premium to the market, with the equal-weight value portfolio outperforming the market by 3 percentage points per year since 1998 and the equal-weight quality portfolio outpacing the market by 2 percentage points per year over the same horizon" Japan's value mandate 06/16/23 Value Investing "If the reform catalyst plays out, a rising tide may lift all boats, and one might do quite well investing in Japanese large value. But it is curious to us that the stocks you would expect to be most in demand based on the catalyst criterion (and fundamentals) have seen prices rise the least so far this year as investors got excited about Japan." Size doesn't matter 06/16/23 Value Investing "The fact large-cap value and small-cap value stocks earn similar returns may be shocking for investors who have been sold the idea that value investors have to invest in small-caps to capture the value premium. But we need to remember that data/evidence should drive decisions, not stories." Size and long-only value investing 06/16/23 Value Investing "Equally weighted large-cap value portfolios have historically earned similar returns as small-cap value portfolios." [pdf] Concentrating for factors 05/21/23 Markets Value Investing "How many stocks should you own in a concentrated factor portfolio if the goal is maximizing expected returns or Sharpe ratio?" Outperformance, please 05/21/23 Behaviour Value Investing "What's the difference between fund 1 and fund 2 that makes fund 2 so much more attractive? I can tell you it isn't the return because the two funds are designed to have exactly the same return. The key difference between fund 1 and fund 2 is that fund 1 is a frequent underperformer that sometimes has a large outperformance, while fund 2 is a frequent outperformer but sometimes suffers large underperformance." Swedish Fish 04/30/23 Value Investing "Overall, we think that the low valuations in Europe relative to the US warrant a consideration of overweighting Europe in a global asset allocation today. And one doesn't have to enjoy eating fermented herring or ice swimming to be attracted to the historical discounts on offer in countries like Sweden." Booms and busts in value 04/30/23 Value Investing "Campbell, Giglio, and Polk also showed that while the classic value strategy bets on the convergence of valuation ratios across and within industries, the intra-industry component of such a bet typically contributes much more to value.s average outperformance. Thus, investors building value-oriented portfolios might want to consider funds that are industry neutral." European value 04/08/23 World Value Investing "the European market is effectively a large value index today, as it trades at 13x Price/Earnings, which is cheaper than the US large value index at 14x Price/Earnings" America's first value investor 03/25/23 Graham History Value Investing "Hetty Green's accomplishments are extraordinary by any standard, but what makes them even more impressive is that she succeeded despite having none of the advantages afforded to men at the time. Hetty Green could not purchase a seat on the New York Stock Exchange, serve as a director on a corporate board, or even exercise the right to vote." Value spread expands 03/19/23 Value Investing "Today's peak seems more like the tech bubble than the financial crisis. Expensive stocks were bid up to unfathomably high prices, while deep value type stocks have just plodded along." Intangibles and value 03/05/23 Value Investing "It is worth noting that other value metrics, such as price-to-sales (which is not affected by accounting for intangibles), did not work during the 'dark winter' for value stocks. This shows that the poor performance of the value factor was less about how the worth of a stock was measured and more about the price aspect (growth stocks outperformed because the multiple of earnings investors were willing to pay for them increased dramatically relative to the multiple for value stocks)." Information in valuation spreads 02/12/23 Value Investing "For value investors, the above findings are good news. The largest historical drawdown for the value premium from November 2016 through October 2020 led to a dramatic widening of the book-to-market spread between value and growth stocks." After the darkest hour 02/05/23 Value Investing "Today, deep value companies in Europe can be purchased at around 5x EV/EBITDA and 0.8x Price/Book" Tim talks value 01/29/23 Value Investing Tim McElvaine talks about some of his recent investments. [video] Valuation risk strikes 01/29/23 Markets Value Investing "We think there's ample room for continued normalization of multiples that should continue to support small-cap and value stock returns globally in the decade ahead." The bubble has not popped 01/08/23 Asness Value Investing "Value spread at 94th percentile" The Globe 250 Method 12/18/22 Momentum Investing Norman Rothery Stingy Investing Value Investing "Our star system combines two schools of investing with pedigrees that stretch back decades and that have been quite profitable in recent times. It starts with value investing principles, which favour profitable companies that trade at low prices relative to their fundamentals. Our system also employs techniques used by momentum investors, who like to buy recent winners." The Globe 250 Megastars 12/18/22 Momentum Investing Norman Rothery Stingy Investing Value Investing "Our new Megastar ranking of Canada's largest publicly-traded companies evaluates each major stock on the TSX and awards two star ratings - one for its appeal to value investors and the other for its allure to momentum investors. We then focused on the 20 stocks with the best blend of value and momentum characteristics, which form our Megastar team." The Globe 250 12/09/22 Momentum Investing Stingy Investing Value Investing "The idea is to deliver the information that investors desire and use numerical analysis to highlight stocks that might deserve a spot in your portfolio." [$] Top 20 Megastars 12/09/22 Momentum Investing Stingy Investing Value Investing "Our new Megastar ranking of Canada's largest publicly-traded companies evaluates each major stock on the TSX and awards two star ratings - one for its appeal to value investors and the other for its allure to momentum investors. We then focused on the 20 stocks with the best blend of value and momentum characteristics, which form our Megastar team." [$] The Screaming Value portfolio 11/28/22 Norman Rothery Stingy Investing Value Investing "But the second graph puts the screaming into the Screaming Value portfolio because it shows how far it fell in down periods." Vincent Daniel and Porter Collins interview 11/06/22 Value Investing "Tobi interviews Vincent Daniel and Porter Collins from Seawolf on energy, inflation and the Fed." [video] Order 66 11/06/22 Value Investing "The central truth of the investment business is that investment behavior is driven by career risk. The prime directive ... is first and last to keep your job." Fair multiples 10/28/22 Growth Investing Value Investing "Mean reversion of the multiple is so powerful that the only factors other than starting TEV/EBITDA that matter are gross margin, free cash flow conversion and, to a small extent, size and return on capital (EBITDA/assets, this time with the sign in the direction we.d expect)." Predicting growth 10/23/22 Value Investing "The data in this chart is counterintuitive. Not because the high growth forecasts are too optimistic, but because they fade so quickly. We suspect that this historical base rate chart is far from what many investors hold in their head. But we also suspect that if we choose to replicate this data 20 years from now, the results will look eerily similar." The Frugal Dividend portfolio 10/23/22 Dividends Norman Rothery Stingy Investing Value Investing "The Frugal Dividend portfolio offers a crop of stable dividend payers trading at bargain prices. It's the value investing variant of the Stable Dividend portfolio" Where growth forecasts err 10/16/22 Markets Value Investing "This analysis provides a tidy logic for value investing. Value investing works because stocks with low growth expectations priced in are less likely to disappoint dramatically." The Stable Dividend portfolio 10/11/22 Dividends Norman Rothery Stingy Investing Value Investing "The recent tumble inspired me to check in on the Stable Dividend strategy to see how it's holding up in these uncertain times. It offers a conservative approach to picking stocks that focuses on Canadian dividend payers that are steady performers." Let's get nuts 10/01/22 Markets Value Investing "In our opinion, the long overdue normalization of corporate profits is currently underway. As demand begins to falter and corporate costs remain elevated, we suspect a growing number of companies will announce lower earnings guidance later this year and into 2023. We anticipate businesses tied to housing will lead the way." Rob Arnott interview 10/01/22 Arnott Value Investing "Arnott shares his outlook on inflation, value stocks, and his cheap diversifiers strategy." [video] TSX 60 for value investors 09/25/22 Norman Rothery Stingy Investing Value Investing "The low-P/E portfolio fared the best of the bunch with average annual gains of 10.8 per cent from the end of January, 2002, through to the end of last month. It handily beat the index by an average of about three percentage points a year." Patience of value investors 09/25/22 Value Investing "Over the eight-year period 2000-2007, the Fama-French U.S. Value Research Index returned 11.0 percent per annum, outperforming the Fama-French U.S. Growth Research Index return of just 0.4 percent per annum by 10.6 percentage points a year. As you saw in the chart on valuation spreads from AQR, today's valuation spreads are very similar to what they were at the last peak in the 'bubble' in growth stocks. While that isn't a guarantee that value stocks will outperform, and do so by significant margins, it's what the historical evidence suggests is likely." Abandoning diversification 09/04/22 Value Investing "Perhaps at the time when many investors are abandoning diversification in favor of putting all their money in the S&P 500, it's time to reconsider - and make the bet - that valuation gaps that have driven wide relative return differences might be strongly mean reverting." The size factor 08/27/22 Markets Value Investing "over the full period since 1963, small-cap value has been by far the best-performing corner of the equity markets, according to Ken French's data. And this relationship has been consistent across geographies" Emerging market cycles 08/19/22 Value Investing "we see no compelling reasons for an evergreen allocation to EM. However, EM equities perform particularly well during recoveries, when currencies stabilize and earnings and multiples rise." Value is not an interest rate bet 08/12/22 Value Investing "It seems obvious to so many that interest rates drive the value trade. After all, growth stocks have much longer-dated cash flows than value stocks and thus should be a 'longer duration' asset and move more with longer-term interest rates, right? 'Growth (or often just 'tech') stocks soar on plunging interest rates' (or vice versa) has become a common wise-sounding observation in the last few years. In fact, this is all taken as an axiomatic given in countless pundit and press observations. However it's not nearly that simple, and mostly it's just not true." Betting against expensive junk 08/12/22 Value Investing "For the first six months of this year, long-only investors really couldn't win. Unless you started the year long oil, almost every major asset class produced losses." Tom Russo interview 08/07/22 Value Investing "Global value investor Tom Russo says today's investment environment is the most challenging of his 40-year career. He explains why his core companies are up to the challenge." [video] Value Cray-Cray 08/07/22 Value Investing "Value Spreads Are Back to Tech Bubble Highs" Never anything wrong with value 08/01/22 Value Investing "Keswin and Wellington walked through 60 years of data on value, showing that the average up cycle lasts eight years, while down cycles last two. If investors look beyond what the big indices are showing, it's been no different since 2008" Keith Smith's Q2 themes 07/17/22 Value Investing "Bonhoeffer Capital Management's Keith Smith discussed investment themes for Q2 2022, with an emphasis on Asbury Automotive Group and Scipps Networks." [video] Valuations with and without Tech 05/29/22 Value Investing "Turns out, the S&P 500 ex-technology is actually more expensive than the S&P 500, suggesting that large-cap tech might be relatively cheap but the devil is in the details." Value investing is not all about tech 05/29/22 Value Investing "The within-industry value spread (far closer to what we actually trade) is currently 95th percentile versus its own history and still 90% of the way up from median to its tech bubble peak (the prior peak before the crazy COVID driven 2020-2021 peak). The expensiveness of tech vs. the S&P 500 is 84th percentile versus its own history (so still on the high side but not the stratosphere) but only 17% of the way up from median toward its tech bubble peak." On European value 05/29/22 Value Investing "So it stands to reason, or at least consider, that in a more normal market environment, Europe might have a lot of catching up to do - particularly some of the value stocks across the continent." Good news for large-cap value 05/23/22 Value Investing "Just as economic theory would predict, over the period 1927-2021, the Fama-French U.S. large-value research index returned an annualized 12.0% versus an annualized return of 14.5% for the Fama-French U.S. small-value index (an outperformance of 2.5% percentage points per annum). Economic theory would also predict, as Vogel demonstrated, that the advantage shrinks if one uses equal weighting for large stocks - it yields a higher average monthly return than value weighting them, resulting in a smaller return spread against the small-cap value portfolio. The reason is simple: Equally weighting large value stocks creates a portfolio with more weight to smaller stocks within the large cap universe." Crisis investing in Europe 05/23/22 World Value Investing "Just like in the US, European small value stocks outperformed the market consistently and significantly after crises." Value spread still crazy 05/14/22 Value Investing Cliff updates his graph ... EM crisis investing 05/08/22 Value Investing "The model works so well in large part because it dramatically shifts geographic exposures, as there's almost always an EM crisis happening somewhere." Using momentum to find value 05/08/22 Momentum Investing Value Investing "The research demonstrates that using multiple measures of value and combining value and momentum in a strategy has produced superior results compared to using either the traditional HML value factor or the traditional momentum factor independently." Homeland securities 05/01/22 Value Investing "Reams of studies suggest that consistently holding the cheapest and most thinly traded stocks within a country's market provided investors with a healthy premium in the long haul. Purchasing pessimism (as reflected in low prices) pays off on long horizons. But does the same apply between countries?" Size does not matter for value 04/17/22 Academia Value Investing "Based on prior academic research conducted in long/short portfolio analysis, some market participants believe that long-only Value investing works better in small-cap stocks. Our research shows that this is not true in long-only Value investing, which is how most practitioners allocate towards the Value premium. Our primary research finding is that equal-weight large-cap Value portfolios and small-cap Value portfolios are statistically similar from a returns perspective. The data suggests that value investors with a liquidity preference should allocate towards equal-weight large-cap Value portfolios. If nothing else, the data suggests that practitioners should split their Value allocations across the large-cap Value (equal-weighted) and small-cap Value since these portfolios have zero overlap but similar historical returns, highlighting a potential diversification benefit." Generational dislocation in value stocks 04/17/22 Value Investing "We often get asked whether value stocks are 'cheap.' The short answer is 'yes', but they have been cheap for a while. This important caveat underscores the fact that valuation tends to be a poor timing mechanism for all but true long-term investors." Value factor comes back 04/17/22 Books Value Investing "Antti's latest book does exactly that. It argues that Value (and Momentum), are still reliable long run sources of return that can (and should) be used to enhance portfolio returns during the current environment of low expected returns." Drivers of deep value 03/30/22 Value Investing "As expected, deleveraging and multiple expansion tend to contribute positively to returns in deep value, while earnings growth tends to be a negative contributor over a one-year hold." Value stocks are still cheap 03/19/22 Value Investing "Low interest rates might not justify very cheap value vs. growth, but people think they do because they're so extreme in their long-term forecast of growth" Wise words from Walter Schloss 03/13/22 Schloss Funds Value Investing "A fee structure, by the way, that would make any fund managers squeamish. Schloss believed his pay should be tied to success. So he got 25% of realized gains. But if there were losses, his limited partners were made whole before he earned a cent. He only got paid when his partners made money." The evidence mounts against active share 03/06/22 Markets Funds Value Investing "Since the initial publication of research documenting active share, its advocates have clung to the belief that the metric could identify funds that would outperform. But the academic evidence has all but disproven that thesis." Sector neutral or not? 03/06/22 Value Investing "But for long only investors - and that is pretty much every traditional fund out there - their research finds that it is highly unlikely that a sector-neutral strategy will perform better than a strategy that incorporate sector bets." The cross-section of stock returns before 1926 02/15/22 Markets Momentum Investing Academia Value Investing "We study the cross-section of stock returns using a novel constructed database of U.S. stocks covering 61 years of additional and independent data. Our database contains data on stock prices, dividends and hand-collected market capitalizations for 1,488 major stocks between 1866-1926. Results over this 'pre-CRSP' era reveal a flat relation between market beta and returns, an insignificant size premium, and significant momentum, value and low-risk premiums that are of similar size as over the post-1926 period." That's it 02/13/22 Value Investing "Global value spread at 98th percentile" The size of the value premium 02/04/22 Value Investing "While there are no crystal balls, there doesn't seem to be any strong evidence supporting the belief that the value premium is dead. And there may not even be any evidence that it was either smaller than Fama and French had originally found or that it is now smaller than it was originally found. The poor performance has been due to changes in what John Bogle called the speculative return (the change in relative valuations)." Bubble stock meltdown 01/31/22 Growth Investing Value Investing "This breakdown is significant, especially for growth stocks. Remember, growth stocks trend, and value stocks mean revert. The psychology is simple. People hear about a hot stock that's gone up 3x, they buy some, it goes up 2x, they buy more: the whole attraction of buying a hot growth stock is the historic return trajectory. Value stocks are the opposite: you do well buying them when they're down, as our Crisis Investing piece showed. And so, once the trend gets broken, once the magic of the rising stock prices disappears, it's a long way down until valuation becomes the justification for buying." Conglomerates worth holding 01/15/22 Value Investing "Power Corporation of Canada is a great example. The stock is roughly the same price today as it was in 2007. Yet it has grown its book value per share from roughly $17 to $33 during that time, and paid shareholders $18 in cumulative dividends per share to boot. To me, that.s exciting!" Stock market history 01/02/22 World Markets Value Investing "This also means that US growth is not necessarily 'expensive' vs. European growth, but that European value has a decent chance - at least from a historical perspective - of being extremely inexpensive not only when compared to European growth, but also when compared to US value." Value investing after the peak 01/01/22 Value Investing "Overall, the conclusions are the same - the five-year stretch after the valuation peak was another good time to be a value investor. Not nearly as good as after the 1999 peak, but the relative outperformance was around 13% annualized in the U.S. and 8% annualized in international markets" Investing in banks 12/19/21 Markets Stocks Real Estate Value Investing "Local real estate prices have not just acted as a predictor over the full period, but they have also been a very consistent predictor. The spread between the top decile and bottom decile of stocks ranked by this factor has persisted through multiple market environments." That's it, that's the blog 12/19/21 Value Investing "They say a picture is worth 1000 words. I'm embracing the concept in this post, which is just a single graph presenting the value spread constructed using the methodology that most closely reflects how we actually view value at AQR. Spoiler alert: the spread continued to explode higher in 2021. Despite this, we still made some money on value this year, which makes us very excited for 2022 and beyond." This is the show 12/19/21 Value Investing "Although it's difficult to know when volatility and opportunities will return, we are closely monitoring newly formed cracks in the small cap market. Specifically, as inflation has forced the Federal Reserve to reduce its bond purchases, we're noticing growing weakness in many of the stocks on our possible buy list. In effect, all boats are no longer rising. Even with the popular stock indices trading near record highs, several of the stocks on our possible buy list are becoming more attractively priced, with a growing number of stocks approaching their 52-week lows." Building an EBITDA/EV portfolio 12/05/21 Value Investing "How did the portfolio with the highest EBITDA yielding stocks perform over the recent decade? Terrible compared to the S&P 500, as expensive stocks dramatically outperformed cheap ones, regardless of the chosen valuation metric." Thomas S. Gayner interview 11/06/21 Value Investing "Barry Ritholtz speaks with Markel Corp. co-chief executive officer Thomas S. Gayner. Gayner oversees investing activities for the company - which boasts a capital portfolio of $27 billion - as well as the Markel Ventures companies." [audio] Two sides of the coin 10/30/21 Value Investing "Profitability and value are two sides of the same coin and ought to be considered as complementary peers or jointly in a combined strategy." Valuations and interest rates 10/16/21 Value Investing "Over the full and more recent sample period, we also found that none of the factor premiums had an economically significant exposure to annual yield changes, indicating that any relationship is relatively short-lived. Therefore, we can conclude that most factor premiums do not have a stable or economically material relationship with bond yield changes on an annual basis." Not dead yet 10/16/21 Value Investing "Current large-cap growth P/E ratios are higher than they have been over the last ten years and are similar to the ratios of the early 2000s, just before that 'bubble' burst. On the other hand, small-cap value ratios have not changed as significantly over the same period." How quality works 10/07/21 Value Investing "The top decile of the value factor delivers returns through change in multiples. The companies have anemic asset growth, and profitability does not improve. But multiples do. This reflects our understanding of how value works. Low multiples often reflect poor earnings. But while earnings may continue to be poor, they are not as bad as was priced, so multiples improve." Tobias Carlisle interview 09/24/21 Value Investing "Our discussion with Tobi revolves around: stock market fall of early 2021, valuing digital businesses, quantitative and value Investing, learning from ancient philosophers, separating the message from the messenger, and much more!" Value vs. growth debate 09/19/21 Value Investing "The opposing view, that a group of stocks whose underperformance is more than explained by their falling relative valuations is actually cheap, seems a far less extraordinary claim. In order for it to be true, we merely need to believe that the future prospects of value stocks are not drastically worse than they have been in either the long term or the relatively recent past." Are value stocks cheap for a reason? 09/05/21 Value Investing "The value spread remains unusually high, which has led investors to be concerned that value may be cheap for a reason. In this short presentation, our Portfolio Solutions Group (PSG) explains how we evaluate this spread and illustrates our view that the current high value spread is forecasting higher expected returns, and not low fundamental growth rates." The international test 08/29/21 World Value Investing "A few anomalies were strong across regions. Most of these were value anomalies (such as price-to-book, price-to-cash flow, and price-to-earnings). Others included gross profitability, earnings surprise, and new shares issuance." Factors in fixed income 08/29/21 Value Investing "According to the paper, a global investment-grade strategy that uses quality and value factors generates more yield (1.55 percent) relative to the benchmark (1.33 percent). At the same time, it has a similar level of credit risk as the benchmark." The impact of goodwill 08/22/21 Value Investing "Liu, Yin, and Zheng.s findings led them to conclude that the negative return predictability of goodwill is due to the fact that investors underreact to the negative information on the firm value associated with high goodwill. Perhaps the publication of their paper will lead to at least a reduction in the size of the anomaly, as their findings were not limited to small firms where limits to arbitrage can allow mispricings to persist." Francis Chou Q&A 08/06/21 Chou Value Investing "The Center for the Advancement of Value Investing Education (CAVIE)'s 2021 Virtual Seminar on Value Investing and the Search for Value welcomed Francis Chou as a Guest Speaker. Mr. Chou is the Founder and President of Chou Associates Management" 22 maxims of Sir John 08/02/21 Value Investing "The most famous of Templeton's contrarian actions happened in 1939. On the eve of the Second World War, when Templeton was all of 26-years old, he borrowed a then-massive $10,000. He had decided to buy 100 shares in each of 100 companies whose beaten-up stocks cost less than a $1. Templeton judged the market was in headless chicken mode due to fears about the upcoming conflict. He wasn't sure which shares would prosper. But he was convinced they were all trading out of whack. The profits he banked when the markets recovered initiated a lifetime of running money." Dan Rasmussen interview 07/25/21 Value Investing "Dan then delves into leverage and the value premium, telling us how important this interaction is. He gives us great details on the subject based on a study he was a part of while at Bain Consulting. The takeaway was that roughly 50% of deals done at multiples greater than 10x EBITDA posted 0% returns to investors, net of fees." Tim Travis on options and financials 07/25/21 Value Investing "Tim Travis is a veteran deep value investor and money manager with a long history of success in traditional investments, such as stocks and bonds, and deep value investing. He has developed an innovative methodology of combining options and distressed investing with value investing to generate income, reduce risk, and add an element of timing." [video] Location and the value premium 07/11/21 Value Investing "We investigate the value-growth premium puzzle by merging insights from urban economics and finance that relate firm location to its stock performance. The value-growth premium in locations with high historical house price appreciation is 3.6% larger per year than the premium in areas that experienced little house price appreciation. The link between housing value appreciation and the cross-section of returns supports investment-based models explaining the value premium; moreover we find the house price channel reduces growth firm returns rather than increasing returns of value firms. House price appreciation remains significant after controlling for common explanations of the premium." The value premium 07/11/21 Value Investing "The poor performance of value stocks versus growth stocks over the past decade has led to the belief that the value premium is dead. This, however, seems to be more a U.S. market phenomenon. The Canadian value premium persists, particularly for stocks with low prices." Maintaining the flame 06/20/21 Value Investing "As absolute return investors, we're empathetic to the challenges of maintaining discipline throughout an entire market cycle. While refusing to overpay and protecting capital during periods of excessive overvaluation sounds easy, it is not. It's one of the most difficult duties required by a portfolio manager and fiduciary. And while it's never been easy, the current market cycle's duration and extremes have made it the most challenging cycle of our careers." Combining value and profitability 06/13/21 Value Investing "When viewed in combination with similar such evidence from the US, the data suggest important benefits to targeting value and profitability jointly rather than piecemeal." Value and momentum investing 05/30/21 Momentum Investing Value Investing "This article examined a common question - for Value and Momentum Investing, what is the best way to combine factors? While not the first article on the topic, we provide another set of insights. When examining mid-cap and large-cap stocks in both the U.S. and international markets, and keeping the number of stocks in the portfolio the same, more concentrated portfolios historically had higher returns in the 'Separate, then combined' Portfolio as opposed to the 'Combined-signal Portfolio.' In the U.S., as one adds more stocks, the return differential gets smaller. Last, from a risk-adjusted returns perspective, there is no clear-cut winner/loser." Value's turn 05/23/21 Markets Value Investing "Value's pain should eventually be rewarded just like it was in the period after 1999, when finally the performance and valuation disparity turned. Fundamentals started mattering and the market began rationally pricing assets. For a 7-year period after 1999, Value went on to trounce Growth by over 14% annually." Predictability of the value premium 05/23/21 Markets Value Investing "Consider that in December 1994 (shortly after the publication by Gene Fama and Ken French of their seminal paper 'The Cross-section of Expected Stock Returns'), the relative price-to-book ratio of value stocks versus growth stocks was 2.1. Using Vanguard's Value ETF (VTV) and their Growth ETF (VUG), at the end of April 2021 that ratio had widened to 3.2 (52 percent wider), predicting a much larger value premium than Fama-French had found. We see the same pattern when looking at small value and growth stocks. At the end of 1994, the spread was 1.5. Using Vanguard's Small-Cap Value ETF (VBR) and their Small-Cap Growth ETF (VBK), the spread had widened to 2.3 (53 percent wider). Once again, the widening of the spread predicts a larger value premium than Fama-French had found. In other words, in terms of expected returns, the data suggests that the outperformance of value since April 2021 is likely to continue, as Yara, Boons, and Tamoni found that the spread has a strong predictive value two years out." Wise words from Lou Simpson 05/23/21 Buffett Value Investing "Lou Simpson is largely unknown, even among investors. Yet, he quietly racked up a track record that bested the S&P 500 by 6.8%." Value still beats growth 05/16/21 Value Investing "The analysis above shows that a very simplistic split using the P/E multiple generated about a 2.5% spread between Value and Growth over a 40+ year period. When using Quintiles, the spread was about 5.75%. For deciles, the spread was about 7.4%." You needn't hold your winners 05/16/21 Value Investing "If stock performances showed higher persistence than would occur through chance, then the odds would favor investors who follow Baillie Gifford's advice to keep those that got you here. But they do not." U.K. dividend value since 1800 05/09/21 World Value Investing "I explore the U.K. Value factor, by showing its previously unseen history extended back to 1800, and illustrating the similarity between its recent drawdown and bounce back as compared to the U.S. value factor." Resurrecting the value premium 05/09/21 Value Investing "They sought to show that the value premium could be restored through the use of a number of simple alterations that have been long used by many practitioners, as well as academics. They augment the book-to-market ratio with three alternative value signals, which have in common that instead of relying on balance sheet information, like book-to-market (or HmL) they are more based on earnings and cash-flows." Berkshire Hathaway meeting 05/02/21 Buffett Munger Value Investing "Berkshire Hathaway Chairman and CEO Warren Buffett was joined by Vice Chairman Charlie Munger, and both shared their unscripted views on Berkshire Hathaway, the markets, the economy, corporate governance, and a lot more." [video] Value stocks are poised to outperform 05/02/21 Value Investing "We expect value to outperform growth over the next ten years by five to seven percentage points, annualized, and perhaps by an even wider margin over the next five years." The economic recovery in Japan 03/21/21 World Value Investing "Despite one quarter of value outpacing growth, LTM EBIT margins are still 52% below their 2018 peak. Because of this, upward pressure on stock prices should depend very little on multiple expansion. Simply getting back to 2018 operating income is a ~100% return if these value stocks can hold their current multiples." Meb talks to Dan 03/21/21 Value Investing "In today's episode, we start with an update on Dan's private equity replication thesis and hear about the rise of private credit in the past few years. Then we dive into his recent paper on emerging markets crisis investing. While buy and hold investors in emerging markets have experienced higher volatility for disappointing returns, Dan believes learning to navigate these EM crises can provide the ability to reap excess returns. He walks us through the differences between global and idiosyncratic crises and what performs best between both debt and equity in each case." Joel Greenblatt and Rich Pzena talk value investing 03/14/21 Value Investing "Legendary investors and long-time friends Joel Greenblatt (Gotham Funds) and Rich Pzena (Pzena Investment Management) recently sat down with investment strategist Steve Galbraith for a masterclass in value investing. The three long-time friends discussed a host of topics - including quality, momentum, interest rates, financials, ESG, disruption, parallels to the internet bubble, and their current positioning - along with the basics of how they define value." [video] The long run is lying to you 03/07/21 Asness Markets Value Investing "To state the obvious, when strategies get more expensive, all-else-equal they do better while that richening is occurring. Yet to assume these changes are the expectation going forward, as simply examining past returns does, strikes us as folly. I examine the returns on various markets, market differentials, and most importantly, the value factor, using a regression framework that accounts for these valuation changes." Good versus bad value stocks 03/07/21 Value Investing "In this short research note, we will contrast Value & High Quality versus Value & Low Quality across stock markets." UK value is extremely promising 02/20/21 Value Investing "While we still like our last named trade of the decade, emerging markets value stocks, the UK equity market, and UK value stocks in particular, are now even cheaper." Chou follows Buffett and Watsa 02/08/21 Buffett Watsa Chou Norman Rothery Stingy Investing Value Investing "I wish Mr. Chou well on his new venture and hope it proves to be a great success, much like Fairfax Financial or Berkshire Hathaway. But I admit that I'm not a disinterested observer. I own a stake in all three value-oriented companies. With a little luck they'll float higher over the long term." [$] Tiny titans strategy 12/19/20 Value Investing "O'Shaughnessy Tiny Titans screen looks for the 25 companies with the highest price strength over the last year after applying the market cap and value filters" Q3 2020 GMO letter 12/12/20 Value Investing "No matter how we define cheap stocks - whether on book, or free cashflow, or forward earnings - they look attractive relative to history. Ten of the eleven definitions of Value presented are cheaper than they've been in at least 90% of months since 1971" Tobias Carlisle interview 12/12/20 Value Investing "Tobias Carlisle is a well known author. He's written extensively about value investing. In our view, Deep Value is one of the best investment books ever written." Don't count out value 11/15/20 Norman Rothery Stingy Investing Value Investing "The announcement buoyed the market and value stocks in particular. I've been investing for almost three decades and don't remember a time when several of my stocks gained more than 20 per cent in a single day. But it happened on Nov. 9, when advances north of 5 per cent seemed to be the norm for value stocks." [$] Horses for courses 11/14/20 Value Investing "Had you bet on large growth in the early '60s after it had built up a lead on small value over half a decade, you would have missed one of the best opportunities to bet on the opposite horse. Had you done it again in 1974 when large growth had really pulled ahead by double digits, you would have missed out again. Same for the early '90s and, of course, March of 2000. Today, large growth is way ahead of small value." Value waves the white flag 11/01/20 Value Investing "I'm not giving up. My principles have a strong theory behind them. My efforts are not just value, but deep value, and I have gotten my share of kicks to the gut as a result. At some point the tide will turn, even if it is private equity absorbing value stocks out of the market. The investment math is hard to break. If companies are cheap on net worth and earnings, they will appreciate." Combining value and profitability 11/01/20 Value Investing "Adding profitability on top of a value strategy reduces the strategy's overall volatility." CROIC, CFROI, CROCI, and CROCS 09/19/20 Value Investing "Running a Value fund is somewhat like being stranded on a tiny tropical island out in the ocean. You can't really run away and are exposed to the harsh forces of nature. If you're lucky, there might be a coconut tree or big rock providing some shade. But it will still be hot most of the day, regardless of where you're sitting, and often you have to watch out for falling coconuts." Why Buffett bought Japanese stocks 09/18/20 Buffett Value Investing "Japan is one of the few value investments available in today's global developed markets. Large caps in the United States have gotten dramatically more expensive compared to Japan in the last 10 years." The value premium in Canadian stocks 08/30/20 Value Investing "The value premium is also strong for low-price stocks, varying from 11 per cent to 12 per cent during the period from 1983 to 2000, to between 5 per cent and 8 per cent from 2001 to 2018. Low-price stocks tend to be more obscure, are followed by fewer analysts and are typically less liquid than high-price stocks." 2 decades of value with Chris Mittleman 08/22/20 Value Investing "Chris Mittleman runs Mittleman Investment Management, an SEC-registered investment adviser. MIM employs a concentrated, long-term investment approach, typically holding between 10 and 20 positions." [video] A nearly two century winning streak 08/22/20 Stingy Investing Value Investing "Value investing added more than 100 years to its winning streak after the recent unearthing of data from before the great crash of 1929. All told, value outperformed in the United States since 1825 with many ups and downs along the way. Alas, it is currently in its most dramatic down period on record." Cheese consumption vs. death by bedsheet 08/16/20 Markets Montier Value Investing "Investing is always about making decisions while under a cloud of uncertainty. It is how one deals with the uncertainty that distinguishes the long-term value-based investors from the rest. Rather than acting as if the uncertainty doesn't exist (the current fad), the value investor embraces it and demands a margin of safety to reflect the unknown. There is no margin of safety in the pricing of U.S. stocks today. Voltaire observed, 'Doubt is not a pleasant condition, but certainty is absurd.' The U.S. stock market appears to be absurd." Times that try stock-pickers' souls 08/14/20 Value Investing "As maddening as this behavior is, it is typical of investor psychology at peaks and troughs; and consequently, the 'price' of growth is higher than it has ever been." Death and the demand for growth 08/09/20 Value Investing "If history is any guide, 10 years from now, among seasoned (i.e., not recently IPO-ed) firms, approximately 1.4% of large firms and 19% of small firms will have died a bad death" Stranger things 08/01/20 Value Investing "The stock market is noisy, and strange things can happen over three, five, even ten years. But over the long haul, investors eventually get what they pay for. Those who buy expensive equities at low yields usually realize low returns over the long run. And investors who buy cheap stocks at high yields can realize high returns - provided they stick with the strategy over the long haul." Nate Tobik talks to Tobias Carlisle 08/01/20 Value Investing "Nate Tobik is the Founder of CompleteBankData, author of the Bank Investors Handbook, and writes about deep value stocks in the Oddball Stocks Newsletter" [video] Handling the crisis 07/18/20 Value Investing "Of the firms we surveyed, 56% took measures to shore-up their liquidity position, 44% adjusted their workforce, and 16% adjusted wages and compensation." Value in recessions and recoveries 07/04/20 Value Investing "Value, quality, and small-cap strategies all tend to perform well during recoveries regardless of the catalyst for the bear market and recession." Beyond the zero bound 07/04/20 Value Investing "Perhaps the most significant conclusion to draw from Japan's experience during ZIRP therefore is not about the special impact of a low-rate environment. As we see it, interest rates were relevant in predicting bond returns and the poor performance of bank stocks, but other asset classes were better predicted by relying on entry valuations and yields." Room to run 06/26/20 Value Investing "The market today is a tale of two cities. Growth stocks are trading at very rich valuations as their prices have shrugged off any economic effects of coronavirus, whereas value stocks are trading at deeply discounted valuations that reflect significant fear about the pandemic's economic impact." Micro machine 06/20/20 Stocks Value Investing "Maj Soueidan on nano cap investing with Tobias Carlisle" [video] 5 factor investing tips 06/12/20 Momentum Investing Value Investing "Value, generally represented by portfolios of cheap stocks, holds up well in the analysis. Enterprise multiples and price-to-earnings generate some of the strongest results, however, the practitioner favorite - book-to-market - while able to be replicated, certainly doesn.t yield the strongest results." Two centuries of value and momentum 06/06/20 Momentum Investing Value Investing "Both Value and Momentum have crawled out of even deeper drawdowns in the past." Volatility and value 05/31/20 Value Investing "Historically, as uncertainty abates, and spreads contract, value outperforms" Equity styles and the Spanish flu 05/31/20 Academia History Markets Value Investing "We study the performance of equity styles during the period around the Spanish Flu pandemic of 1918-1919 and other deep historical market corrections to gain a deeper understanding on the performance of different groups of stocks during crises. We extend the widely used CRSP database with hand-collected data on U.S stocks and examine the major pre-1926 market corrections. We find that low-volatility and momentum tend to reduce losses during sharp market selloffs. By contrast, smaller stocks with high yields (value) offer less protection, but perform well during the recovery phase. Over major market selloffs and subsequent recoveries combined equity styles added value." Value and interest rates 05/23/20 Value Investing "We find no evidence that links the size of the value premium to the level of interest rates, and therefore our results do not support assertions that a change in interest rate environment is a necessary condition for value's recovery from the last decade. Neither do our results support assertions that interest rates or the yield curve have been a major driver of value underperformance during the sharp drawdown from 2017 to 2019 or over the past decade." Trend following in growth and value 05/15/20 Growth Investing Value Investing "Value returns appear to be inversely correlated to historic returns: the worse value's recent performance, the higher the expected return. Growth appears to be the opposite: the better the historic return, the higher the expected future return. Value is mean reverting. Growth trends." Value investing is not dead 05/09/20 Asness Value Investing "We think the medium-term odds are now, rather dramatically, on the side of value, with no 'this time is different' explanation we can find (and we've tested a lot of them!) holding a drop of water and no other period in the 50+ year history matching today." Rob Arnott interview 05/03/20 Value Investing "I had a chance to connect with Research Affiliates Founding Chairman Rob Arnott to talk about his most recent presentation, which deals with the economy, falling stock prices, valuations and the death of value investing." [video] Tobias Carlisle talks micro 05/03/20 Value Investing "Q&A with Tobias Carlisle, Acquirer's Fund at the Planet MicroCap Showcase Virtual Investor Conference 2020." [video] Historic opportunity in small caps 04/24/20 Value Investing "Following extreme periods like this historically, small value outperformed large growth by 16.8% annualized over the following 10 years." Dan Rasmussen on microcaps 04/24/20 Value Investing "Dan Rasmussen talks about microcaps and value" [video] Yesterday's profits 04/17/20 Value Investing "Unless you were concentrated in extremely high-expectation large growth stocks, we believe it was a very bad call to get out of equities because earnings were forecasted to disappoint." Cheap winners vs boring winners 04/17/20 Momentum Investing Value Investing "Should investors prefer boring over cheap winners? Based on this analysis, there is no clear answer. The Low Volatility factor had significantly lower drawdowns than Value, but both feature low correlations to Momentum, which creates attractive multi-factor portfolios. Cheap stocks have not performed well over the last decade, but are cheaper, per definition, and low-risk stocks exhibit interest rate-sensitivity." Dear fellow investors 04/17/20 Funds Value Investing "Let us start by saying that in our entire careers, we have rarely seen an opportunity to add as much long-term value for our investors as we do right now. This isn't to say that we believe that things will start getting better tomorrow, as we have no idea how this situation is going to play out over the next few weeks or months. But we do believe that the long term is what really matters in investing, and our confidence level is much higher for the longer term." Small Cap Value 04/12/20 Value Investing "You can see the returns coming out of a crisis tend to be far stronger in small value stocks than their large cap brethren. In fact, the numbers have been substantially higher." Priced In 04/11/20 Value Investing "In our view, it's buying cheap securities that likely won't experience bankruptcy. In debt, we think the place to do that is higher-quality high yield. In equity, we think the place to do that is deep-value equities that are also statistically unlikely to go bankrupt." The valuesburg address 03/06/20 Value Investing "It is for us the survivors, rather, to be dedicated here to the unfinished work which those who invested in cheap stocks (and the truly fallen who shorted expensive ones) have thus far so nobly advanced." Dan Rasmussen interview 02/21/20 Value Investing Dan Rasmussen talks private equity and value [audio] Venial sin punished quickly 02/21/20 Value Investing "The point is a simple one. Value has started 2020 with an extremely severe loss versus very long-term history, and, defined in a wide variety of ways, the worst loss yet (examining all of the same 6-week length periods) over the entire long 2010-2020 value drawdown." Crisis investing 02/15/20 Value Investing "We have spent the past year studying every financial crisis in the US since 1970. We have done this work for your benefit, so that you will keep your head when all about you are losing theirs. When weak hands fold, when forced sellers liquidate, we hope this research will help you make good decisions." Historical value 02/15/20 History Value Investing "While they may not have been known by the same names, many modern investment factors have historical roots stretching back centuries." Liquidity and factor returns 02/07/20 Momentum Investing Value Investing "We observe that the performance of the factor decreased consistently as the minimum liquidity constraints increased. This result can be explained by cheap stocks frequently being small stocks, i.e. having exposure to the Size factor. Removing these small and cheap stocks led to lower factor performance." VAH:Value vs Glamour 02/01/20 Value Investing "How HEI ran 47,500%; Anti-FOMO Starter Size Rules; and Value vs Glamour" [video] Value's death exaggerated 01/17/20 Arnott Value Investing "Over the last 12 years, the relative valuation of value and growth moved from the 21st percentile to the 97th percentile. This revaluation explains most of value's underperformance. Today, the relative valuation level is close to the most attractive valuation level in history at the peak of the tech bubble in 2000." VAH: Akre 01/17/20 Value Investing "S02 E02 Akre Never Sells, What Buffett Should Buy and Damodaran's Market Delusion" [video] O'Shaughnessy Q4 2019 letter 01/17/20 Funds Markets Value Investing "our updated in-house 10-year point estimate for the U.S. market's nominal total return fell during the year, and now sits at ~1.5% annualized, which would mean a ~16% total return over the next decade." Value's underperformance 01/10/20 Value Investing "Critics of value investing have declared the death of value. However, the empirical analysis suggests it is unlikely because the size of the current drawdown, while painful, is not an outlier, and the pre- and post-2007 data suggest there have been no statistically significant changes in the two drivers of the value premium - migration and profitability. The simple explanation for value's underperformance is the relative increase in the valuations of growth stocks." Value after hours 12/27/19 Value Investing "Passive melt-up and more" [video] The presumed end of value 12/16/19 Value Investing "after almost all investors have left the Value segment and even fundmanagers have softened their strategies with Growth criteria, there are inter-esting opportunities in the Value segment. Even though it is impossible to predict when the cycle will rotate and Value will make a comeback, it can be concluded that a more contrarian trade than Value is currently hard to find; and in recent decades Value has rarely been as attractively valued as today." [pdf] Improving deep value strategies 12/16/19 Value Investing "Their findings are consistent with prior research. For example, the use of multiple value metrics, composite scores, and negative screens is now common among many quantitative fund providers." Forget the shorts 12/11/19 Momentum Investing Markets Value Investing "The results show that a hedged long position will have a better Sharpe ratio than the classic long/short factor portfolio. The short portfolios are positive, and in some cases, better than the long portfolios; however, the short combination of factors are inferior." Unit economics 12/03/19 Value Investing "Bluegrass Capital talks modern value with Tobias Carlisle" [video] Floyd Odlum 12/03/19 Value Investing "He then pooled together another $39,000 to form his first partnership. That original $39,000 grew to $150M in controlled assets. All that during a span of just twelve years." Long-only factors 11/26/19 Value Investing "In contrast to recent research from Novy-Marx and Fama and French, the long leg of the low-risk and value premiums are NOT explained by the profitability and investment factors. The low-risk and value premiums are actually unique. In contrast, the short-leg of the low-risk and value premiums (i.e, the high risk and expensive stocks) can be explained by the profitability and investment factors." Value after hours 11/26/19 Value Investing Memories of Nortel in the TSE 35 edition. [video] Dr. George's paper 11/22/19 Value Investing "The purpose of this paper is to examine whether earnings quality contributes to the book-to- market's predictive power in the cross section of stock returns. Earnings quality is embedded in the value-growth effect given that retained earnings is a key part of the book value of equity. Earnings quality reflects the effects of managerial discretion on reported earnings, which has been shown to be associated with both risk and behavioral biases in asset pricing. Our results affirm the existence of a value premium and show that the value premium is more pronounced within poor earnings quality stocks. Moreover, we find that poor earnings quality contributes to the value premium mainly through the pricing of growth stocks. Our results suggest that the quality of reported earnings has an incremental role in shaping expected returns of value versus growth stocks." Time for a venial value-timing sin 11/08/19 Value Investing "To evaluate this, we look at how to measure whether a factor, in this case the value factor, is itself rich or cheap versus history. We look at three approaches, from academic to more AQR-like, and the answer, regardless of the approach taken in measuring cheapness, is that value is currently quite cheap compared to history. And it has gotten that way over the last almost two years." Ian Cassel interviews Tobias Carlisle 11/08/19 Value Investing "Ian Cassel is Chief Investment Officer at Intelligent Fanatics Capital Management. He turns the tables on Tobias to discuss deep value, the acquirers multiple and Acquirers Funds, LLC." [video] Compounding machines 11/08/19 Funds Value Investing "Join us for a rare interview is Chuck Akre and John Neff of Akre Capital Management" [video] Jack Forehand on applied value 11/01/19 Value Investing "Jack Forehand is a partner at Validea Capital and is responsible for the firm's overall operations and portfolio management." [video] Costs and returns from factor portfolios 10/22/19 Value Investing "Well-designed, factor-based funds are able to capture the returns provided by both the size and the value factors." O'Shaughnessy's Q3 2019 10/18/19 Value Investing "The rapid stretching of growth multiples in large cap, and the breadth of highly-levered, money-losing companies in small cap stand out as dominant themes in this market." Owner managers 10/18/19 Value Investing "Joe Boskovich talks to Tobias Carlisle about finding great owner/operators." [video] Enhance momentum strategies 10/11/19 Momentum Investing Value Investing "A strategy that buys small value winners and sells large growth losers (MAX strategy) generates significantly larger momentum profits than a standard momentum strategy, is robust to common return controls and does not suffer from return reversals for holding periods up to 3 years." Graham's Net-Nets 10/11/19 Graham Value Investing "The implication of calculating the arithmetic mean return vs the geometric mean return is stark. The arithmetic mean would, on the balance of probability, have materially overstated returns." Lawrence Hamtil talks about sectors 10/11/19 Markets Value Investing "Through his blog and his Twitter account, Lawrence frequently discusses the under-the-radar influence of uncompensated sector bets on the performance of value, small and micro, and international strategies." [video] Beyond the 500 10/11/19 Value Investing "The cost of adding a standard liquidity filter to systematic value portfolio takes about 4-5% off your returns" Bubblicious 10/04/19 Markets Value Investing "Most of us value investors don't believe in market timing at all. It is so amusing to watch the market go down 200 pts (or more) on a tweet only to reverse itself within a day or two by another tweet. Why anyone would trade based on this stuff is beyond me. I am a believer that headlines almost never mark turning points in the market. If the market is making a new high and then plunges on some negative headline, you can bet that that high will not be a high of any significance. I have seen various attempts over the years to analyze peaks and troughs in the market and matching it with news headlines; there usually is no headline that marked the top or bottom of a market." The Acquirers Fund 10/04/19 Indexing Stingy Investing Value Investing "The value strategy used by the Acquirers Fund is heavily informed by the methods highlighted in Mr. Carlisle's books. More specifically, he likes to look for bargain stocks by comparing a firm's enterprise value - in simple terms, the market value of its equity plus net debt - with its operating income after depreciation. The ratio is a close cousin of the enterprise-value to earnings-before-interest-and-taxes ratio. You can think of both as fancier versions of the more familiar price-to-earnings ratio." [$] Jim Mitchell on microcaps 09/24/19 Funds Value Investing "His fund documents illustrate just how unusual his strategy is. They refer to market capitalization 'below $100 million,' no 'quarterly SEC filings,' and average holding periods of 'more than five years.' This is not a typical investment vehicle. But he has been at it for more than 38 years and racking up impressive returns in the process." Why value investing works 09/17/19 Value Investing "Greenblatt's simple idea is so insightful. Value investing works (over the long term) because it sometimes does not work (in the short term)." Thomas Braziel on distressed activism 09/17/19 Value Investing "Thomas Braziel is the managing partner at 507 Capital, an investment firm specializing in unlisted credit opportunities. Thomas hunts for very unusual, off-the-run opportunities in bankruptcy, and presses his claims through activism, receivership and other active means." [video] Value and the yield curve 09/06/19 Value Investing "We observe that the returns of the Value factor were negative when the yield curve was flattening and positive when steepening in the period between 1971 and 2019. These results are intuitive as a steepening yield curve typically implies a risk-on environment where investors are more inclined to take larger risks, such as betting on cheap, but problematic companies. On the contrary, when the yield curve flattens, investors tend to expect worsening economic conditions and are more likely to allocate to stocks associated with safety." The perch portfolio 08/31/19 Dividends Stingy Investing Value Investing "When it comes to lunch, many investors pay for their lakeside repast using money sent their way in the form of dividends from large companies. But smaller companies also pay dividends and often generate succulent returns." [$] Factor investing works 08/31/19 Value Investing "Don't fall for claims by highly respected asset managers that factor-based investing isn't working. Factor-based strategies have outperformed capitalization-weighted indices over long time horizons." Contrarian investing in commodity cyclicals 08/31/19 Value Investing "Some investors avoid these cyclical industries because of their wild and unpredictable fluctuations, but these data suggest that using economic data to evaluate investment opportunities in cyclicals and buying at economic troughs can provide above-market returns." Factor investing on the country level 08/31/19 Markets Value Investing "It is worth noting that the performance of the Value factor on country level is similar to that on single stock level. In both universes, the factor experienced a significant boom-and-bust cycle over the last 30 years. Investors have been buying cheap and selling expensive stocks as well as countries at approximately the same time periods." Bye-bye net-net 08/31/19 Accounting Value Investing "The problem for the value investor is that long-term leases create long-term assets, so the assets are not part of working capital, but, to adhere to IFRS 16, the increased liabilities are deducted to calculate net-net working capital. With current assets unchanged and total liabilities increased, there will be even fewer companies that pass the net-net working capital screen. I think that it is now an interesting historical artifact with no practical application for today's investors." [$] How painful can factor investing get? 08/19/19 Value Investing Very Fraud spotting 07/31/19 Value Investing "The portfolio manager's smile and relaxed posture immediately disappeared. With a furrowed brow he asked me to confirm: in Florida? Yes, in Florida. Why, was that a particularly poor state to purchase a house in?" Vol can be improved 07/31/19 Value Investing "Not all low-volatility stocks outperform. Those that are expensive relative to their profitability actually underperform the market." Tobias Carlisle talks to Tim Melvin 07/26/19 Value Investing "Before writing full time, Tim was vice president at Ferris Baker Watts, a boutique investment firm, where he specialized in deep value investing. He has also worked as a stockbroker, advisor and portfolio manager." [video] Value investing and concentration 07/26/19 Value Investing "Given that Value beat Growth over this time sample, what one finds is that on average, the more concentrated the portfolio (on average), the higher the CAGR over this time period (especially when keeping the holding period the same). Additionally, over the full-time period, while there is deviation amongst the Value metrics, they are generally similar in CAGR performance." Long live value 07/26/19 Value Investing "Value has underperformed since the beginning of 2007. Another prolonged period of underperformance for Book-to-Price and Earnings-to-Price happened between 1926 and 1941." Eric Cinnamond interview 07/07/19 Value Investing "Eric Cinnamond, CFA is a partner at Palm Valley Capital Management and a portfolio manager at the Palm Valley Capital Fund (PVCMX). Eric focuses on absolute return small cap value" [video] Quant Cassandra 07/07/19 Markets Asness Value Investing "But the real magic skill of his is that despite some fairly horrific and none-too-short relative and absolute return periods, he's stuck with his style, and his risk level, like grim death." The earnings mirage 07/07/19 Accounting Markets Value Investing "The conceptual problems with book value as an accounting tool are well-known. But one problem that often gets missed is the problem of inflation. Book values are not adjusted for inflation over time, and therefore they tend to understate the true value of corporate net assets. We recently developed a new technique for calculating book value, called 'integrated equity' that corrects this distortion. Our original research piece, "The Earnings Mirage" carefully explains this technique and uses it to generate data for sectors, countries, periods of history, and even factors." The Frugal Dividend portfolio 06/26/19 Dividends Norman Rothery Stingy Investing Value Investing "Mixing a gin and tonic yields a satisfying summer drink. Combining investment ingredients can provide sunny returns. In that spirit, I'd like to introduce the Frugal Dividend portfolio. It adds a value investing twist to the Stable Dividend portfolio. The idea is to seek out low-volatility dividend stocks that trade at reasonable prices because the combination has worked well over the past 25 years." [$] On the value factor 06/26/19 Value Investing "Given that the performance of the Value factor is similar across stock markets and asset classes, indicates one common driver that is likely related to market structure. Our research suggests that it is mainly risk sentiment that is driving the performance of the Value factor, although that framework requires further validation." Tobias Carlisle talks to Dan Rasmussen 06/26/19 Value Investing "Verdad's Founder and Portfolio Manager Dan Rasmussen talks about his replication of private equity investing in the public markets using undervalued, levered, small-cap stocks." [audio] Curious Chuck Akre 06/21/19 Value Investing "My guest today is Chuck Akre, a now widely famous investor who founded Akre Capital Management in 1989, which now manages approximately $10B dollars. We discuss his investing style and his 'three-legged stool' for evaluating companies. Please enjoy this great conversation." [audio] Tobias Carlisle talks to Peter Rabover 06/21/19 Value Investing "Peter "Russian Bear" Rabover, CFA is the Managing Director at Artko Capital based in San Carlos, California." [video] What works 06/15/19 O'Shaughnessy Value Investing "From January 1, 1963, through December 31, 2012, the stocks in the best decile of the value composite earned an average annual compound return of 17.3%, approximately 6.2% better than the All Stocks universe, which earned 11.1% over the same period." Is value overcrowded? 06/15/19 Swedroe Value Investing "Summarizing, comparing relative valuations at the end of 2018 to those at the end of 1999, we find that, with the exception of the still-wide gap in the P/B of large growth stocks, the rest of the ratios look similar, with (in terms of P/E) small growth being relatively far more expensive (with a ratio of 6.1versus 5.1) than it was just before the growth bubble burst in 2000." Indigo to go private? 06/15/19 Stocks Tattersall Value Investing "Minority shareholders will be reluctant to tender at the current depressed price, but by chance we have tangible evidence of what a smart insider thought the stock was worth a year ago. During several weeks in January and February of 2018, Mr. Schwartz reported significant insider purchases of Indigo shares in the $19-to-$20 range." Jim O'Shaughnessy talks to Tobias Carlisle 06/06/19 Value Investing "Jim published his first book Invest Like the Best in 1994, followed by the first edition of What Works on Wall Street in 1997, How to Retire Rich in 1998, and Predicting the Markets of Tomorrow in 2006." [video] John Neff dies at 87 06/06/19 Neff Value Investing "He brought considerable wit, as well as investment wisdom, to the proceedings, and was always generous with his time and insights. He was a brilliant contrarian, common-sensical investor, and one of the nicest, most decent people I have ever known." F Score in Australia 06/06/19 Value Investing "We show that when applied to the 200 largest stocks in the Australian market, the Piotroski signal generates long/short portfolio returns of 1.0% per month. However, much of this return is on the short side. The long/short return is much higher against smaller cap stocks and is evenly balanced between the long and short sides. Positive returns are generated in 74% of months. The premium to high F score stocks is robust to controls for the size, value and momentum risk premia. We use three separate tests to show that the standard explanation for the power of the F score signal - analyst neglect of the news contained in small stocks - isn't supported by the data. Other underlying forces must be at work." Cheap vs expensive countries 05/27/19 World Value Investing "An alternative to selecting single stocks is to focus on entire countries and rank these as cheap or expensive. The rationale for abnormal returns from buying cheap stocks should apply on country level as well. From the perspective of a current Value portfolio, this might result in replacing the shares of Deutsche Bank with indices for Greece or Portugal, which are two countries that have been trading cheaply in recent years given structural problems in their economies." Interest rates and returns 05/20/19 Value Investing "Across multiple interest rate cycles in the United States between April 1965 and December 2017, there has been no meaningful relationship between changes in interest rates and returns on the broad equity market, small value stocks, or leveraged small value stocks." Role of shorting, firm size, and time 05/01/19 Momentum Investing Academia Value Investing "We examine the role of shorting, firm size, and time on the profitability of size, value, and momentum strategies. We find that long positions comprise almost all of size, 60% of value, and half of momentum profits. Shorting becomes less important for momentum and more important for value as firm size decreases. The value premium decreases with firm size and is weak among the largest stocks. Momentum profits, however, exhibit no reliable relation with size. These effects are robust over 86 years of U.S. equity data and almost 40 years of data across four international equity markets and five asset classes. Variation over time and across markets of these effects is consistent with random chance. We find little evidence that size, value, and momentum returns are significantly affected by changes in trading costs or institutional and hedge fund ownership over time." Valuation horse race 05/01/19 Value Investing "Value isn't necessarily dead - it all depends on how you measure it, when and where it is measured. This inconsistency suggests that value is merely 'noisy,' which is well-established." Concentration is cool 04/21/19 Value Investing "Sharpe ratios tend to be maximized in a value portfolio around 25 positions." Fairfax Lollapalooza 2019 04/03/19 Value Investing Check out the schedule of events for next week's Fairfax Lollapalooza. Forward vs trailing price to earnings 04/03/19 Value Investing "It also became clear in my study that had an investor focused on low trailing P/E ratio stocks she would have done much better than focusing on low forward P/E ratio stocks." Chou's letter 04/03/19 Chou Value Investing "In summary, although the markets have been less kind to value investing, we exacerbated the problemas practitioners." [pdf] Guy Gottfried talks at Ivey 03/18/19 Value Investing "Guy Gottfried talks to Dr. George's class" [video] Growth at a reasonable price works 03/11/19 Value Investing "Our results suggest a GARP approach can generate enviable results, although how enviable depends on the observation period. Perhaps the strategy's key benefit is forcing investors to adopt a systematic framework so they can allocate to exciting growth stories - the rising Amazons - albeit only when they are trading at reasonable valuations." Guy Gottfried at Ivey 03/11/19 Value Investing "Ivey Business School's Value Investing Program of 2019 welcomed Guy Gottfried as a Guest Speaker." [video] The dirty little secret of value funds 02/20/19 Value Investing "The mystery is deepest in the case of value funds. Many shelves of academic research have demonstrated that one of the more dependable ways to beat the market, at least on paper, is to buy cheap stocks and shun expensive ones." [$] Why most active managers fail 02/20/19 Value Investing "To put it simply, the cheapest stocks are disproportionately small in terms of size and volume. This means that an active manager looking to choose, say, the best 40 of these stocks would be unable to manage more than $200M or so. Even a more passive, quasi-indexed, approach owning the 200 cheapest stocks could only handle about $1B." Time varying factor premiums 02/20/19 Value Investing "For value investors, the above findings are good news, as the relatively poor performance of value stocks in the U.S. over the past decade has led to a widening of the book-to-market spread between value and growth stocks, restoring it to about the same level it was when Eugene Fama and Kenneth French published their famous study" Broken beta 02/12/19 Indexing Value Investing "Smart beta will disappoint some investors, but that's as much their fault as the product providers. Investors do not appreciate the significant tracking errors relative to their benchmarks. This has led ETF issuers to create index products with only slight factor tilts. Given the higher price tag of smart beta ETFs compared to plain-vanilla equity ETFs, they are probably not worth the higher fees." Looking for the intuition 02/12/19 Value Investing "After a very tough 2018 for many quantitative strategies, particularly in market-neutral stock selection, one hurdle many investors face is getting some basic intuition about results, and even more elementary, about what one actually owns in such a portfolio. This matters as the more intuitive something is the easier it is, all else equal, to stick with it. I can't fully fix this problem. A multi-factor process, by design, lacks simple one-liner explanations. Frankly, that's much of the idea of diversifying across factors and stocks. But, while I can't fix this completely, I do hope I can help." Where is the Value 02/05/19 Value Investing "The countries noted above as being deeply discounted relative to peers and history are also showing up as having favorable Earnings Growth relative to peers - Portugal, Greece, and Russia." Bob Robotti's blog 01/28/19 Value Investing "In this first video Bob Robotti follows-up on our year end letter with the story of Mr. Market, a tale well known to value investors. We look forward posting more short videos as a regular feature of the blog." Battle for Stuart Olson 01/16/19 Value Investing "As a long-term shareholder, I wish Crescendo Partners and Jamarant Capital every success in their quest to reduce the valuation discount that we all see in the Stuart Olson stock price. Depending on whom they nominate for the board, I may very well vote for their candidates. But in spite of my optimism, I suspect that we have seen only the opening salvo of a protracted battle for the future of the company." [$] Humans love a narrative 12/10/18 Funds Value Investing "What that means is that if you can eliminate companies with really bad balance sheets or really poor quality businesses, or that are trading at crazy expensive multiples, then you can gain a lot versus the broad market as opposed to simply buying the absolute best balance sheets or the companies with the highest returns on capital." Cliff Asness interviwew 11/26/18 Asness Value Investing "Cliff was an original quant researcher and he has long been one of the financial writers and thinkers that I look to for education and for inspiration." [audio] Alpha within factors 11/05/18 Value Investing "it's possible to generate alpha within the value factor by shifting its allocation in the direction of stocks with better future earnings outcomes. We used additional factors that are correlated with those outcomes--specifically: momentum, trailing growth, accruals and leverage--to filter out value traps and identify the strongest companies out of what remains." Size matters 11/05/18 Value Investing "This suggest that if there are excess returns anywhere in the market, those returns are in precisely the stocks that are on the verge of being inaccessible to most fund managers (and ETF products) seeking to run higher amounts of assets under management." Tom Gayner interview 11/01/18 Value Investing "Gayner went to the University of Virginia and studied accounting, following which he went to work for PricewaterhouseCoopers. While working as an accountant, he realised that he had made a mistake and soon decided to shift to investing" [video] O'Shaughnessy Q3 2018 letter 10/22/18 Value Investing "The internally financed, high investment group outperformed the debt financing, low investment group by 3% per year, annually. That is a large number in a large cap universe" The odds of value 10/15/18 Markets Value Investing "Allocating tactically based on the market skewness might be considered unusual given the abstract nature of skewness. However, the skewness of the stock market can perhaps be understood as a measurement for the risk sentiment of investors. If risk aversion prevails, then investors are less likely to be interested in cheap, but problematic stocks and Value investors will not get compensated for holding undesirable stocks." Micro and small cap factor investing 10/09/18 Value Investing "The quality factor is most effective in micro caps, successfully screening out the deteriorating businesses." 3 shades of value 09/29/18 Indexing Value Investing "Rebalancing into ultra-cheap shares at the market's lowest point helped these funds outperform VTI in 2009 as the recovery got underway. DFA U.S. Large Cap Value, Invesco FTSE RAFI US 1000 ETF (PRF), and Invesco S&P 500 Pure Value ETF (RPV) had excess returns of more than 2 percentage points over VTI from March 2009 through June 2018. RPV had the best returns of the bunch, outpacing VTI by 6.3 percentage points annually." Go small value 09/24/18 Value Investing "Small-cap value is where you have a fighting chance of finding the alpha opportunities passed over by the big guys. With little sell-side coverage or institutional ownership of these stocks, your research could lead you to a proprietary insight and significant upside." Low-P/E in the DJIA 09/24/18 Norman Rothery Stingy Investing Value Investing "It's easy to find simple stock-picking strategies that have outperformed the market for decades. One of the very simplest was highlighted way back in 1973 and has continued to trounce the market since then." [$] Bruce J. Flatt talk 09/06/18 Value Investing "In this talk, Bruce Flatt, CEO of Brookfield Asset Management, shares his journey, the challenges faced by Brookfield over the decades, key ideas that have shaped it's philosophy for successful investing and principles for enduring through times good and bad." [video] Share buybacks: a global perspective 07/23/18 Value Investing "For example, in the United States, the S&P 500 Buyback Index has pummeled the overall market, averaging annual returns of 13.98% since January of 1994, versus 9.05% for the S&P 500 over the same period" Deconstructing the low vol anomaly 07/23/18 Value Investing "Research has provided persistent and pervasive evidence that the low-volatility anomaly, at least in stocks, is well explained by other common factors, specifically the value factors of D/P and E/P, the profitability and investments factors, and the term factor. This makes the low-volatility factor redundant for portfolios that already have exposures to these factors." O'Shaughnessy letter 07/23/18 Value Investing "Is Value ever going to work again? Since 2010, the Russell 1000 Growth index has outperformed the Russell 1000 Value index by roughly 70%, leaving many investors wondering if Value's historical edge will persist, or whether, instead, the future will be more random." Lessons from Jim O'Shaughnessy 07/23/18 Value Investing "We are, by our very nature, story-loving animals, and we create stories to create narratives that help us make sense of what is going on around us in the world, and many times, those stories are wrong. And so, from our perspective, trying to make a successful forecast, short-term forecast, is a virtual impossibility, because, in the short term, there's quite a bit of noise in the marketplace. And people mistake noise for signal, and they have a narrative about it, and it's very believable, but unfortunately, often wrong. So we don't make forecasts in terms of what the market's going to do over short periods of time because quite frankly, we don't know. And if others were honest, they would have to admit that they don't know, either. However, we do make forecasts based on very long-term time in the market." Long live value 07/23/18 Value Investing "We discuss how difficult the market has become for active investors, thematic investment opportunities, and the potential sources of market mispricings." [audio] The art of catching falling knives 07/09/18 Value Investing "Ashok Leyland was a case of falling knife for me, and I did not want to get hurt catching it mid-air on its way down. But I learned something about catching falling knives from this mistake of omission, which has helped me in my subsequent decision making." In defense of the value premium 06/25/18 Value Investing "In fact, even though the value premium has been quite large and persistent over the long term, it has been highly volatile." Lou Simpson wisdom 06/04/18 Value Investing "One thing a lot of investors do is they cut their flowers and water their weeds. They sell their winners and keep their losers, hoping the losers will come back even. Generally, it's more effective to cut your weeds and water your flowers." Factors from scratch 06/04/18 Momentum Investing Value Investing "The excess returns associated with Value and Momentum result from convergent and divergent processes, respectively. Value stocks are systematically underpriced and gradually converge on their fair value over time. Momentum stocks start out fairly valued or slightly overvalued, and go on to become more overvalued in the short-term, before reverting back. Both styles represent a market mistake that can be captured as alpha." Replicating in Europe 05/23/18 Value Investing "For context, the 4.5% premium of leveraged small value over small value is similar in magnitude to the 3.8% premium that we observed in our US research from 1965 to 2017. While the premium in the US includes in-sample data that was used to train the ranking algorithm, the observation of a 4.5% premium in Europe is completely out of sample." Graham & Doddsville: Spring 2018 05/07/18 Value Investing "This is a bittersweet issue for us. Bruce Greenwald, the Academic Co-Director of the Heilbrunn Center, retires at the end of this academic year" The process matters 05/07/18 Value Investing "After doing more research, I realized how much process mattered when it came to selecting which value stocks to invest in." Factor investing: art and science 04/30/18 Momentum Investing Value Investing "Having studied finance for a long time, I think I now know less about how the stock market works. In fact, I probably should have stopped studying finance after I read Ben Graham's Intelligent Investor, over 20 years ago. Life would be a lot easier, or at least less complicated. Adhering to Graham's straightforward value investing ethos certainly worked out for Warren Buffett" Joel Greenblatt talks to Barry Ritholtz 04/22/18 Value Investing "Bloomberg View columnist Barry Ritholtz interviews Joel Greenblatt, co-founder of Formula Investing LLC and managing principal, co-chief investment officer and portfolio manager at Gotham Short Strategies and Gotham Asset Management LLC." [audio] Martin J. Whitman dies at 93 04/22/18 Value Investing "Martin J. Whitman, who made .safe and cheap. a value-investing mantra during more than two decades managing the Third Avenue Value Fund, has died. He was 93." What's cheap? 03/27/18 Momentum Investing Markets Value Investing "Stocks with high conviction buyback programs are as cheap as they've been since the tech bubble, and trending cheaper." High conviction buybacks 03/19/18 Value Investing "Buybacks may not be well timed in aggregate, but they have been timed well (at least, timed at cheaper relative prices) by firms with high conviction buyback programs. These firms can get lost in the shuffle because, on average, the cash spent on buybacks by these high conviction firms represent a minority of the total cash being spent on buybacks." Simple value strategies win 03/19/18 Value Investing "While relative-value strategies do seem to add value over a passive index, it appears investors would be generally better off if they relied on simple P/E-based investing." Capex darlings and the myth of long-termism 03/19/18 Value Investing "part of the allure of buybacks is the signal to shareholders that management will not fritter away precious capital on dubious projects" Sequential models 03/05/18 Value Investing "The sequential model allows investors to prioritise factors and has the advantage of resulting in a concentrated portfolio of stocks. However, the prioritisation requires investors to have a strong preference for specific factors, which can be a difficult choice given that factors tend be highly cyclical." Private equity returns in public markets 03/05/18 Markets Value Investing "It has been a while since we discussed private equity on the show, so I was excited for this week's conversation. My guest is Dan Rasmussen, the founder of Verdad advisers. Dan worked in private equity and has spent years studying the entire field. Dan identified several key drivers of private equity's outsized returns: size, value, and leverage. His firm uses these factors as a starting point to build a portfolio of public equities that behave like their private brethren." [audio] Thomas Russo talks at Google 02/26/18 Russo Value Investing "Thomas Russo describes the important ingredients of his tax-efficient, long-term buy-and-hold approach to global value equity investments." [video] High-debt value 01/29/18 Value Investing "Dan then delves into leverage and the value premium, telling us how important this interaction is. He gives us great details on the subject based on a study he was a part of while at Bain Consulting. The takeaway was that roughly 50% of deals done at multiples greater than 10x EBITDA posted 0% returns to investors, net of fees." [audio] Value and momentum portfolio construction 01/22/18 Momentum Investing Value Investing "Being a Value investor is difficult, given that the stocks of a Value portfolios tend to have inherent issues, otherwise, these stocks would not be cheap. Being a B/M-focused value investor over the past decade has been especially hard, as the factor returns were effectively zero - plenty of pain, but no gain. Experiencing this factor cyclicality often leads investors to contemplate adding other factors in the hope of improving performance. An obvious candidate would be Momentum, as cheap and rising stocks are more appealing than cheap stocks. However, it is not quite straightforward for investors to add Momentum to a Value portfolio as there are several options available. In this short research note, we will analyze Value & Momentum portfolios created by three common multi-factor model approaches - the combination, the intersectional and the sequential models." Fundamentals of value investing 01/22/18 Value Investing "An interview with Value Investor, Joel Greenblatt. In this interview Joel discusses his approach to Value Investing and its core elements. Joel also discusses his career including examples of investments and why they were successful or not." [video] Graham & Doddsville Winter 2017 12/24/17 Value Investing "There is no investment is without risk. But paying 4x earnings eliminates a lot risk." Purgatory for pessimists 12/18/17 World Markets Value Investing "Also, notice the disparity in excess return between an equal-weighted versus a cap-weighted portfolio construction process. These are the exact same stocks! Yet, a cap-weighted approach underperforms by hundreds of basis points, even in large 300-stock portfolios." Wes Gray on QVAL 12/18/17 Funds Indexing Value Investing "Wes Gray, CEO of Alpha Architect, says he searches the 'trash bin' for companies in order to find 'deep value' in the QVAL ETF. He joins Bloomberg's Scarlet Fu and Eric Balchunas." [video] Bill Nygren Talks at Google 12/18/17 Funds Value Investing Oakmark fund manager Bill Nygren talks about value investing at Google. [video] Countering the narrative about value 12/04/17 Value Investing "By using the price-to-book ratio (or "P/B") as a primary determinant of value, the Russell 1000 Value index has tended to favor stocks from sectors with generally low P/B ratios, such as financials and energy companies, while excluding stocks from sectors such as technology and consumer staples, which may look cheap relative to earnings or cash flows, but have lofty P/B ratios. This, combined with a lack of sector constraints, means that comparing Russell 1000 Value to Russell 1000 Growth is really more akin to comparing energy and banks to consumer and technology stocks" Factor investing and trading costs 12/04/17 Value Investing "Trading costs degrade performance. Factor investing strategies have capacity constraints. Higher turnover factors have lower capacity constraints than lower turnover factors." Going deep on contrarian factor timing 12/04/17 Value Investing "we study all the interesting things that happen when some stocks, or other assets, get deeply cheap while others get deeply expensive and, in the process, learn more about the economics of value investing, and how timing works when you sin a little but now in lots of places at once" Microcap as an alternative to private equity 11/27/17 Value Investing "Private equity has become a central component of many institutional and high-net-worth investment portfolios over the past decade. While private equity offers potential advantages, it also requires taking distinct risks. This paper highlights an alternative to private equity - microcap equities - which mitigates several of these risks." Fairfax vs. Berkshire Hathaway 11/20/17 Value Investing "We find that while value beats growth (that is, the value premium is confirmed) in the total sample (on average, by 430 basis points annually - a basis point is 1/100th of a percentage point), the value premium is actually driven by the firms with the poorest earnings quality. The average value premium for the best earnings quality firms (the top quartile) is 60 basis points, whereas the corresponding value premium for the poorest earnings quality firms (the bottom quartile) is 960 basis points. That is, an investment strategy that emphasizes lower-quality value stocks will improve the long-term performance of a value portfolio." Lou Simpson interview 11/11/17 Value Investing "There's also a negative correlation between the number of people making the investment decisions and the results. If you have a lot of people involved, you tend to have the least competent person making the decision, because you need consensus." Joel Tillinghast interview 11/06/17 Books Value Investing "The fund's definition of low-priced is changing in November, from a price at time of purchase of under $35, to either a price under $35 or a higher-than-index earnings yield (that is, a low P/E). The original price test was meant to include small-cap stocks, but also larger companies that were temporarily depressed and turning around. The newer test is looking for low-priced relative to intrinsic value, which is how I have always run the fund." Tobias Carlisle interview 10/30/17 Value Investing "Toby tells us that the book describes a simple way to find undervalued companies. In essence, you're trying to find a company trading below its intrinsic value. This is how to get a great price as a value investor. Of course, you get these prices because things don't look too rosy with the stock - there's usually a crisis or some hair on it" [audio] Avoid dividends 10/30/17 Dividends Value Investing "Many investors, including retirees, value those quarterly dividend checks. But recognize the huge opportunity cost ones pays for them. The 'bird in the hand,' so to speak, is costing about three or four in the bush." Graham and Doddsville: Fall 2017 10/23/17 Value Investing "In this issue, we were fortunate to speak with five investors who provide a range of frameworks and investment styles. All of these investors focus on understanding downside risk, developing a differentiating view, and studying history." CAPE ETFs 10/16/17 Indexing Value Investing "Shiller's CAPE ratio looks at how current stock prices compared to the company's average inflation-adjusted earnings over 10 years. As described in the BMO prospectus, the indexing process for its ETF involves identifying the top 100 securities with the highest 10-year CAPE yield based on price and sector. A momentum filter is then applied to remove 20 securities with the lowest price momentum over the last 12 months. The remaining securities are equally weighted." Value stock returns 10/07/17 Markets Value Investing "Examining the 5-year and 10-year results, one finds similar (but much more pronounced) results as in the mid/large-cap stocks. At a 5-year level, there are more Growth stock losers (highly negative returns) and at the 10-year return level there are more big winners from the Value stocks." The death of value 10/01/17 Value Investing "Clearly, value investing, as proxied by a portfolio that buys cheap stocks based on price-to-book ratios, ate crow over the past 10 years. Why?" Value in the value factor 09/17/17 Value Investing "Value and Size are cheap while Low Volatility and Growth are expensive" Value investing is difficult 09/17/17 Value Investing "Whilst in its basic form a value approach may be considered elementary compared to other investment styles, it is the most exacting behaviourally; this is a key reason why a long-term premium exists for owning value stocks and why both active managers and fund investors struggle to embrace the discipline." Finding takeover candidates 09/17/17 Tattersall Value Investing "There is no guarantee that stocks trading below net collateral value per share will be subject to a takeover offer or go private, but the numbers make it feasible to buy the company with no money down. That is why they are intriguing candidates for a patient investor." Tim's letter 09/11/17 Value Investing "I realize the general market is relatively expensive and there are many uncertainties. This is reflected in our cash position which represents just under 25% of our net assets at June 30th. Additionally, in August we purchased a modest amount of portfolio insurance in the fashion of 'put options'. The recent sale of our position in Polaris will raise cash to over 35% of net assets giving us both downside protection and the ability to take advantage of investment opportunities." Seth returns cash 09/11/17 Value Investing "Value investors seek stocks that they believe are undervalued by the market. A more than eight-year bull market has made stocks expense on a number of historical measures, leaving fewer bargains to be found." ILTB with Meb Faber 09/11/17 Dividends Markets Value Investing "Meb is a quantitative researcher whose firm Cambria has been behind many interesting investment strategies that break the Wall Street mold. We talk investing factors, dividends, angel investing, podcasts and more." [audio] Chou's letter 09/02/17 Funds Chou Value Investing "we believe pharmaceutical stocks as a group are selling at attractive valuations, in comparison to the free cash flow and earnings they generate. The recent price drops may present one or more attractive long-term investment opportunities" Tom Russo on global investing 08/30/17 Value Investing "Tom looks for companies with strong cash-flow characteristics, where large amounts of 'free' cash flow are generated. Portfolio companies tend to have strong balance sheets and a history of producing high rates of return on their assets. The challenge comes in finding these obviously desirable situations at reasonable or bargain prices. Tom's investment approach is focused on a small number of industries in which companies have historically proven to be able to generate sustainable amounts of net free cash flow. (These industries typically have included food, beverage, tobacco, and advertising-supported media.)" [audio] Buying moats 08/28/17 Value Investing "My guest this week is Pat Dorsey, who was the longtime director of equity research at Morningstar, where he specialized in economic moats: sources of sustained competitive advantage that allow a few companies to deliver huge returns over time." [audio] Investing in floppy disks 08/28/17 Value Investing "Two years ago, we were trading at 10 times revenue. ... At 10 times revenue, to give you a 10-year payback, I have to pay you 100 per cent of revenues for 10 straight years in dividends ... That assumes that I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes that I pay no taxes, which is very hard. ... And that assumes that with zero R&D for the next 10 years, I can maintain the current revenue rate. ... Do you realize how ridiculous those basic assumptions are? You don't need any transparency. You don't need any footnotes. What were you thinking?" Anomalies abroad 08/20/17 Academia Value Investing "A pre-specified set of nine prominent U.S. equity return anomalies produce significant alphas in Canada, France, Germany, Japan, and the U.K. All of the anomalies are consistently significant across these five countries, whose developed stock markets afford the most extensive data. The anomalies remain significant even in a test that assumes their true alphas equal zero in the U.S. Consistent with the view that anomalies reflect mispricing, idiosyncratic volatility exhibits a strong negative relation to return among stocks that the anomalies collectively identify as overpriced, similar to results in the U.S." The August of our discontent 08/07/17 Markets Value Investing "This month is the ten-year anniversary of the "quant crisis" or "quant quake" - that one week period in August 2007 when quantitative equity strategies like factor investing and statistical arbitrage suffered very large losses and then, in the next few weeks, made an almost full recovery. Given the current popularity of factor investing it seems a good time to review what happened that summer and discuss its relevance for today." Robert Robotti Interview 07/30/17 Funds Value Investing "Robert Robotti on the role of active management in the modern world" [audio] Compound your face off 07/30/17 Value Investing "Lots of you will already be familiar with Wes Gray, and those of you who are not are in for a treat. Wes is the founder of Alpha Architect, a firm which manages quantitative equity strategies for clients using factors like value and momentum. He also advocates for a more concentrated, pure approach to factor investing, which listeners know is music to my ears." [audio] Perfect storm 07/30/17 Markets Value Investing "We've seen this act before. If you didn't own the nifty 50 stocks in the early 1970s, you underperformed and, thus, money continued to go into them. If you were a growth stock manager in 1998-1999 and you were not buying 'net' stocks, you underperformed and were fired. More and more money went into fewer and fewer stocks. Today you have a similar case with the FANG stocks. More and more money is being deployed into a narrower and narrower area. In each case, this trend did not ended well." Valuation showdown 07/23/17 Value Investing "It appears more fruitful to look at companies in the context of their total enterprise values, as opposed to their market capitalizations. Again, this resonates. To understand whether a company's shares are mispriced from the perspective of a whole owner, it is crucial to understand first what it would take to own the company outright." Thomas Russo interview 07/16/17 Value Investing "In a rare interview, great value investor Tom Russo explains why the ability to say no and the capacity to suffer are key to investment success." [video] Canadian Net Net 07/16/17 Value Investing "With the S&P/TSX composite index close to its record high, it is difficult to argue that the overall stock market is beset with pessimism, but in my portfolio, one sector is deep under water and out of favour: oil-service stocks. Here, it is easy to find stocks trading at half of book value, which have proven that they can survive with oil at $30 (U.S.) a barrel and with a balance sheet strong enough that the bank has not called the loan. For a risk-tolerant investor, this is a fertile research universe." [$] PB blind spot 06/26/17 Value Investing "A possible reason for the limited efficacy of price-to-book is because of the increase in shareholder transactions, primarily through the increase in share repurchases." The Canadian Acquirer's Multiple 06/26/17 Value Investing "Over the full eighteen-and-one-half year period, the screen generated a total return of 2,536 percent, or a compound growth rate (CAGR) of 19.1 percent per year. This compared favorably with the S&P/TSX Composite TR, which returned a cumulative total of 232 percent, or 4.7 percent compound." Whiplash: Value vs. Growth 06/18/17 Growth Investing Markets Value Investing "With mean reversion, investor behavior, and interest rates all lining up on the same side, things are indeed starting to look up for value." Graham and Doddsville Spring 2017 05/14/17 Value Investing "In this issue, we were fortunate to speak with three investors who provide a range of perspectives and investment approaches. All three apply variations of value investing and fundamental research to find overlooked opportunities. These investments could be stable businesses in turbulent geographies, misunderstood businesses engrossed in controversy, or compounders that are hiding in plain sight." Alt-facts about formulaic value investing 04/23/17 Value Investing "We believe that even the simplest systematic value strategy will likely earn higher expected returns than the broader market over the next 50 years, but it may not be 'healthy' and it will surely be volatile as heck. We also believe that more sophisticated systematic value strategies will likely earn a marginal premium over the simplest value strategies over the next 50 years. But let's not fool ourselves, the bulk of the excess expected returns that may be realized by these 'sophisticated' value strategies will be driven by the fact that these portfolios will own cheap companies the world hates, not from the 'sophistication.'" Joel Greenblatt talks at Google 04/09/17 Value Investing "Since 1996, he has been a professor on the adjunct faculty of Columbia Business School where he teaches Value and Special Situation Investing. He is the author of three books, You Can Be A Stock Market Genius (1997), The Little Book That Beats The Market (2005), and The Big Secret for the Small Investor (2011)." [video] Jim O'Shaughnessy talks at Google 04/09/17 Momentum Investing Value Investing "Investors who do not have the following traits and emotional quality should index their portfolios. I find they are the majority of investors today." [video] Factor timing is hard 03/19/17 Value Investing "Adding value from market timing is very hard even though the aggregate market price (e.g., the CAPE) matters and varies a lot over time. In our latest paper, we again show that factor timing is likely even harder than market timing." Chuck Akre talks at Google 03/12/17 Funds Value Investing "Chuck talks about compounders at Google." Klarman's letter 02/12/17 Value Investing "President Trump may be able to temporarily hold off the sweep of automation and globalization by cajoling companies to keep jobs at home, but bolstering inefficient and uncompetitive enterprises is likely to only temporarily stave off market forces" Factor investing art and science 02/05/17 Value Investing "My conclusion is that we are still a long way away from understanding the so-called 'science' of investing. We're probably better off understanding the insanity of investors and the incentives of delegated asset managers if we want to understand the science of investing, but this is controversial among many financial economists." Francis Chou profile 01/28/17 Chou Value Investing "At the moment, no sector stands out in terms of valuation - it's all expensive, he says - but he's being patient." Charles de Vaulx interview 01/22/17 Value Investing "Veteran value fund manager, IVA Advisers' Charles de Vaulx explains why he has nearly 40% of his portfolios in cash." [video] And that's OK 01/22/17 Value Investing "I don't know a lot of things when it comes to investing. I don't know exactly how or when the current market cycle ends. I don't know when valuations will matter again. I don't know when central banks lose control and free markets return. I don't know the next time I'll be fully invested. And I certainly don't know the near-term direction of stock prices. But I get asked about these things frequently. I wish I knew, but I don't." Cash cows of the Dow 01/15/17 Value Investing "The Cash Cows, despite having the lowest dividend yield, have by far the largest buyback yield resulting in a total shareholder yield that is nearly double that of the Dogs and about a third higher than the Dow." Absolute vs. relative value 01/15/17 Markets Value Investing "In keeping with Montier's absolute value philosophy, we investigated several dynamic allocation strategies based on reducing or eliminating exposure to markets as they get more or less expensive, using the real earnings yield as our yardstick. In every case we tested the absolute value based approach delivered a higher Sharpe ratio, and a much higher ratio of returns to our approximation of Montier's measure of risk - maximum drawdowns." CAPE works 12/04/16 Value Investing "CAPE's value is not in predicting what a single asset class or market is going to do all by itself in a vacuum. But as we've intended to illustrate in this paper, when you use CAPE in the broader, logical way, the data seems to prove it's a wonderful timing tool." Why moats are essential 11/20/16 Value Investing "The key to investing is not assessing how much an industry is going to affect society, or how much it will grow, but rather determining the competitive advantage of any given company and, above all, the durability of that advantage. The products or services that have wide, sustainable moats around them are the ones that deliver rewards to investors." Is value investing broken? 11/20/16 Value Investing "Here are the times Ben Graham invested in: the 1910s through the 1950s. He invested during Two World Wars, the start of the Cold War, the atomic bombings of Nagasaki and Hiroshima by the U.S. and then the testing of nuclear weapons by other countries, The Great Depression, a big explosion (reportedly a terrorist bombing) on Wall Street, and the longest shut down of trading in Wall Street history that I can remember at least (right as World War One started). People talk about political risk today. Political risk in Ben Graham's time meant Marxists and Fascists. Investors saw hyperinflation in Germany after the war and then they saw deflation after the 1929 crash. These were not simple times. If you go back and read the newspapers from the time - you can see how not simple they were." Bill Miller interview 11/06/16 Value Investing "In a wide-ranging discussion, Miller talks about everything from his stock selection process, his infamous streak, and what he got wrong during the financial crisis." Investors must be contrarians to outperform 11/06/16 Value Investing "If you are not getting more humble over time, you have a flawed system." Joel Greenblatt interview 11/06/16 Funds Value Investing "How do you prevent investors from buying and selling at the wrong time? Financial innovator and successful value investor, Gotham Funds' Joel Greenblatt explains his new hybrid approach combining indexing and his active long/short strategies." [video] Sarah Ketterer on value 10/23/16 Value Investing "Highly-rated global investor, Sarah Ketterer, Portfolio Manager of Causeway International Value Fund explains why there is still plenty of value to be found in overseas markets." [video] Buyback bulls and bears 10/09/16 Markets Value Investing "I expect buybacks to continue at high rates so long as interest rates continue to be lower than the earnings yields of companies, and will continue to garner accusations of CEOs of manipulating earnings and stock prices to line their own pockets. But the data offers stronger support for the claims that buyback programs on average generate long-term excess returns for shareholders, driven by the earnings of the companies" Berkowitz interview 10/02/16 Value Investing "An exclusive interview with a deep value investor whose outstanding long term track record has been seriously tested in recent years. Why Fairholme Fund's Bruce Berkowitz says there is light at the end of the tunnel." [video] 12 lessons from Howard Marks 09/25/16 Value Investing "To convey my points in this post I decided to take an investing style that many would consider to be very different from value investing and show that they are in fact based on the same principles applied in different ways to different types of assets. That other investing system I will discuss here is venture capital." The discipline of value investing 09/17/16 Value Investing "The key to implementing the strategy successfully is separating your investment process from short-term results: to have discipline." Has P/B become a bad measure of value? 08/06/16 Value Investing "A possible reason for the limited effectiveness of P/B is because of the increase in shareholder transactions, primarily through the increase in share repurchases." MiB: Wes Gray 06/25/16 Value Investing "Gray combined his military and mathematical backgrounds as a quant running Alpha Architect. His focus on momentum and value have yielded excellent results." Timing buyback yield 06/25/16 Markets Value Investing "the market's overall buyback yield is not something on which you should base any investing decisions." Concentrated value 06/16/16 Value Investing "The best returns came from a 5 stock portfolio. The best Sharpe ratio came from the 15 stock version. Both return and Sharpe degrade after 15 stocks." Norway's Warren Buffett 06/11/16 Value Investing "Kristian Siem is considered by many to be the Warren Buffett of Norway. Since 1987 Siem has compounded his money at a rate of about 30% annualized, increasing his worth from about $5 million in 1987 to around $2 billion by 2014." The Top 200 Canadian Stocks for 2016 06/03/16 Growth Investing Dividend Investing Norman Rothery Stingy Investing Value Investing "In other words, the All-Star Stocks beat the market by an average of 11.4 percentage points per year." The Top 500 U.S. Stocks for 2016 06/03/16 Growth Investing Dividend Investing Norman Rothery Stingy Investing Value Investing "We're very pleased to be able to say that the U.S. All-Stars have outperformed over the last decade - despite getting off to a rocky start. Indeed, they bested the market over the last one, three, five, seven and 10 years, with particularly strong relative gains more recently." 52 Pick-Up 05/15/16 Markets Value Investing "The one trend that is clear...the largest capitalization stocks--known commonly as mega cap--consistently underperform. From 1964-2015, stocks with the largest market capitalizaitions underperform by 1.7% per year. These are the stocks you here about most often on CNBC and typically find themselves as Dow components." Chuck Akre: compounding machine 05/14/16 Value Investing "Great Investor Chuck Akre explains how he finds "compounding machines" -- companies that produce high rates of returns for shareholders. Chuck says these companies are few and far between, but once he finds them, he holds on to them." [video] Chris Davis: compounding machines 05/14/16 Value Investing "Third generation value investor Chris Davis discusses why unpopular financial stocks can actually be compounding machines." [video] The cost of dividends 05/08/16 Dividends Value Investing "It turns out that the simple value strategy (which included avoiding high yield stocks) actually produced higher returns than the dividend strategy - not just similar returns. In other words, before we even get to the tax benefits, 'value' had already trumped 'dividends.'" Shrinkage vs. growth 05/08/16 Value Investing "The most interesting story in the history of capital allocation was the rapid growth and then steady shrinking of Teledyne, a conglomerate formed by Henry Singleton in 1960." Minimum volatility investors beware 04/24/16 Markets Indexing Value Investing "If the long-term benefits of Low Vol investing are actually associated with some sort of Value premium, then current Low Vol investors should beware. Valuation for Low Vol stocks is expensive. A once good idea has run its course. All of the research I have done or reviewed suggests that high current valuation leads to low future return. Valuations on Low Vol have risen substantially in just the last few years. Based on the PE ratio, USMV is 80% more expensive than it was when it launched. In a best case scenario, Low Vol seems destined for mediocre future returns. In a worst case, the correlations and volatilities underlying the ETF's holdings could change quickly, providing an unexpected return profile for investors whose expectations have been managed for downside protection." Seth Glickenhaus dies at 102 04/24/16 Value Investing "Seth Glickenhaus, a bond trader turned money manager whose studies of law and medicine failed to lure him away from Wall Street, his professional home for more than eight decades, has died. He was 102." FCF/EV backtest 04/24/16 Markets Value Investing "Average excess returns seem to increase in almost a linear fashion from the 1st quintile to the 5th quintile, which gives me more confidence that the FCF/EV ratio does have a direct relationship with 1-year stock returns." Chou Funds letter 04/10/16 Funds Value Investing "It is hard for us to believe that RFP is trading as low as $4 per share." A flock of value investors 04/10/16 Chou Watsa Norman Rothery Stingy Investing Value Investing "A flock of value investors from across North America will land in Toronto this week to hear what Prem Watsa, the CEO of Fairfax Financial, has to say at his firm's annual meeting. But they should think about one of the company's investments on their way there." [$] Alpha or assets 04/10/16 Funds Value Investing "With fees lower across the board, scale becomes a more important consideration for asset managers when deciding what strategies to offer the investing public. When fees fall, assets need to rise. For assets to rise across a business, the strategies offered need to be able to accommodate more invested money." Multi-factor badness 03/28/16 Momentum Investing Markets Value Investing "My argument would be that momentum and value mature at different rates. For example, positive momentum tends to be a short-term impulse while expensive tends to be a long-term drag. Negative momentum is a short-term drag while cheap is a long-term positive force. The measurement periods are totally different." Dividend stock downside 03/20/16 Taxes Dividends Value Investing "I had started with a hypothesis: by avoiding dividends might we actually improve 'dividend investing'? But by removing the dividend, it inadvertently refocused the selection methodology on pure value. My research turned out to be a backdoor way of reminding myself that value investing and dividend investing - while often confused as the same thing - are actually distinct strategies. And more times than not, value wins out." Is value coming back? 03/20/16 Value Investing "Lots of money is flowing out of value strategies, and the stocks are cheap. I've lost several clients, and may lose some more. Oddly, it is the losing of clients that gives me the most hope. You need people to leave a strategy when it is down and out for the strategy to bottom." Stocks you shouldn't own 03/13/16 Markets Value Investing "We believe that in the age of indexing, active strategies should first work hard to remove the poorest quality stocks from consideration entirely, regardless of their weight in the index. Size alone - the driver of a stock's weight in SPY and other index funds - is not a sufficient reason for owning a stock." Smart beta gone wrong 03/12/16 Indexing Markets Value Investing "Many of the most popular new factors and strategies have succeeded solely because they have become more and more expensive. Is the financial engineering community at risk of encouraging performance chasing, under the rubric of smart beta? If so, then smart beta is, well, not very smart." Valuable losses 02/28/16 Buffett Value Investing "A rare interview with Great Value Investor Wally Weitz on finding opportunities where others are seeing losses." A value catch 02/28/16 Norman Rothery Stingy Investing Value Investing "Bargain hunters have profited handsomely by buying Canadian dividend stocks at low price-to-sales and price-to-earnings ratios. It's a big reason why I went fishing for such stocks this week." [$] A gambler or the house 02/21/16 Value Investing "Just like the house in a casino, value investors sometimes get destroyed. Several very high profile investors with great long term track records felt that pain in 2015. Real value stocks (and strategies) hurt to buy and sometimes really hurt to hold." Kleinschmidt interview 02/07/16 Value Investing "An exclusive interview with Tocqueville Fund's long-time portfolio manager Robert Kleinschmidt. The contrarian value investor explains why commodities are key to the market and what they are telling him now." Change in shares outstanding 02/07/16 Markets Value Investing "The first quintile barely exhibited a positive annualized return. The stock of these companies that increased shares outstanding underperformed the market in 75% of the years in this 16-year test period. The average excess returns versus the S&P 500 equal weight benchmark were a negative 3.34%. In contrast, the 5th quintile outperformed the benchmark 81.25% of the time and produced average excess return of 5.54%." Meb Faber interview 01/31/16 Value Investing "On today's show, co-founder and CIO of Cambria Investment Fund, Meb Faber, discusses a global value investing approach with Preston and Stig. Although the US stock market has recently dropped significantly at the start of 2016, Meb suggests the market might still have more to fall. Meb also reveals how he is invested, and which returns he expects for US and emerging stock markets in the years to come." The simplest way to select stocks 01/31/16 Graham Norman Rothery Stingy Investing Value Investing "The stock market can act like a demented Rube Goldberg machine designed to confound investors. But clear away the complexity and it offers some simple methods that perform surprisingly well over the long run. One was revealed by the late Benjamin Graham in a 1976 article called The Simplest Way to Select Bargain Stocks. The famous money manager calculated that his method would have generated 15-per-cent average annual returns over the prior 50 years." [$] Dorfman's robot 01/22/16 Dorfman Funds Value Investing "Are you better off with a robot? Dorfman Value Investment's John Dorfman discusses why his robot list performs so well" [video] The robot portfolio 01/22/16 Dorfman Funds Value Investing "The Robot boasts a compound average annual return of 15.58 percent, compared to 4.17 percent for the S&P 500. Figures include reinvested dividends. The cumulative return for the Robot stocks has been 1,119 percent, versus 123 percent for the index." Sequoia sued over Valeant stake 01/16/16 Funds Value Investing "The investment firm that runs the Sequoia Fund, long known for its ties to Warren Buffett, was sued by shareholders who claim it recklessly took a huge stake in embattled drug company Valeant Pharmaceuticals International Inc, causing more than $2 billion in losses." Mohnish Pabrai lecture 01/16/16 Value Investing "Mohnish Pabrai talks to students at Boston College" 3 investors meet in a bar 01/02/16 Value Investing "All three had the exact same investing methodology: buy the cheapest 10% of the market every year, and hold for a year. Each of the three also selected from the exact same list of U.S. stocks. The only difference was how they measured value. Bill used book value, Ernie used earnings, and Sam used sales." A value investor's view on 2016 01/01/16 Indexing Markets Norman Rothery Stingy Investing Value Investing "While it might be easy to think that the end is nigh during a soft patch, odds are good that the markets - and value investing in particular - will fare well over the long term. After a dry spell, it's important for value investors to stick to their guns in the new year." [$] Factors that launched 1,000 ETFs 12/26/15 Momentum Investing Value Investing "Across the five factors, the average long/short spread was 10.3%/year for the entire period (1964-2015), 10.6% for the period of rising rates (1964-1981), 11.8% for the period of falling rates (1981-2008) and 2.3% for the ZIRP period. Clearly, things have tailed off." William Smead interview 12/18/15 Value Investing "Smead Value Investor fund.s William Smead explains why his concentrated, high quality, low turnover approach has delivered top investment performance." [video] These sliders might get a grip 12/13/15 Markets Norman Rothery Stingy Investing Value Investing "It's almost time to pull the toboggan out of storage and head to the hills for a little winter fun. After all, there's something special about speeding downhill on a crisp winter day. But going downhill is something stock investors fear and they've been taken on an infernal toboggan ride this year." [$] International enterprise multiple 12/13/15 Value Investing "The paper, published in the Journal of Financial and Quantitative Analysis, confirms the U.S. evidence that cheap enterprise multiple stock outperform expensive enterprise multiple stocks by about 1 percent per month. And it works just as well whether the markets are developed or emerging, and in stocks small and large." Consider net-net stocks 12/13/15 Value Investing "These are companies trading below liquidation value per share, which in some cases would be the best outcome. Needless to say, they are almost always microcap, thinly traded and facing severe headwinds." Patrick O'Shaughnessy interview 12/13/15 Value Investing "In this episode Preston and Stig talk to Patrick O'Shaughnessy about what he does best: 'Demystifying stocks with hard core facts!' Patrick O'Shaughnessy is a lead authority in the new generation of quant value investors, and he runs the amazing blog, The Investor's Field Guide. Co-hosting this week's show is bestselling author Toby Carlisle, who blogs at Greenbackd.com" T. Boone Pickens talks with Carl Icahn 12/05/15 Value Investing "T. Boone Pickens sat down with legendary businessman and activist shareholder, Carl Icahn. The two men discussed energy security, including the effect of Saudi oil exports on America's production, Carl's views on the markets and much more." The persistence of growth 12/05/15 Growth Investing Value Investing "Both the long term average and time series charts make this very clear: the growth rate advantage of high growth stocks from the past five years does not persist over the next five years. Growth stocks tend to keep growing, but their relative advantage over low growth narrows considerably. If and when the market prices stocks by extrapolating past trends into the future, there is an opportunity to bet against that misguided extrapolation (long value, short growth)." The season for tax-loss selling 11/29/15 Taxes Norman Rothery Stingy Investing Value Investing "We're quickly approaching the season for feasting on figgy pudding and watching Ebenezer Scrooge have a change of heart. It's also a charitable time of year for value investors who lend a helping hand to people who desperately want to sell their shares for tax reasons." [$] Why is there an investor return gap? 11/28/15 Behaviour Value Investing "The investor return gap persists, despite strong evidence that factor performance is mean reverting, because investors use the manager selection process for alpha timing." A conversation with Cliff Asness 11/21/15 Academia Momentum Investing Value Investing "Tyler and investment strategist Cliff Asness discuss momentum and value investing strategies, disagreeing with Eugene Fama, Marvel vs. DC, the inscrutability of risk, high frequency trading, the economics of Ayn Rand, bubble logic, and why never to share a gym with Cirque du Soleil." [video] Carl Icahn on activist investing 11/07/15 Behaviour Value Investing Carl Icahn talks about his approach at the 2015 DealBook conference. [video] Value Investing is difficult 11/07/15 Value Investing "Even with a sound approach to equity investing, you should expect multi-year periods where crazy things happen." James O'Shaughnessy interview 11/07/15 Books Value Investing "How to be humble about stock investing, and how you are likely to beat the stock market by taken yourself out of the equation" [audio] The ability to suffer 10/18/15 Funds Norman Rothery Stingy Investing Value Investing "The capacity to suffer for a good cause is admired in heroes. But it also happens to be a quality that money manager Thomas Russo, of Gardner Russo & Gardner, looks for when selecting stocks. He's a devotee of Warren Buffett and seeks out high-quality businesses - that can withstand a few sword fights - with the view to holding them for the long term." [$] Interview with contrarian David Dreman 10/18/15 Dreman Value Investing "Dreman is also well known for sticking to a bottom-up, low PE stock-picking approach. In the interview below, he explains the extensive research that has proven the quality of the strategy, where he sees opportunities in the market and the 19th century book he says investors should read." Fall 2015 Graham & Doddsville 10/18/15 Value Investing "The average investor tends to invest in the strongest past returns and get the worst forward returns." Buybacks and debt 10/10/15 Debt Value Investing "The number one question I get about the shareholder yield factor is whether or not this debt-funding-buybacks is a big issue and something that should scare us. Asked differently, are companies that are taking on more debt to buy back shares ticking time bombs?" Thomas Russo on global value 10/10/15 Russo Value Investing "I consider myself to be a farmer - not a hunter. And I think most people on Wall Street are hunters. They like to fell big beasts and I'm very comfortable planting a few rows and just tending to them carefully." [video] Style swapping 10/04/15 Growth Investing Indexing Markets Norman Rothery Stingy Investing Value Investing "It's been a hard year for Canadian value investors. Those who wisely steered clear of the resource sector might be down only a little bit. But others will have to do some belt tightening this Thanksgiving." [$] How not to wipe out with momentum 10/03/15 Indexing Funds Momentum Value Investing "Front runners and high transaction costs, a function of the strategy's required high turnover, largely destroy the potential benefits of a momentum-based passive portfolio." Building optimal value portfolios 10/03/15 Value Investing "The authors also found that, due to a diversification benefit, a 50/50 blend of B/P and E/P outperformed both single-metric strategies during most 10-year periods between 1973 and 2013. The blended strategy had the highest annualized return: 14.21 percent per year over the period January 1973 through December 2013, followed by E/P with 13.48 percent per year and B/P with 12.79 percent per year." Are buybacks an oasis or a mirage? 10/03/15 Accounting Value Investing "The dilution rate for the U.S. equity market in 2014 was 1.8% compared to the historical dilution rate of 1.7% over the 80-year period from 1935 to 2014." Charlie Munger on Benjamin Graham 09/27/15 Graham Munger Value Investing "Charlie Munger has developed a powerful system that is useful in making any type of decision. One notable application of this system by Munger relates to investing and involves another system developed by Benjamin Graham." How to beat activist investors 09/27/15 Value Investing "One problem with riding the coattails of activists is that their stocks rally sharply the second it becomes known that they have big positions in companies. So you miss out on a lot of their gains." Charlie Dreifus interview 09/25/15 Dividends Value Investing "veteran contrarian investor Charlie Dreifus explains why he is not worried about recent stock market turbulence and where he is still finding high quality bargains." The prejudices of Mr. Market 09/12/15 Buffett Value Investing "Sanjay will show how the stock market is deeply prejudiced in pricing moated businesses and that exploiting those prejudices - especially when they combine - has helped him in his investing process." [video] Can it work if everyone knows about it? 09/05/15 Academia Markets Behaviour Asness Value Investing "We're going to argue that certain well-known classic strategies that have worked over the long term will continue to work going forward, though perhaps not at the same level and with different risks than in the past." The capacity to suffer 09/05/15 Value Investing "Tom Russo: The capacity to suffer doesn't mean you're supposed to suffer" [video] Chou Semi-Annual 2015 09/02/15 Funds World Value Investing "The current conditions make me feel that investors are being set up for heartbreaking disappointment, especially for the unwary." Dividend yield a value factor? 07/31/15 Dividends Value Investing "Prior to the financial crisis bottom (pre-2009), the higher yielders were cheaper than the next bucket (2-4% yield) 92% of the time. Since 2009, they've only been cheaper 30% of the time." A value asset allocation strategy 07/25/15 Markets Academia Value Investing "After enduring years of frustration trying to identify a valuation-based asset allocation technique.that actually worked.I think the team at Gestaltu is on to an interesting concept. By simply looking at real spreads between equity valuations and realized inflation (high spreads are good for equity; low spreads are bad for equity), one can devise a timing rule that captures most of the upside, but protects on the downside. Of course, this is all historical data and could very well be an exercise in data-mining. That said, the concept of buying equity assets when they have much higher yields than current inflation, is intuitively appealing." Why people repeat financial errors 07/25/15 Value Investing "This week on our Masters in Business radio podcast, we speak with Howard Marks, co-chairman of Oaktree Capital Group. In our discussion, Marks explains what 'second-level thinking' means for investors and why so many people make the same financial errors." High conviction buybacks 07/18/15 Dividends Value Investing "the high conviction companies have gone on to ourperform the average large stock by about 3.3% in the subsequent year, while the low conviction firms haven't really delivered much excess return at all (just 0.5%, on average)." O-score and distress risk 07/12/15 Academia Value Investing "Value investing always wins, even after controlling for distress. And value investing really wins among the most distressed firms. Oddly enough, expensive firms that are distressed earn 14.44% less than cheap firms that are distressed." The evolution of a value investor 07/04/15 Value Investing "Tom Gayner is the CIO of Markel Corp, where he manages the company's investment portfolio. He talks about his journey as an individual and value investor." Timing strategies for value investors 06/20/15 Stingy Investing Value Investing "Conservative investors should think about following Mr. Maida's lead and pare back on stocks because the markets might be sailing into trouble." [$] Dividend stocks and value investing 06/20/15 Dividends Value Investing "The results suggest that a sort on a simple value investing measure works well at sorting dividend stocks." Buyback extravaganza 06/20/15 Academia Value Investing "Buybacks may not be well timed in aggregate, but they have been timed well (at least, timed at cheaper relative prices) by companies with the highest conviction buyback programs. These can get lost in the shuffle because, on average, the cash spent on buybacks by these high conviction firms represent 22% of the total cash being spend on buybacks (gross)." Lessons from market extremes 06/13/15 Value Investing "Bottom line: value wins again for consistency the fact that the median value stock has outperformed nicely. Glamour has the more fun and exciting outliers, but the median glamour stock gets killed and even the best ones are extremely volatile." Risky bet on Greece 06/10/15 Watsa World Value Investing "The contrarian American billionaire Wilbur L. Ross Jr. made a bundle betting on the Irish banking system when it was down and out, and a similar wager on Cyprus now looks promising. But Greece may prove to be the toughest test yet of his knack for cashing in on eurozone crisis spots." Value investing is far from dead 06/06/15 Behaviour Stingy Investing Value Investing "'Bring out your dead!' is the corpse collector's refrain at the start of a classic scene in Monty Python and the Holy Grail. In the movie, the collector encounters a customer who wants to dispose of a body that's, well, not quite dead yet. I was reminded of the scene when reading Ian McGugan's piece in ROB Magazine on the looming death of value investing. Just like the customer in the movie, I think he was little too eager to consign the time-tested strategy to the grave." [$] Woe betide the value investor 06/06/15 Behaviour Funds Value Investing "Alas, the fund manager's profession is abysmally depressing. You are regularly reminded by academic research that, on average, you destroy value, net of fees; a monkey randomly selecting stocks, or a cap-weighted index, outperforms you. (Sort of makes you question the value of your MBA degree and CFA designation.) Nor are the select few who have delivered long-term outperformance spared. New evidence suggests that your clients' decisions undo your work, so that, in the end, your contribution to their financial well-being is still quite negative. Your time-weighted returns may be superior, but the dollar-weighted, net-of-fee returns the clients actually receive are nonetheless adverse." Timing poorly 06/06/15 Academia Funds Behaviour Value Investing "Value investing is viewed as a historically successful investment strategy. The literature generally agrees on the robustness of the strategy but disagrees on the explanations for the success. While the empirical research focuses exclusively on the time-series returns - or the buy-and-hold return - of a value portfolio, the investor experience is, of course, driven by the internal rate of return (IRR) - or the dollar-weighted average return. Although the buy-and-hold average portfolio return may be the proper way to document the anomaly, the dollar-weighted average return can shed light on some interesting questions which cannot be addressed by analyzing the buy-and-hold returns. In particular, examining the dollar-weighted returns allows us to ask whether investors have actually generated superior IRR consistent with the reported buy-and-hold outperformance of value strategies." History of price-to-sales 05/31/15 Value Investing "Price-to-sales is a very simple ratio. Arguably, it is the least nuanced and therefore least manipulated valuation measure. A sale, for the most part, is a sale. Unlike earnings, book value, and other fundamental measures which are sometimes more opinion than fact, sales is a more straightforward number." Tobias Carlisle talks at Harvard 05/31/15 Value Investing "Tobias Carlisle speaking to Michael Parzen's Business Statistics Class, Harvard College, April 21, 2015." [video] Using the price-to-book ratio 05/27/15 Value Investing "One key thing to note about price-to-book: it has tended to push investors towards financials, utilities, materials and industrials, and push them away from health care, technology, and consumer staples." The original value factor 05/23/15 Value Investing "Book value (or 'common equity' calculated as total assets minus total liabilities) has some advantages. Unlike earnings, it is fairly stable through time and almost always a positive number. This makes calculation easy and leads to lower turnover in a live value portfolio based on price-to-book. Many famous style indexes and money managers use price-to-book to define value." Prem Watsa tells his Horatio Alger story 05/23/15 Watsa Value Investing "You know why I got that job? Because I got a call for a second interview, and the other three didn't show up." Russo on long-term value 05/23/15 Russo Value Investing "Tom Russo invests in iconic brand name companies for the long term. Which global businesses is he most enthused about now?" The Top 200 Canadian Stocks for 2015 05/18/15 Growth Investing Dividend Investing Stingy Investing Value Investing "Our annual All-Star stock picks, which combine the best growth and value characteristics, have climbed by an average of 17.3% a year since we started 10 years ago. That assumes an equal dollar amount was put into each All-Star stock in first year and rolled into the new All-Stars each year thereafter. By way of comparison, the S&P/TSX Composite (as represented by the XIC ETF) advanced by just 5.3% annually over the same period. The All-Stars beat the market by an average of 12.0 percentage points per year over the last decade." The Top 500 U.S. Stocks for 2015 05/18/15 Growth Investing Dividend Investing Stingy Investing Value Investing "The U.S. All-Stars have performed very well since the stock market collapse in 2008. If you had purchased equal dollar amounts of them six years ago and rolled your portfolio into the new list of All-Stars each year, you'd have gained 22.9% per year on average. The market also fared well over the same period with the S&P 500 (as represented by the SPY ETF) advancing 13.6% per year." The O'Doul's of value investing 05/15/15 Value Investing "I don't really get why anyone would prefer fundamental index to more concentrated, pure-play bets on value or shareholder yield. Let's see why." Combining value and momentum 2 05/09/15 Value Investing "We find that sorting stocks on value and then momentum has been a historically successful strategy. However, sorting stocks on value and then quality, which is inline with a fundamental value philosophy, works just as well, if not better. We hypothesize that the .momentum. effect identified within the cheap stocks bucket, is really a proxy for strong fundamentals and positive operational momentum among the cheapest, highest quality value stocks. Our preference.based on empirical and philosophical grounds.is to go with a more .pure. value philosophy that focuses on buying the cheapest, highest quality value stocks, as opposed to a muddled value approach that buys the cheapest, highest momentum value stocks." Methods to improve the Piotroski F-Score 05/04/15 Academia Value Investing "We have identified ways to improve the baseline Piotroski F-Score and enhance value investing strategies. The final product is the FS-Score, which incorporates net-share repurchases and free-cash-flow metrics and arranges the metrics to align closer with traditional value-investing principles." Adopting factor investing 05/04/15 Markets Value Investing "Over the years, academics have compiled an extensive body of research demonstrating the existence and characteristics of various factor premiums. But do their findings hold up in the real world, when factor strategies are implemented by mutual funds? This is a vital question for investors because, unfortunately, there's often a long way to go from theoretical returns (which don't include implementation costs) to realizable returns (which do)." Frank Martin speaks in Toronto 04/27/15 Value Investing "Frank Martin talks about CAPE" Russell Napier speaks in Toronto 04/27/15 Value Investing "Mr. Napier talks about equity valuation, inflation, deflation and mean reversion" The next generation of value investors 04/25/15 Stingy Investing Value Investing "To the youth of today, Ferris Bueller's Day Off is a movie from a bygone age. But the '80s hit came back to me when I saw three teams of MBA students advising investors to 'skip' a little-known company with a name reminiscent of the movie's main character." Ben Graham Centre conference slides 04/19/15 Value Investing The slides used at least week's value investing conference are now available. Take heart, value investors 04/17/15 Value Investing "These are tough times for bargain-hunting investors. Ever since the financial crisis, most value-oriented portfolios of stocks have lagged the broad market, and for fairly obvious reasons. When central banks are injecting massive amounts of money into the economy, and holding interest rates at record lows, investors have no great reason to be choosy about which companies to buy. The entire market is headed up." Rock stars of value investing 04/12/15 Chou Watsa Stingy Investing Value Investing "When Mr. Watsa takes centre stage on Thursday to opine about his company and the markets more generally, it will be interesting to get a measure of his bearishness." Joel Greenblatt speaks with Howard Marks 04/12/15 Value Investing "Joel Greenblatt Managing Partner and Co-CIO of Gotham Asset Management speaks with Howard Marks Chairman, Oaktree Capital Management L.P." [video] How to combine value and momentum 04/04/15 Momentum Investing Value Investing "The evidence suggests that we keep highly active exposures to value and momentum in their purest forms (assuming we are doing high-conviction non-watered down versions of the anomalies). Blending the strategy dilutes the benefit of value and momentum portfolios." Howard Marks talks at Google 04/04/15 Value Investing Howard Marks talks about investing with people at Google. [video] The power of share repurchases 04/04/15 Value Investing "Each incremental refinement to investing in the U.S. large cap stocks has led to significant improvement in returns. After controlling for nefarious or misguided motivations, a strategy based on both dividends and buybacks has delivered outsized returns since 1982. Further qualifying the strategy by insisting on attractive valuations and high quality earnings creates a strategy that has been formidable in what arguably should be the most efficient area of the global stock market." Dogs ready for a rebound 04/04/15 Stingy Investing Value Investing "Long-term reversal is just the sort of momentum effect that value investors love. After all, if a company can resolve the troubles that sent it tumbling in the first place, its stock may bounce back to its former highs." Chou annual for Canadians 03/28/15 Markets Chou Value Investing "In 1981, I felt the economic conditions were such that you were set up for a huge success. You just needed the courage to load up the truck and buy everything in sight. By contrast current conditions make me feel that investors are being set up for a heartbreaking disappointment, especially for the unwary." Mohnish Pabrai and Guy Spier 03/28/15 Value Investing "Mohnish Pabrai and Guy Spier in conversation with Saurabh Madaan at Google" [video] 3 Stingy Stocks for 2015 03/19/15 Stingy Investing Value Investing "It's worked well so far because the Stingy Stocks have gained 15.2% per year on average since 2001. By way of comparison, the S&P500 (as represented by the SPYETF) advanced only 6.5% a year over the same period. The Stingy Stocks bested the index by an average of 8.7 percentage points a year." 3 Graham Stocks for 2015 03/19/15 Graham Stingy Investing Value Investing "If you had purchased equal dollar amounts of the Graham stocks and replaced them with the new batch each year, your portfolio would be up a whopping 877% (18% annualized) over the full period." Third Avenue Funds letter 03/14/15 Whitman Value Investing "In analyzing junior securities of companies with perpetual lives, especially the common stocks of corporations, markets tend to be quite inefficient in measuring long-term underlying value." Fairfax 2014 letter 03/14/15 Watsa Value Investing "The CAPE (Cyclically Adjusted Price Earnings) Ratio for the S&P500 is currently at 28 times. It has been higher only twice before; both times ended badly. The first time was in 1929 and the second time during the dot.com boom of 1999 to 2002. The rising U.S. dollar (with over 40% of the average S&P500 companies' earnings coming from abroad) and the current record after-tax profit margins, combined with deflation, could result in significant declines in the earnings of the S&P500 companies - just as the index hits record highs. We say 'caveat emptor', and continue to be very cautious about our equity positions. I have reminded you many times in past Annual Reports of the warning from the distant past from our mentor Ben Graham: 'Only 1 in 100 survived the 1929 - 1932 debacle if one was not bearish in 1925'." Sequoia Fund 2014 report 03/14/15 Funds Value Investing "One reason we think the trend could have legs is that markets continue to grow more efficient. Our colleague Greg Alexander likes to say 'the Index is a lot better than it used to be.' U.S. corporate managements are generally competent and focused on creating shareholder value. There are not a lot of mutts left in the kennel, so to speak, so winning the dog show is harder." A pioneer of the investment industry 03/14/15 Kahn Value Investing "His passion for investing shown through in everything he did. We owe him a great deal of gratitude because he helped to demonstrate that investing should be moved from the back office to the executive suite." Tobias Carlisle interview 03/07/15 Value Investing "I had a lot of fun recording an interview with Stig Brodersen and Preston Pysh of The Investors Podcast on one of my favorite subjects, deep value investing." Chou America Annual 03/05/15 Bonds Chou Value Investing "We believe that CDS are starting to sell at prices that are becoming interesting. At recent prices, they appear to offer one of the potentially cheapest forms of insurance against market disruptions. We are continuing to monitor CDS prices and may potentially invest in CDS in the future." Piotroski Score Backtest Part 2 02/14/15 Value Investing "As you can see in the bar chart above, average excess returns are negative for F-Scores below 3. The average excess returns then climb up from just over zero for F-Score 3 and then climb steadily to about 5% for F-Score 8. Then the average excess returns jump to 9% for F-Score 9. There appears to be something a bit special for getting a perfect score. However, we have to be careful not to draw too many conclusions about F-Score 9, since the average portfolio size for Piotroski Score 9 is only 34 positions." Concentrated P/B does badly 02/14/15 Value Investing "Book to price is a bad value factor. It is a decent stock selection factor overall, but relative to the other ways of measuring value (earnings to price, cash flow to price, EBITDA/EV, etc) it is sub par." Martin Whitman interview 02/14/15 Whitman Value Investing "In this exclusive interview taped at the Museum of American Finance, Whitman takes on Congressional and Wall Street ignorance about debt, credit worthiness, and earnings." [video] Rummaging through the stock bargain bin 02/14/15 Stingy Investing Value Investing "Value investors like to buy discounted stocks and they spend their days rooting through the market's half-off bin. But they have to be wary because, much like dollar-store specials, the bargains can be illusory." Eveillard: Legendary Value Investor 02/07/15 Markets World Value Investing "An exclusive interview with legendary value investor Jean-Marie Eveillard" [video] Piotroski F-Score backtest 02/07/15 Academia Markets Value Investing "This backtest for Piotroski F-Score reveals that the first quintile underperforms the S&P 500 Equal Weight Index benchmark. These companies typically weak balance sheets and weak earnings performance so it is not surprising that stock returns for these companies would underperform. The second through fifth quintiles have higher than average annual excess returns than each of the previous quintiles. I like that there was a consistent linear trend upwards from the 1st to 5th quintiles. The Piotroski F-Score does appear to be a powerful fundamental predictor of 1-year stock performance." World CAPEs 01/31/15 World Markets Value Investing "The Shiller P/E can be used in a valuation context, by comparing the current multiple to the historical values. As the multiple gets stretched far beyond the average, reversion is expected to occur." Buy the most despised company 01/18/15 Markets Value Investing "Between April 1983 and December 2007, the despised portfolio outperformed the admired one by more than 2 percentage points per year, on average. In addition, the professors found that increases in admiration were, on average, followed by lower returns." Pat Dorsey Lecture 01/18/15 Value Investing "What does it mean for a company to have a moat? What are the key drivers to valuation? Pat Dorsey will use examples to shed light on these, and more questions." [video] MiB: Patrick O'Shaughnessy 01/12/15 Books Value Investing "O'Shaughnessy discusses that despite the difficulties of the economic environment, youth have tremendous advantages youth in terms of an investment horizon of up to half a century. This allows compounding to take place. In our conversation, we discuss active versus passive, why investors are their own worst enemies, and what they should - and should not - be doing." The education of a value investor 01/04/15 Behaviour Books Value Investing "Guy Spier talks about his book at Google" [video] Tobias Carlisle and Deep Value 12/27/14 Value Investing "The evidence reveals an axiomatic truth about investing: Investors aren't rewarded for picking winners; they're rewarded for uncovering mis-pricing." Behavioral portfolio management 12/20/14 Behaviour Value Investing "Do you know the names of the stocks you own? That may seem like a funny question, but simply knowing the names of your holdings puts you at risk of making behaviorally driven decisions, such as acting on emotionally fueled news stories, according to C. Thomas Howard" Patient investing 12/13/14 Value Investing "First Eagle Global Fund's Matthew McLennan. First Eagle is known for its value-oriented, margin of safety approach and making preservation of capital its first investment goal. ... McLennan explains why he is currently finding markets around the world expensive, and why 'patience' is his best investment idea." [video] Digging manager graveyards 12/12/14 Behaviour Value Investing "Taking on tracking error is a great way to get fired as an asset manager. As an individual, it is a great way to break your confidence and sell your hated value stocks." The dangers of reacting to short-term volatility 12/06/14 Value Investing "It is true that the volatility of terminal wealth across all holding periods is found to be higher for stocks than bonds in every market examined and, thus, stocks are riskier when risk is measured by volatility. But interestingly, the higher volatility of terminal wealth from stocks is mostly on the upside. So, stocks have both higher upside and more limited downside than bonds." Value Investing by Bruce 11/29/14 Value Investing "Bruce Greenwald's presentation from the Welcome Event for the 12th International Post Keynesian Conference." [video] High-flying Fairfax 11/23/14 Momentum Investing Stingy Investing Value Investing "Melding value investing with momentum investing tends to be particularly powerful. In this case, think of value investing as the meat and potatoes of portfolio construction. The idea is to stick to good companies at reasonable prices. Momentum investing represents the horseradish because it favours hot stocks that are expected to move even higher." Price-to-book value ratios 11/23/14 Value Investing "...analyzing the results for stocks based on their price-to-book value ratios underlines and highlights why we should always seek access to the longest datasets we can find, as they offer much better indications of what investors should expect from various types of investing." Joel Greenblatt on WealthTrack 11/23/14 Value Investing "Joel Greenblatt of the Gotham Funds will explain his big change in portfolio strategy, from a very concentrated approach to broad diversification." The Top 200 11/15/14 Stingy Investing Value Investing "Our annual All-Star stock picks, which combine the best growth and value characteristics, have climbed by an average of 17.3% a year since we started 10 years ago. That assumes an equal dollar amount was put into each All-Star stock in the first year and rolled into the new All-Stars each year thereafter. By way of comparison, the S&P/TSX Composite (as represented by the XIC ETF) advanced by just 5.3% annually over the same period. The All-Stars beat the market by an average of 12.0 percentage points per year over the last decade." Joe Rosenfield's remarkable story 11/15/14 Buffett Value Investing "By popular demand, I'm posting here the PDFs of an article I wrote years ago: 'The Best Investor You've Never Heard Of,' about Joe Rosenfield, the uncommonly courageous thinker who was for many years the chairman of the investment committee of Grinnell College - and a hero to many other great investors, including his friend and admirer Warren Buffett." Net Nets in London 11/15/14 Markets Academia Graham Value Investing "Firms with an NCAV/MV greater than 1.5 display significantly positive market-adjusted returns (annualized return up to 19.7% per year) over five holding years." Cloning value 11/08/14 Stingy Investing Value Investing "Today I'll focus on cloning smart investors like Warren Buffett. I'm not talking about brewing up mini-Buffetts in some sort of nefarious genetic experiment, but simply copying the portfolios of the best investors in the world. The idea is to ride the coattails of their expertise - without having to pay for it." Concentrated value 11/08/14 Markets Value Investing "To take advantage of value investing, you need a smaller portfolio than you may think. I was curious to see what different levels of portfolio concentration would have produced in a value-only portfolio over the past 50 years, and report the results here." Graham and Doddsville: Fall 2014 11/01/14 Value Investing Featuring interviews with Wally Weitz and Guy Gottfried. Value investors see few bargains 10/26/14 Value Investing "Small-cap valuations are still quite asinine" Buffett's stock pickers 10/19/14 Buffett Value Investing "So how have the Oracle's disciples done? Quite impressively, according to our estimates. Both have outpaced the S&P 500 in their time at Berkshire (their compensation is determined by how much they beat that index over three years). Combs has done the better of the two, generating a cumulative return of 116% over the past nearly four years-more than double the S&P's 55% over the same period. Weschler's portfolio is up 81%, but he's had only three years to prove himself. Combs' picks increased an incredible 51% last year alone. And Weschler is well ahead of the market this year." Low volatility and value 10/19/14 Academia Value Investing "A large part of the performance associated with low volatility stocks is clearly being driven by exposures to value; however, there does appear to be some marginal benefit to investing in low volatility stocks." Cigar-butt stocks get last laugh 10/11/14 Stingy Investing Value Investing "If you're a value investor or are simply interested the sort of thinking behind Mr. Icahn's latest round of activism, then you'd do well to pick up a copy of Deep Value. It'll help you become a better investor." Is value investing a hoax? 10/04/14 Value Investing "It was a wide-ranging conversation canvassing some interesting ideas: Net nets, the Acquirer's Multiple, and the validity of value investing" The large-stock value premium 09/19/14 Value Investing "Recently, we have seen a rise in the level of discussion about whether there is a significant value premium in large-cap stocks. The value premium is the tendency of stocks with low prices relative to measures of their value to outperform stocks with high relative prices. Since large-cap stocks make up about 90 percent of the total global market capitalization, this is an important issue." The durable low volatility effect 09/13/14 Behaviour Markets Value Investing "One of the basic tenets of finance is that investors are compensated for taking risk. For equity markets, that means that high volatility stocks are expected to outperform low volatility stocks. But that hasn't happened. Low-risk stocks have historically outperformed high-risk stocks." A few cheap stocks 09/13/14 Value Investing "The reason that value works is that it is a proxy for expectations. Cheap valuations = lower expectations for the future--but these bleak forecasts often turn out to be too grim. This alternative way of looking at value can help investors identify stocks that are both cheap today, but also have had falling expectations over time. To paraphrase Templeton, the key isn't to find stocks for whom the outlook is good, but to find stocks for whom the outlook it is miserable." Charles Munger: Secrets of Buffett's Success 09/13/14 Zweig Munger Value Investing "Why did nearly 250 investors converge on Los Angeles this past week to listen to a 90-year-old man address the annual meeting of a tiny legal-publishing and software company? To hear Charles T. Munger - better known as Warren Buffett's right-hand man - expound on one of his least-known holdings and just about everything else." Barry Ritholtz interviews James O'Shaugnessy 08/30/14 Value Investing "Barry Ritholtz interviews James O'Shaughnessy, the chief executive officer of O'Shaughnessy Asset Management. They discuss the strategies that work on Wall Street." [Audio] Tobias Carlisle at Deep Value Summit 2013 08/29/14 Value Investing "Tobias Carlisle talks about KLIC and why he bought it." [Video] Tobias Carlisle interview 08/29/14 Books Value Investing "Tobias Carlisle talks about his book Deep Value." [Audio] 108-year-old investor 08/24/14 Kahn Graham Value Investing "Three days a week, Irving Kahn takes a taxi from his flat in Manhattan for the short ride to the offices of his investment firm, Kahn Brothers. Nothing surprising about that, you might think. But Mr Kahn is 108 years old." The moneyball of quality investing 08/24/14 Markets Academia Value Investing "Factor investing has rightfully gained adherents among investors seeking superior risk-adjusted returns. Our research reveals that quality is not a factor that reliably commands a premium in its own right. Nonetheless, value investing conditioned upon certain indicators of company quality is a promising strategy." Are cash flows better return predictors? 08/16/14 Academia Value Investing "Novy-Marx (2013) shows that profitability, measured by gross profits-to-assets, predicts the cross-section of average returns just as well as book-to-market ratios do. We find that, in our 1994-2013 sample of S&P 1500 stocks, cash flow measures are even better predictors of stock returns than various income statement-based measures. We present a procedure for transforming indirect cash flow method statements into disaggregated and more direct estimates of cash flows from operations and other sources. We then derive 'direct method' cash flow measures and form portfolio deciles based on these measures. Stocks in the highest cash flow decile outperform those in the lowest cash flow decile by over 10% annually after controlling for well-known risk factors. Our results are robust to the investment horizon, and controlling for sector differences. We also show that, in addition to operating cash flow information, cash taxes and capital expenditures provide incremental predictive power." The Top 200 for 2014 08/13/14 Growth Investing Stingy Investing Value Investing "We're thrilled to report our efforts have paid off handsomely since last time. Our All-Star stocks, which combine the best growth and value characteristics, gained an average of 55.0% since last year. By way of comparison the Canadian market, as represented by the S&P/TSX Composite ETF (XIC), gained 7.2% over the same period." Top 500 U.S. Stocks for 2014 08/13/14 Growth Investing Stingy Investing Value Investing "Last year's All-Star stocks turned out to be great buys, gaining an average 38.7%. In comparison, the U.S. stock market, represented by the S&P 500 (SPY), climbed only 23.3% since last time. The U.S. All-Stars beat the market by 15.4 percentage points, not including dividends." Valuing community banks 07/25/14 Value Investing "There isn't one way to value a community bank, but multiple ways. Each way could yield a different value, but ultimate all methods of valuation should somewhat agree on a potential value." Relative value in the TSX 07/12/14 Stingy Investing Value Investing "Thirty-one of the 60 stocks passed Mr. Graham's test at the end of 2008 when the financial system was in acute distress. But that number has been getting smaller and smaller ever since. This week, only six stocks passed the test." Never buy expensive stocks. Period. 07/05/14 Markets Value Investing "One can't even simulate a scenario where a diversified portfolio of 30 expensive stocks can beat the worst performing portfolio of 30 cheap stocks. Why investors allocate to expensive, or "growth," stocks is beyond me." Diversify with Warren Buffett 06/29/14 Buffett Indexing Funds Stingy Investing Value Investing "Berkshire Hathaway represents an interesting option for cost-conscious investors who want to pick up a diversified collection of businesses in one handy package." Value combo 06/29/14 Value Investing "The attraction of the combo is that it delivers returns comparable to the very best metric at any point in time." The power of share repurchases 06/29/14 Markets Dividends Value Investing "One of the most effective stock selection strategies in the U.S. over the past several decades has been to buy stocks that are in the midst of repurchasing significant quantities of their shares-but just blindly following buybacks isn't always the best strategy. While many companies that are repurchasing large quantities of their shares make for great investments, others are dangerous and should be avoided." Do longer-term calculations enhance performance? 06/20/14 Academia Value Investing "In theory, using long-term measures makes sense, but the evidence does not support this story. There may be other considerations such as turnover and taxes, but in the context of the study above, there is no benefit to using longer-term measures." Price to sales ratio backtest 06/07/14 Value Investing "This backtest of the Price/Sales ratio reveals that the first quintile outperforms the S&P 500 Equal Weight Index benchmark. The second through fifth quintiles have lower average annual excess returns than each of the previous quintiles and the overall trend in excess returns is a linear decrease as the P/S ratio increases." Price to free cash flow ratio backtest 06/07/14 Value Investing "This backtest of the P/FCF ratio reveals that the first quintile outperforms the S&P 500 Equal Weight Index benchmark. The second through fifth quintiles have lower average annual excess returns than each of the previous quintiles and the overall trend in excess returns is a linear decrease as the P/FCF ratio increases." Value vs the market since 2008 05/25/14 Markets Value Investing "Value investors are right. The period since 2008 has been more difficult for value strategies than it was in the early 2000s. But simple value strategies have still outperformed over the full period, and by a wide margin. This is despite the fact that, in many instances, the value decile often underperforms the market, and in some cases, more than half the time." Meet Francis Chou 05/04/14 Funds Chou Stingy Investing Value Investing "It's a pity more money managers don't follow Mr. Chou's example. But investors would be wise to follow him." Liquor Stores NA is no bargain 04/27/14 Stocks Stingy Investing Value Investing "Alcohol beverages represent one of the joys of university life. But three teams of savvy business students didn't show Liquor Stores NA Ltd. much love when they evaluated it this month." Chou's 2013 letter 03/30/14 Chou Value Investing "We believe that the market is currently fairly valued and we sincerely doubt the overall returns from equities in general over the next five to 10 years will be compelling. On the contrary, we believe the returns may be far more modest than those hoped for by investors. Not only are the P/E ratios and price-to-book values still high and dividend yields low relative to historic valuations, but the number of companies that are underpriced is at an all-time low. In light of this scenario, and with its obvious lack of bargains, we would not hesitate to sell our investments and be 100% or 50% cash -- or whatever the number may be." David Winters interview 03/30/14 Value Investing "Wintergreen Fund's David Winters, a value investor who describes himself as the opposite of an index hugger, has more than 60% of his portfolio invested in companies based overseas and has recently taken a stand against Coca Cola management and Warren Buffett" Newspaper stock, really? 03/28/14 Watsa Stingy Investing Value Investing "Flint knapping was an important skill many years ago and then technological change made it obsolete. But, in a strange twist of fate, it has been making a bit of a comeback thanks to the Internet. It's now easy to learn how to knock out an arrow tip the old-fashioned way. While the Internet is a great boon to hobbies such as flint knapping, it's knocking the stuffing out of some businesses. Newspapers are a case in point." A big day for value investors 03/28/14 Watsa Stingy Investing Value Investing "Value investors are set to descend upon Toronto for the Fairfax Financial annual meeting. They're making the trip from all over the world to hear Prem Watsa, the firm's CEO, talk about strategy and investing in early April." Prem's letter 03/08/14 Watsa Value Investing "In this environment, with zero interest rates and high debt levels prevailing in most developed countries, giving them limited flexibility to react to unintended consequences, we think it is prudent to have a very strong balance sheet with a large cash position and to be protected on the downside. When problems hit, only those with cash and very liquid assets can take advantage of them. While it is very painful and costly waiting, we think your (and our!) patience will be rewarded." Benj likes gold 03/08/14 Stingy Investing Value Investing "When you think about the sort of people who grow up and go into the investment business, you might imagine characters such as Alex Keaton from the 1980s TV series Family Ties. Michael J. Fox brought the role to life and played a straight-laced conservative kid who was a little too obsessed with money. But it's best to ignore such stereotypes, because more artistic souls can also become great investors, and Benj Gallander is a prime example." 3 Stingy Stocks for 2014 03/03/14 Stingy Investing Value Investing "Over the last year the Stingy Stocks have climbed by an average of 37.8% while the S&P500 (as represented by the SPY exchange traded fund) advanced only 29.7%. Both fared well but the market trailed by 8.1 percentage points." 4 Graham Stocks for 2014 03/03/14 Graham Stingy Investing Value Investing "If you had bought equal dollar amounts of the Graham stocks and replaced them with the new batch each year, you would have gained 830% (or 19% annualized) over the full period." A CAPE Crusader 03/02/14 Shiller Markets Montier Value Investing "Having spent a large proportion of my career prior to joining GMO working at investment banks, I'm well aware of what Andrew Smithers describes as 'Stock Broker Economics,' the second tenet of which is 'The market is always cheap.' Over the years I've witnessed many attempts by the practitioners of this most dark art to justify why tried and tested measures of valuation are no longer meaningful, or occasionally create new measures of valuation that purport to show the market to be cheap." Take a vacation 03/02/14 Stingy Investing Value Investing "The mood is glum in Valueville these days. Conditions are so depressed that its inhabitants can be spotted packing up their Bloomberg terminals and heading off on extended vacations." Investment principles and habits 02/16/14 Value Investing "David Kostin, Goldman Sachs' chief U.S. equity strategist, explained that investor demand for 'value' has been so pervasive that low-valuation stocks had outperformed higher valuation peers by 12 percent in 2013. As a result, the distribution of S&P 500 P/E multiples was now its tightest in at least 25 years, implying less differentiation of companies based on valuation." A bargain from Tweedy 02/01/14 Stingy Investing Value Investing "These days more than a few famous value investors are selling stocks and allowing cash to pile up in their portfolios." Mohnish Pabrai's Boston College talk 01/12/14 Pabrai Value Investing Set aside some time to watch Mr. Pabrai's presentation. Casting a wide net for deep value 01/05/14 Value Investing "In 1651, Thomas Hobbes described the life of mankind as "nasty, brutish and short." He could also have been describing the list of Canadian stocks that typically pass the Ben Graham net-net working capital screen." Words of wisdom to value investors 12/29/13 Value Investing "One thing that has always pleasantly surprised me on my travels is how generous so many value investors are with their time and advice, no matter how demanding their positions and other commitments are. I've come to believe that this willingness to share with one another, the attitude of 'there are no secrets,' and the modesty of talking about one's successes as well as failures, is what distinguishes our shared global value investing community." Why a cheap stock can be a bad buy 12/15/13 Value Investing "When you can buy merchandise at 40 per cent off the last ticketed price in the weeks before Christmas, you know that the current retail environment is grim. But when even the liquidators are closing up shop, maybe the situation is worse than we realize." Prem Watsa opens up about BlackBerry 12/08/13 Watsa Value Investing "Bets on debt-ravaged Greece or ailing phone maker BlackBerry would make many investors flee, but for Prem Watsa both are part of a 'cautious' strategy he employs to manage Fairfax Financial's US$23.3 billion portfolio. Indian-born Watsa, 63, often compared to U.S. investor Warren Buffett, another self-made man, prides himself on a strategy of investing in stocks and markets others avoid." Key new findings on stock selection 12/02/13 Value Investing "Better and more consistent results are achieved when a composite of individual factors is used. A value composite helps avoid value traps and can show some seemingly pricey stocks to be attractively valued. Financial strength and earnings quality composites are better used to identify stocks to avoid." Still beating the market after 9 years 12/01/13 Growth Investing Stingy Investing Value Investing "Finding the right Christmas gift can be difficult and some people are particularly hard to shop for. The combination can, on occasion, make the holiday season feel like an exercise in passing the proverbial brown sweater back and forth. Investors suffer from a similar problem when looking for good stocks. But, in some ways, they have it even worse because they have to wait for months, if not years, before finding out whether their picks turn out to be duds or stars." Who needs Wall St.? 11/24/13 Stingy Investing Value Investing "Many people go to New York to try to make a fortune on Wall Street. But value investors often thrive in smaller cities, where they're insulated from the groupthink that can infect those in the big city." Treasure hunters of the financial crisis 11/10/13 Value Investing "Five years ago, the global financial system was falling apart. Lehman Brothers had imploded. Banks had stopped lending. Foreclosure signs were as common as weeds on the front lawns of suburban homes. And Bruce A. Karsh saw the buying opportunity of a lifetime." Companies that lower their share count 11/10/13 Stingy Investing Value Investing "Most investors focus on a company's share price. They should spend more time looking at a related question - how many shares the company has, and whether that number is growing or shrinking." How to find bargains 11/10/13 Stingy Investing Value Investing "Great bargains can be found by sorting stocks into piles using different measures of financial merit." Prem Watsa the Canadian Warren Buffett 11/03/13 Watsa Value Investing "Fairfax, which has a portfolio worth US$24.1 billion, has gained 31% this year, compared with a 7.8% rise in the Standard & Poor's/TSX Composite Index. The investment firm has returned 13% annually over the past 20 years, mirroring the rise of Warren Buffett's Berkshire Hathaway Inc., according to data compiled by Bloomberg." Cliff Asness 10/27/13 Value Investing "Cliff Asness interview on WealthTrack" Graham & Doddsville: Fall 2013 10/13/13 Funds Behaviour Value Investing Be sure to read the Guy Spier interview: Build Your Life in a Way That Suits You Why cash is not trash 10/13/13 Stingy Investing Value Investing "Holding a concentrated portfolio that contains only a few stocks is a two-edged sword. If you pick the right stocks, they can pay off in spades. But if you don't, you might be taken to the poorhouse." Finding value among U.S. dividend stocks 10/13/13 Dividends Stingy Investing Value Investing "To obtain a well-rounded portfolio, dividend investors should pick up at least a few international stocks. That's why I'm on the hunt today for U.S. dividend payers that might also appeal to value investors." 12 things I've learned from Graham 10/05/13 Graham Value Investing "Everyone makes errors and mistakes and so having insurance against those mistakes is wise. With a margin of safety you can be somewhat wrong and still make a profit. And when you are right you will make even more profit than you thought. Finding a margin of safety is not a common event so you must be patient. The temptation to 'do something' while you wait is to hard for most people to resist. The best investors are those who have a temperament which is calm and rational. Excitement and expenses are the investor's enemy." Market underestimates BlackBerry 09/29/13 Watsa Value Investing "'The market's very emotional,' he adds. 'You'll find huge optimism when everything's going well, huge pessimism when things are not working out as well. And what we say is the truth is in between.'" Fishing for a bargain among small-fry 09/22/13 Dividends Stingy Investing Value Investing "Insisting on value helps to keep the prices I pay in line, while keeping an eye on dividend growth points the way to reasonably healthy businesses." It doesn't work all the time 09/22/13 Value Investing "There are valid theories on investing, and they work on average. If you pursue them consistently, you will do well. If you pursue them after failure, you can do better still." Francis Chou seminar 09/05/13 Funds Value Investing "Francis talks value at the Ivey business school" Ben Graham did not give up on value investing 08/25/13 Indexing Graham Value Investing "So, no, Ben Graham did not give up on value investing. One could easily say that he was arguing for value indexing." Bullish on cash 07/21/13 Markets Value Investing "Charles de Vaulx has an investment idea: cash. That may seem an odd choice, since cash earns less than inflation, making it a money-losing proposition. But Mr. de Vaulx, who oversees $17.8 billion as chief investment officer at International Value Advisers in New York, has been boosting his cash position. He is having trouble finding stocks he considers cheap and won't buy overvalued stocks. He considers bonds even more overvalued than stocks, leaving him perched on a lumpy cash pillow." Negative EV stocks 07/21/13 Stingy Investing Value Investing "Enterprise value has one peculiarity that market capitalization does not. It's possible for a company to have a negative enterprise value. That might sound odd at first but remember the calculation subtracts a firm's cash from the market value of its equity and debt." In Paris, value stocks are in bloom 07/06/13 Stingy Investing Value Investing "I have a soft spot for Mr. Tobik's value investing philosophy. But, much like a slice of Roquefort cheese, the tiny firms he favours aren't for everyone. If you're looking for a bit of extra flavour to determine whether these firms might suit your own palate, check out what his site has to offer." Last Leucadia letter 06/25/13 Value Investing "Forty-three years ago, the two of us met at Harvard Business School and thirty-five years ago was the beginning of a remarkable partnership - the results of which are tabulated on the opposite page. The end of 2012 marks the end of this partnership and the last letter from the two of us." A new Graham defensive stock 06/23/13 Graham Stingy Investing Value Investing "It's rare to find ancient structures that have stood the test of time. But those that survive hold lessons for the modern world. One of those lessons was recently learned by researchers at the Lawrence Berkeley National Laboratory who cracked the puzzle behind Roman concrete. When used to build ports, the ancient stuff significantly outlasts the common version, which can handle only a few decades in the waves." The importance of expectations 06/16/13 Value Investing "I've come to appreciate that investments always take much longer than I expected to work out. This is why investors seek out catalysts, it's an effort to reduce patience. I'd rather work on my patience skills, because there are a lot more investments without catalysts out there, than with them." Value around the world 06/16/13 World Academia Value Investing "Over the last decades the value premium has well been documented for various time spans and countries. It is proven to be a consistent asset pricing anomaly. This study presents the largest international study on portfolio returns formed according to the book-to-market ratio and examines how cultural differences affect the magnitude of value returns. The cultural differences are measured in two dimensions: patience and risk aversion based on the data collected by the International Test on Risk Attitudes (INTRA). In accordance with a consumption based Gordon model we find that risk aversion is positively and patience negatively related to the magnitude of value profits. Similar results hold for the average stock volatility. Although patience is positively related with the degree of economic development, its relation to value returns does not disappear after controlling for general economic and financial development measures. Furthermore, we find that the value premiums are also positively associated with the country price earnings ratio and negatively related to firm size." The Top 200 for 2013 06/15/13 Growth Investing Stingy Investing Value Investing "Short term results are one thing but the All-Stars really shine over the long-term. If you had bought equal amounts of the All-Stars and rolled your gains into the new stocks each year, you'd have enjoyed 15.2% average annual returns over the last eight years. By way of comparison, the S&P/TSX Composite (XIC) only climbed 4.5% a year over the same period. The All-Stars outperformed by an average of 10.7 percentage points a year." Top 500 U.S. Stocks for 2013 06/15/13 Growth Investing Stingy Investing Value Investing "Canadian stocks have many fine qualities but are far less numerous than their U.S. counterparts. It's only natural to look across the border for bargains to round out a diversified portfolio. That's why we extended the Top 200 methodology stateside and are pleased to present this year's MoneySense Top 500 guide to U.S. stocks." Stocks with a bounty 06/09/13 Graham Stingy Investing Value Investing "I have a soft spot for old Westerns, the type where it's easy to tell the villains and heroes apart - largely because the bad guys are framed in posters proclaiming they're wanted either dead or alive. When it comes to stocks, is it possible to want them dead or alive? It might be, provided they have enough assets that can be liquidated at a profit. In such cases, investors stand to make money if a firm goes bankrupt, but can also do very well should it turn around and thrive." 8 Stingy Stocks for 2013 05/31/13 Stingy Investing Value Investing "I started the Stingy method in 2001 in an effort to beat the S&P500 by picking value stocks within the index itself. So far the results have been highly satisfactory." On stock splits 05/26/13 Momentum Investing Markets Value Investing "This brings me to my conclusion: stock splits are a momentum effect, but it is larger when companies are still have a cheap valuation. Perhaps splits have no effect on stock performance - it is all momentum and valuation." Making money out of junk 05/19/13 Schloss Value Investing A 1973 interview with Walter Schloss Fairfax meeting slides 05/05/13 World Watsa Value Investing A few of their reasons for hedging... Berkshire Hathaway meeting notes 05/05/13 Munger Buffett Value Investing "MoneyBeat was live in Omaha's CenturyLink Center where more than 35,000 Buffett lovers crowded for some six hours while Buffett and sidekick Charlie Munger's dished out investment wisdom and wit. Read our recap" Colorful Charlie Munger 05/05/13 Buffett Munger Value Investing "One of Munger's biggest zingers today had him saying the European Union's decision to allow Greece to join was as stupid as someone using rat poison as whipping cream." Buffett and the long view 05/05/13 Buffett Stingy Investing Value Investing "As Warren Buffett takes the stage this weekend, it's time to ask if his flagship company is still worth investing in." A value tilt in disguise? 04/20/13 Dividends Value Investing "The yield factor associated with high-dividend-yielding stocks actually detracted from performance." Chou's 2012 letter 03/30/13 Funds Value Investing "In general, we are not that bullish on the stock market. Aside from a couple of industries like the financial institutions in the U.S. and companies in the retail sector, we are not that comfortable with the prices of many stocks." Fishing for value 03/30/13 Funds Value Investing "There are generally three scenarios under which they buy into a company - it's ignored by Wall Street, is misunderstood by investors, or has suffered from panic selling." The best stock-picker 03/30/13 Behaviour Value Investing "By buying companies with safe, high dividend yields, Norman assured himself of getting only companies that had solid financial characteristics (after all, they couldn't have been paying dividends for many years without a good underlying business model and strong cash flow), at prices that were usually - in hindsight - ridiculously cheap, because Norman generally bought them during a hysteria that was causing Mr. Market to offer that particular stock at a particularly attractive price." The gross profitability premium 03/02/13 Academia Value Investing "Profitability, measured by gross profits-to-assets, has roughly the same power as book-to-market predicting the cross-section of average returns. Profitable firms generate significantly higher returns than unprofitable firms, despite having significantly higher valuation ratios. Controlling for profitability also dramatically increases the performance of value strategies, especially among the largest, most liquid stocks" Buffett's annual letter 03/01/13 Buffett Value Investing "wishing makes dreams come true only in Disney movies; it's poison in business." Mohnish Pabrai interview 02/24/13 Funds Value Investing "I don't invest in technology stocks because I understand it. Basically, Buffett would say that he doesn't invest in tech businesses because they are subject to change. Industries with rapid change are the enemy of the investor. Tech businesses, particularly biotech, is a problem from that point of view. All industries work with change but you should ideally be investing in businesses with a low rate of change, not a high rate of change." Tough times for classic value investors 02/24/13 Value Investing "While the U.S. equity market has performed exceptionally well since its bottom in March 2009, Warren Buffett's Berkshire Hathaway has trailed the index by nearly 6%. Buffett is among a number of prominent classic-value investors who have fared poorly over this period. Over long time horizons, value investing has consistently outperformed growth strategies and the broad market index. So what is causing this recent phenomenon?" Put cheapness first 02/24/13 Books Stingy Investing Value Investing "EBIT/EV alone outperformed the magic formula's combination of ratios. Investors would have been better off simply looking for cheap stocks and not paying any attention to quality." Retirement 100 (Fall 2012) 02/16/13 Dividends Stingy Investing Value Investing "Like avid gardeners, conservative investors want their stock dividends to grow. They aren't in it for a quick trade and, instead, follow a slower steadier method that requires only a little weeding and pruning from time to time. It's an approach that has allowed more than a few investors to enjoy a comfortable retirement." 6 Graham Stocks for 2013 02/12/13 Graham Stingy Investing Value Investing "If you had bought equal dollar amounts of the Graham stocks and replaced them with the new crop of stocks each year, you would have gained 681% (19% annualized) over the full period." Tetanus for Tim? 02/09/13 Funds Stingy Investing Value Investing "Spartan accommodations are one reason I became interested in a stock owned by money manager Tim McElvaine. He quipped that he felt the need to get a tetanus shot before visiting the aging headquarters of the company" Legacy of Benjamin Graham 02/04/13 Buffett Kahn Graham Value Investing "Legacy of Benjamin Graham: The Original Adjunct Professor." Francis Chou on value 02/03/13 Funds Value Investing "What keeps you awake at night? I worry if my valuations are wrong. If they are wrong, then you don't make money. I am looking for something that I believe is worth 100 cents, but which I can buy for 50 or 60 cents. But is my 100 cents accurate? Did I miss something? Is the earning power there? Are the assets really worth what they're saying? And is management honourable, or will they run off with the money?" Examining Benjamin Graham's record 01/12/13 Graham Value Investing "The evidence suggests that Graham's simplified approach to value investment continues to outperform the market." Net-nets are not for faint of heart 01/09/13 Value Investing "Strategy Lab contributor Norman Rothery recently tackled an issue that's important for those investors who rely on screens to identify attractive stocks. Should you buy all of the stocks that pass your screen, or simply view them as prospects, which require additional analysis before you sort out winners from losers?" Scary beats safe when it comes to Net Nets 12/31/12 Stingy Investing Value Investing "Cheap and safe are two attributes I look for when picking stocks. But seeking safety doesn't always pay. History suggests that a cheap-and-scary approach may be the better way to go - if you have the stomach for it." Small, illiquid, value 12/23/12 Funds Markets Stingy Investing Value Investing "While the return potential of small value stocks is well known, the benefits of low liquidity may be less obvious. That's why I was pleased to read a study on the topic by Roger Ibbotson, and others, in the latest Financial Analysts Journal, which dissects mutual funds." Ryan Morris, activist value investor 12/21/12 Value Investing "When an activist investor like Carl Icahn tries to take over a household brand, it plays out on CNBC. Most shareholder struggles occur when little-known investment funds try to take over little-known companies like InfuSystem. Of the more than two dozen activist battles in 2012, most involved companies with a market value under $50 million." Focus on the numbers 12/13/12 Stingy Investing Value Investing "Simple numerical strategies may well represent a ceiling to returns for most investors. It's something that's well worth considering the next time you screen for stocks." What value is good value for stocks? 12/01/12 Stingy Investing Value Investing "Next time you're in the bathtub, consider the dynamics of the rubber duck - an easy-to-submerge toy that quickly pops to the surface when it is released. In much the same way, value investors buy stocks that the market has pushed deep underwater because they expect these firms to turn around and head back to more normal levels." Simple but not easy 11/24/12 Value Investing "Tobias Carlisle makes the case for quantitative value." Value vs CAPE 11/17/12 Markets Stingy Investing Value Investing "To probe what value investors can reasonably expect, it's interesting to look at how value stocks tend to do at various levels of market valuation." Canadian Graham stocks 11/17/12 Graham Stingy Investing Value Investing "I'm a big fan of Benjamin Graham's investment techniques and frequently use strategies from the father of value investing to uncover interesting Canadian stocks. With markets looking a bit shaky in recent days, it's an opportune time to focus on Mr. Graham's defensive approach, which I've used profitably for over a decade" Measures of value 11/03/12 Stingy Investing Value Investing "The results are clear: You would have done well by buying stocks with low ratios" Value and dividends 10/06/12 Dividends Stingy Investing Value Investing "Combining a search for dividends with a nose for value often produces good results. But let's take a look at a few practical issues you might encounter when looking for stocks with this tempting combination of features." The school of patience and pluck 09/26/12 Schloss Stingy Investing Value Investing "You don't need special sources of information or cutting-edge analysis to make money in the market. It helps, though, if you have patience and the willingness to buy stocks that other people despise. For proof, look to the career of Walter Schloss." Walter Schloss 2008 talk 09/26/12 Schloss Value Investing "Get some inspiration from Walter's talk at the Ben Graham Centre for Value Investing" 65 years on Wall Street 09/26/12 Schloss Value Investing "Walter Schloss talks at a Grant's event. An oldie but a goodie." Mohnish Pabrai and Guy Spier talk 08/23/12 Value Investing "Mohnish Pabrai and Guy Spier share their considerable wisdom with UC Davis's MBA Value Investing class on 8/22/12." Global Value: 10 Year CAPE 08/22/12 Value Investing "Over seventy years ago Benjamin Graham and David Dodd proposed valuing securities with earnings smoothed across multiple years. Robert Shiller popularized this method with his version of this cyclically adjusted price-to-earnings ratio (CAPE) in the late 1990s, and issued a timely warning of poor stock returns to follow in the coming years. We apply this valuation metric across over thirty foreign markets and find it both practical and useful, and indeed witness even greater examples of bubbles and busts abroad than in the United States. We then create a trading system to build global stock portfolios based on valuation, and find significant outperformance by selecting markets based on relative and absolute valuation." Tim McElvaine's conference 08/22/12 Value Investing "Tim talks about his portfolio and the world more generally at his partners' conference." How to play the market 08/20/12 Kahn Value Investing "You stick to value, to Benjamin Graham, the man who wrote the bible for the market. It's a mistake to believe you can do more, I warn you. John Maynard Keynes was one of the most famous economists in history. He was a genius, but he failed as a macro investor. It was hard to believe at the time. But when he became a bottom-up value guy, well, he became very successful. With value investing, you don't have to bend the truth to accommodate periods with derivatives and manias. Value investing will almost always be right." Why does financial strength forecast stock returns? 08/18/12 Value Investing "The authors measure financial strength with Piotroski.s F-score. They demonstrate that investors can achieve higher returns by investing in stocks of firms with greater financial strength primarily because of institutional demand for stocks with better F-scores and the gradual incorporation of public information into stock prices. Stock return momentum and institutional momentum trading cannot fully explain the relationships between the F-score and subsequent returns and the F-score and subsequent institutional demand." Lonely puppies 07/28/12 Value Investing "I have often owned companies with little to no sell-side analyst coverage. Ask yourself this, how many companies trading on US exchanges are there: that have no analyst coverage, that are US-based, that have a Market Cap over $250 million, that aren't passthrough vehicles, and have pitiful liquidity at least" Howard Marks interview 07/16/12 Value Investing "Howard Marks, chairman of Oaktree Capital Group LLC, talks about Europe's debt crisis, the global economy and investment strategy." The Oracle of Boston 07/07/12 Klarman Value Investing "Mr Klarman is a devotee of 'value investing', a discipline forged by Benjamin Graham and popularised by Warren Buffett, which involves buying stocks at a discount to their intrinsic value. He will look beyond equities for bargains - a good example is Lehman Brothers, which at the end of last year was Baupost's largest distressed-debt position. But in every investment he insists on a 'margin of safety', the buffer between what investors pay for the stock and what they think it is worth, so they are protected against unforeseen events or miscalculations." Figuring it out 07/07/12 Graham Books Value Investing "Before Benjamin Graham started to work on Wall Street, investment analysis was a hit-and-miss affair, focusing more on recent price movements than on the merits of individual companies. Graham, a brilliant mathematician, took the process to a much higher level." Why value stocks lag 05/26/12 Value Investing "Wherein it is observed that value stocks have performed poorly of late. If the pattern holds, value portfolio managers will start to be fired and people will chase after expensive stocks like Facebook. It should all set up some rather good times for patient value investors." Buy Low, Sell High 05/13/12 Value Investing ""Buy low, sell high" is often quoted in finance. While its wisdom is hard to question, its application is hardly extensive. To understand why this is so, it is helpful to put ourselves in the shoes of a typical investor." The devil in HML's details 05/11/12 Value Investing "This paper challenges the standard method for measuring 'value' used in academic work on factor pricing and behavioral finance. The standard method calculates book-to-price (B/P) at portfolio formation using lagged book data, aligns price data using the same lag (ignoring recent price movements), and hold these values constant until the next rebalance. We propose two simple alternatives that use timely price data while retaining the necessary lag for measuring book. We construct portfolios based on the different measures for a US sample (1950-2011) and an International sample (1983-2011). We show that B/P ratios based on timely prices better forecast true (unobservable) B/P ratios at fiscal yearend. Value portfolios based on the most timely measures earn statistically significant alphas ranging between 305 and 378 basis point per year against a 5-factor model itself containing the standard measure of value, as well as market, size, momentum and a short term reversal factor." Which price ratio outperforms the EM? 05/01/12 Value Investing "Having just anointed the enterprise multiple as king yesterday, I'm prepared to bury it in a shallow grave today if I can get a little more performance. Fickle." Which price ratio best identifies value stocks? 05/01/12 Value Investing "Which price ratio best identifies undervalued stocks? It's a fraught question, dependent on various factors including the time period tested, and the market capitalization and industries under consideration" Howard Marks at NYSSA 04/14/12 Value Investing "Howard Marks, legendary investor and Chairman of Oaktree Capital Management, spoke at New York Society of Securities Analysts. He is also the author of the book, "The Most Important Thing: Uncommon Sense for the Thoughtful Investor." Distressed Debt Investing was in attendance as he presented his views on the topic of "Human Side of Investing."" Leucadia Letter 04/13/12 Value Investing "A world-wide recovery in the near future is not a foregone conclusion. Europe and the future of the Euro are far from settled. Growth in China is slowing and the risk of a "Chinese Spring" cannot be ruled out. Iran is a big problem. In an environment of slow growth at home and a dysfunctional government, we believe that less financial leverage is better. We expect many other companies and investors share this view. We emphasize that we are not pessimistic, just cautious." The case for being a copycat investor 03/30/12 Stingy Investing Value Investing "Is purloining good ideas distasteful? U.S. fund manager Mohnish Pabrai doesn't think so. He says it's a great way to make money and urges people to copy notable investors more often. You might want to take a page out of his book and improve your portfolio. " Top 200 Canadian Stocks for 2012 03/29/12 Growth Investing Stingy Investing Value Investing "Walking downstairs on Christmas day was a ceremonial affair when I was young. It started by lining up with my brother to descend to the living room in order from eldest to youngest. Aside from heightening the anticipation of good things to come, it allowed my parents to see our reactions to the Christmas tree, fire, presents, and perhaps most delightfully, the stockings stuffed to the brim with treats. The felling of delight I had when pawing through my treat-laden stocking is now, alas, a thing of the past. But these days I get the same sort of excitement when I look through the largest stocks in Canada for this year's MoneySense's Top 200 All-Stars. This year marks the eighth in a row for the Top 200 tradition which, I'm pleased to say, has been very fruitful." Top 500 U.S. Stocks for 2012 03/29/12 Growth Investing Stingy Investing Value Investing "There are a few skills that every Canadian should pick up in childhood and skating is one of them. But no one tells you that it all slips away after spending years reading books and sipping hot chocolate by the fire. That's something I discovered the hard way when I recently squeezed my feet into a pair of skates and tottered out onto the cold hard ice of my local rink. The prospect of falling seemed far less painful when I was younger, slimmer, and closer to the ground. As a result, my first hobble around the rink was more a triumph of will than of good sense. Just as with learning how to skate, the first leap into the world of stocks can be an uncertain one. That's why - in an effort to help you gain your footing - we search high and low for the best stocks in the U.S. to put in the annual MoneySense Top 500." Stocks are a little pricey: Schiller 03/27/12 Value Investing "'Technology has a fascination...it's part of our sense of the future,' he says. 'We've got an exciting thing going. All the new gadgets are just so breathtaking, there's going to be huge fortunes made. That kind of excitement I do feel in the air.' Having said that, Shiller is not predicting another tech bubble, far from it. He says predicting bubbles is impossible: 'It's like predicting an epidemic. It depends on the contagion of emotions and of ideas.' Furthermore, the author of Irrational Exuberance, which presaged the bursting of the tech bubble, and Animal Spirits believes there's a lot to be worried about." Chou Annual 03/27/12 Value Investing "Here is a funny story of a French tourist visiting Canada. Pierre, an expensively attired middle-aged French tourist on his first trip to Toronto strolls into the bar of his 5-star hotel. The elegant hostess smiles, leads him to a table and beckons her prettiest server to take care of him. They talk, flirt a little and she giggles a bit. When he draws her closer and whispers in her ear, she gasps and ..." Mohnish Pabrai lecture 03/07/12 Value Investing "Mohnish Pabrai, Managing Partner, Pabrai Investment Funds talks to Ivey students" RIP: Walter Schloss 02/20/12 Value Investing "Walter Schloss, the money manager who earned accolades from Warren Buffett for the steady returns he achieved by applying lessons learned directly from the father of value investing, Benjamin Graham, has died. He was 95." 9 Stingy Stocks for 2012 02/16/12 Stingy Investing Value Investing "I started the method in 2001 in an effort to beat the S&P500 by picking value stocks within the S&P500 itself. Thus far the Stingy Stocks have gained 14.3% annually whereas the S&P500 (as represented by the SPY exchange traded fund) advanced only 2.3% a year over the same period." Is the Value Effect Seasonal? 01/26/12 Value Investing "This paper extends the research on value premium by examining patterns of seasonality exhibited in the book-to-market effect in major global equity markets. The results provide evidence supporting the January effect in the value premium phenomenon. Using stock market indices for Asia Pacific Europe, Australasia, and Far East (EAFE) and Europe, with and without the U.K., Scandinavian countries, the U.K., U.S., and Japan form 1975 through 2007, the paper provides out-of-sample evidence from twenty-one countries that comprise different index portfolios. As a robustness measures, we use regression analysis, paired means tests, and non-parametric tests to examine whether the persistence of the anomalous January value premium is real and significant. The annualized excess January value premium ranges from 42.96 percent for Scandinavian countries to 9.24 percent for EAFE markets with 20.28 percent for U.S. Even though such a predictable pattern exists, our analysis suggests that large standard deviations would not allow a viable investment strategy." Invest like a legend: David Dreman 01/26/12 Value Investing "How I'd invest $100,000 right now: I'd put it in good-quality stocks in a portfolio large enough to diversify, or, for the average investor, an index fund. Stocks have traditionally gone up if we see inflation coming. We're not seeing much inflation yet, but we've been printing an awful lot of money in the United States, they've printed $7 trillion since 2008. I've never seen the two not meet." Scouring the market's bargain bin 01/03/12 Value Investing "As a long time value investor, one of my favourite research tools is the famous Ben Graham "net-net working capital" screen. This analysis begins with current assets - typically dominated by cash, accounts receivable and inventories - and then deducts all liabilities, not just current liabilities, to arrive at a net working capital per share value. No value is given to fixed assets such as plant, machinery and real estate, nor to intangibles such as goodwill, patents, licenses or other intellectual property." A market that even a skeptic can like 12/31/11 Value Investing "One of Canada's pickiest and most careful money managers has been on a buying spree lately. Early in July, Vito Maida had the maximum 25-per-cent cash he's permitted to hold in running the Horizons North American Value ETF. Today, while many individual investors are paralyzed with indecision about where to put their money, he's fully invested. 'I would say that this is the first time in a long time that we've been able to construct a portfolio of high-quality companies at very attractive valuations,' Mr. Maida said. Translation for non-hardcore investors: There are some good companies available right now at attractively low prices." Cutting buffett helps sequoia fund 12/29/11 Value Investing "Ruane ran an unconventional fund, closing Sequoia to new investors in 1982 because he didn't want its size to limit what the fund could buy. It opened again in 2008, three years after Ruane's death. Ruane also held a concentrated portfolio. In 2003, Sequoia had 75 percent of its money in its top six holdings, according to a regulatory filing." 106-year-old stockbroker talks shop 12/26/11 Value Investing "Irving Kahn has been following the swings of the market since before the Great Depression...and he still does." Buying a dollar for fifty cents 12/03/11 Value Investing "What makes the stock of particular interest to a value investor is the fact that management reports the value of the investment portfolio every quarter and, as of Oct. 31, the investments and cash were valued at $1.15 a share. So, you are effectively buying an actively managed resource portfolio at 50 cents on the dollar." Charlie Rose interviews Seth Klarman 11/26/11 Value Investing "Award-winning journalist Charlie Rose interviews Seth Klarman, co-chair of the Facing History and Ourselves Board of Trustees, about his deep commitment to the work of Facing History and his thoughts on philanthropic and financial investment." Longleaf Q3 10/14/11 Value Investing "I think the future of equities will be roughly the same as their past in particular, common-stock purchases will prove satisfactory when made at appropriate price levels. It may be objected that it is far too cursory and superficial a conclusion that it fails to take into account the new factors and problems that have entered the economic picture in recent years - especially those of ... the movement towards less consumption and zero growth. Perhaps I should add to my list the widespread public mistrust of Wall Street as a whole, engendered by its well-nigh scandalous behavior during recent years in the areas of ethics, financial practices of all sorts, and plain business sense." Cheap, safe and raring to go 09/24/11 Stingy Investing Value Investing "Do you want a bit more zip from your value stocks? Join me as I explore a combo that might put a little more spice in your portfolio. The secret is combining the thrifty fundamentals of value investing with the price trends of momentum investing" The Indian who bailed out Bank of Ireland 09/08/11 Value Investing "When Bank of Ireland faced an imminent nationalization earlier this summer, a group of North American investors pumped in $1.6 billion to keep it out of the hands of the Irish government, in return for up to a 35% stake in the iconic commercial bank, whose roots date back to 1783. The lead investor in the deal was the Toronto-based Fairfax Financial Holdings Limited, led by Hyderabad-born Prem Watsa, who may be a virtual unknown in the country of his birth, but is fast building a reputation as an investment wizard in his adopted land and also within the global value investing community." A value investor's best friend in China 09/01/11 Value Investing "My experience with statistically cheap China-based investments has not always been positive. It dates back 20 years or more to the TSX-listed Noble China, which had the Chinese licence for Pabst Blue Ribbon, a particularly tasteless American beer. The whole episode ended in tears for the shareholders. So, I am not about to invest my life savings in American Lorain, but I think that Ben Graham would approve a modest exposure." Graham's Simple Way: Summer 2011 08/23/11 Graham Stingy Investing Value Investing "I like to find interesting value stocks using stock screens. One of the best screens to follow is Benjamin Graham's Simple Way, and its variants, which I've tracked for many years in both the U.S. and Canada." Advice from Irving Kahn 08/23/11 Value Investing "At Columbia Business School, Kahn served as an assistant to economist Benjamin Graham, the value-investing guru whose principles of caution and defensive investing inspired a cadre of disciples that includes Warren Buffett. It's an investment strategy born of the beating Graham had taken in '29, and Kahn adopted it as his own. "I stopped wasting time on what people claimed a stock was worth and started looking at the numbers," he says. "This may surprise you, but there were a large number of valuable buys during the Depression."" Watsa sees dirty thirties pain ahead 08/10/11 Value Investing "The U.S. economy appears to be heading toward a lengthy period of deflation such as the one that struck Japan, and there is little policy-makers can do to prevent it, says one of Canada's most accomplished investors. But it isn't just the United States and Europe that Prem Watsa is worried about. The potential bursting of a property bubble in China has him even more concerned. And if Chinese demand for commodities dries up at the same time as U.S. consumers are shutting their wallets, then the global economy is in for a lengthy period of pain." Think garage sale 07/30/11 Funds Stingy Investing Value Investing "Fling open your closets and clear out your basement because it's garage sale time. If all goes well you might be able to shift the contents down the street. In my neighbourhood, you also get the chance to buy sugary pools in flaky cups from the friendly butter-tart lady. But the humble garage sale yields more than sugar-rush-inducing treats. It can offer lessons for stock investors." Bob Rodriguez's perspective 06/06/11 Value Investing "Since coming back to work on Jan. 1, he has found himself galled once again by what he sees. Fund managers, emboldened by their mammoth gains, clamor for risk. Junk bonds remain wildly popular. Even more stunning, says Rodriguez, is the government's failure to address its debt. 'I know one thing from business,' he says, his voice quavering as he tries, mostly successfully, not to yell. 'Unless you correct the problems that are already occurring, you don't add on new leverage and new, other responsibilities until you correct the old! All you're going to do is capsize the ship!'" Seven takeover targets 05/23/11 Value Investing "Picking takeover candidates for fun and profit is a perennial investment sport. How can it not be? When one company takes over another, it typically pays a 20 percent to 70 percent premium over the target's prevailing stock price. Takeovers can enrich investors instantly." Is value compensation for distress risk? 05/20/11 Value Investing "This study provides a comprehensive investigation of the relation between the value anomaly and distress risk. Using risk measures based on accounting models, structural models, credit spreads and credit ratings, we find no relation between the value premium and distress risk. Our findings are inconsistent with the notion that the value effect is a compensation for distress risk." Think big and go broke 05/06/11 Value Investing "Alcoa, with its two AA's, is the first symbol alphabetically in the Standard and Poors 500 Index. It is also traditionally the first S&P company to report quarterly earnings. Why? With results like these over the last 17 years one would think that the SEC would have to drag the results out of them. Or maybe Alcoa executives would hide 'til midnight Friday and put out a press release when no one would be likely to report it. But no, this capitalistic catastrophe is Johnny on the spot every quarter, and neatly illustrates an investing nugget my partner Edwin Levy and I stumbled upon nearly twenty years ago. After faithfully perusing the Value Line Survey every weekend for many years, we noticed that over half of the companies portrayed didn't actually make any money. Value Line follows almost 2000 stocks in its main survey, so this is quite a mouthful, but so many of them look like Alcoa here. They report earnings, to be sure, and we all understand the denotation of "earnings". We mean GAAP, or in some technology companies we mean near GAAP, but only after we fudge some of the expenses. We generally get the hang of Generally Accepted Accounting Practices. But when we say "profits", it has a connotation very different. We know intuitively what a profit is at a local bakery. Profit, in every day speech, means money that we can take out of a business and spend on completely different things--- schools fees, new cars, diamond rings---and when we come back on the Monday morning, we still have an asset to come back to. You can see for yourself that that in no way describes Alcoa." Why this value investor holds cash 03/17/11 Value Investing "The Canadian stock market is more vulnerable to a major pullback than its U.S. counterpart, warns one of Canada's more successful money managers of the past decade. "We think that valuations in Canada, in particular, are at a very dangerous level," said Vito Maida, founder of Toronto-based investment firm Patient Capital Management Inc. "Equities in Canada have, I think, gone to levels that are not attractive today, and could be in for a serious correction."" Tim McElvaine talk 02/16/11 Value Investing "A rare talk from one of the nicest value investors in Canada." Your Roadmap to Investment Success 02/07/11 Funds Dividends Stingy Investing Value Investing "I was pleased to talk at The Investment Show where I made the case that novice investors should opt for low-fee balanced funds. I then moved on to more advanced topics including dividend investing and value investing. Here are the slides that were used..." Follow the Cash 01/30/11 Value Investing "'A company can transfer that free cash flow to shareholders even without sales growth. That's our theology!' jokes the former seminarian. Double-digit cash-flow yields look very attractive compared with 10-year Treasuries yielding roughly 3.5%." 5 Stingy Stocks for 2011 01/29/11 Stingy Investing Value Investing "Our Stingy Stocks climbed a phenomenal 69.4% this year and that marks the second year in a row that they've gained more than 60%." Peter Cundill's last interview 01/27/11 Value Investing "Reporter David Berman spoke with the legendary investor, who passed away this week, for the February issue of Report on Business magazine. Here is Mr. Cundill's last interview." Hedge Fund Analyst Checklist 01/23/11 Value Investing "Anyways, I was cleaning out some old files and came across these notes from the class and thought I would repost them as they are a wonderful guide for a young analyst on how to think about investing in stocks." Roads to Investment Success 12/05/10 Funds Dividends Stingy Investing Value Investing "I was pleased to talk to the University of Toronto Faculty Association where I made the case that novice investors should opt for low-fee balanced funds. I then discussed more advanced topics in dividends and value investing. Although the session was not recorded, here are the slides that were used..." Prem Watsa sees commodity bubble 12/02/10 Value Investing "Never mind the current hype over commodities: Prem Watsa and his team at Fairfax aren't convinced that resources and agricultural goods will continue to skyrocket. "Anything that everybody thinks is going to happen worries us," Mr. Watsa said in an interview. "The excesses get built up. Recessions take them out."" Neosho Capital Q3-10 commentary 11/27/10 Value Investing "When asked how he had weathered the 2008/9 financial meltdown, Markowitz said he had been moderately liquid going into those years, thanks to having sold off some of his 20-odd ETFs and some of his Kraft holdings. Thinking that his own use of MPT, CAPM, Monte Carlo simulations, etc. formulas, had contributed to his decision to reduce his allocation to securities in the run-up to the '08/'09 meltdown, we were surprised when Markowitz confessed, somewhat sheepishly, that it was a phone call with his friend, "Steve", a hedge fund manager, who advised him to sell off a significant enough portion of his holdings prior to the panic that started in September of 2008. Given this admission, we wonder if a further updating of the MPT models is needed to reflect this invaluable step: Call Steve. The trick will be finding a way to put this extra step into algorithmic form." Life and investing after Buffett 11/21/10 Value Investing "So it may be time to start taking a look at Berkshire substitutes. While no company is a Berkshire clone, a couple of U.S.-based holding companies offer a similar mix of experienced management, financial heft and the assurance that your money is being overseen by value-oriented investors who have much of their money riding along with yours." You Can't Be Too Thin 11/06/10 Value Investing "Roger Ibbotson has devoted a career to answering a question that has defied the greatest minds of finance. Namely, why some securities offer better returns than others, even when they have a close resemblance. Now a 67-year-old finance professor at Yale University, Ibbotson thinks he's discovered the answer. It's liquidity. Or the lack of it." Patient Capital 2010 Q3 11/01/10 Value Investing "At current bond prices we strongly believe prospective returns are very low while the potential for loss is extremely high. If interest rates were to rise to only one half of their historical average fixed income securities would suffer substantial losses! We would recommend only very short term fixed income securities at this time. For those looking for income, high quality dividend paying equities are safer and will likely provide returns that are superior to fixed income alternatives over the next several years." The Papers of Benjamin Graham 11/01/10 Graham Value Investing "These papers are not part of either Intelligent Investor nor Security Analysis. The papers range from 1930 to 1974, basically Ben Graham's entire professional life." Enduring Values, Enduring Value 10/31/10 Value Investing "There are four ways to create wealth it is not just cash flow. They are, one, having cash flow from operations available to security holders. A company can use that cash to expand its asset base, reduce liabilities or distribute the money to shareholders, either by paying dividends or buying back stock. Two, and probably much more important, is having earnings, which we define as creating wealth while consuming cash. Remember, though, that earnings for most companies do not have a long-term value unless the company also has access to capital markets because if it doesn't, sooner or later, it will to run out of cash. The third - and very, very important - value-creation method is resource conversion. Such as? Mergers and acquisitions, changes in control, massive recapitalizations, spinoffs, etc. The fourth wealth-creation method, which I touched on previously, is having extremely attractive access to capital markets." Value and Momentum in Frontier Markets 09/20/10 Academia Value Investing "We document the presence of economically and statistically significant value and momentum effects in the new emerging equity markets in the world, the so-called frontier emerging markets. We are the first to investigate the characteristics of individual stocks in these markets. Our unique data set consists of more than 1,400 stocks over the period 1997 to 2008 and covers 24 of the most liquid frontier emerging markets. Our results serve as out-of-sample evidence for the existence of value and momentum effects that have previously been reported for developed and emerging markets. Further, we provide empirical evidence that value and momentum strategies within frontier markets are negatively correlated, and are uncorrelated with the same value and momentum strategies in developed and emerging markets. Our mean-variance spanning tests indicate that investors who expand their investment opportunity set with value and momentum investment strategies based on stocks from frontier markets can significantly improve the efficiency of their investment portfolio." Debunking Beta 09/08/10 Dreman Value Investing "It's time to delete the CAPM from business school textbooks. It's done more harm than good for investors." Darwin's darlings 08/25/10 Value Investing "The premise of the report was that undervalued small capitalization stocks (those with a market capitalization between $50M and $250M) lacked a competitive auction for their shares and required the emergence of a catalyst in the form of a merger or buy-out to close the value gap." Tim's 2010 Conference 08/02/10 Funds Value Investing "Glacier, Indigo, EGI Financial, Sun-Rype Products and Arlington, which is a little bit of a special situation. But all of these companies, I think, are really through any restructuring. They're somewhere in various stages of cash generation or discovery, and whether or not we sell them or not, depends an awful lot on the price they're trading at." Mr. Market refuses 07/25/10 Value Investing "I like sitting on Uncle Warren's knee while he talks about the time he swapped a bag of cocoa beans for a controlling interest in Berkshire Hathaway: 'For several weeks I busily bought shares, sold beans, and made periodic stops at Schroeder Trust to exchange stock certificates for warehouse receipts. The profits were good and my only expense was subway tokens.' Great story, Uncle Warren. I'm right now trying to buy Pfizer with a paper clip and some pocket lint" Sticking to what works 07/06/10 Funds Value Investing "This month Sequoia Fund marks its 40th anniversary. It's a milestone rarely achieved in an industry where three years is considered long term. Even more remarkable is that Sequoia is being run pretty much the same as it was when Warren Buffett's friend and stockbroker, the late Bill Ruane, launched the fund in 1970. It's still a concentrated portfolio with two or three dozen stocks, all heavily researched and bought with the idea that the market is valuing them at less than their true worth. Co-managing the fund is Robert Goldfarb, whose tenure at the New York firm dates back to 1971." Third Avenue Value Q2 2010 05/21/10 Whitman Value Investing "It is difficult to function as a value investor unless the value analyst has a firm grasp of economic reality. It is equally difficult to promulgate intelligent financial regulations unless the sponsors of the regulation have a firm grasp of economic reality. Neither the general public, nor legislators and Obama administration officials, seem to have much of a grasp of economic reality, at least when it comes to dealing with troubled financial institutions." Value investing flip books 05/16/10 Dividends Stingy Investing Value Investing "The flip book helps to highlight a core problem for investors. Namely, the urge to swap out of a good strategy during periods of underperformance which happen frequently and can last for several years. So, be warned. Oh, and also have a little fun with the flip books." Gross profitability as a predictor 05/12/10 Value Investing "Controlling for gross profitability dramatically improves the performance of value strategies, especially among large, liquid stocks. A value-weighted portfolio that is long (short) the extreme high gross profit-to-assets, high book-to-market (low gross profit-to-assets, low book-to-market) produced by a double sort on the two ratios generates an average monthly excess return of 1.16%" Meeting notes 05/11/10 Value Investing "The Inoculated Investor has a series of handy notes from the Berkshire, Markel, Wesco and VIC meetings" Graham and Doddsville spring 2010 05/09/10 Value Investing "This issue features an interview with Glenn Greenberg, founder and portfolio manager at Brave Warrior Capital. Mr. Greenberg outlines his high concentration, low turnover investment approach, with a focus on growing, high quality companies that also offer attractive and defensible free cash flow yields." Winters lecture 04/28/10 Value Investing "David J. Winters, the managing director of Wintergreen Advisers, LLC talks to UWO class" Mohnish Pabrai interview 04/12/10 Value Investing "'All man's miseries stem from his inability to sit in a room alone and do nothing.' And all I'd like to do to adapt Pascal is, 'All investment managers' miseries stem from the inability to sit alone in a room and do nothing.'" Chou's 2009 letter 03/26/10 Funds Value Investing "we believe that investment and non-investment grade corporate bonds are now fully priced. It is similar with equities. Most stocks are now close to being fairly priced and it is harder to find bargains. Although we won't likely see the lows that we saw in February/March of 2009, the risks of investing in equities are greater now." Sir John's prophetic memo 03/25/10 Value Investing "Obsolescence is likely to have a devastating effect in a wide variety of human activities, especially in those where advancement is hindered by labor unions or other bureaucracies or by government regulations. Increasing freedom of competition is likely to cause most established institutions to disappear with the next fifty years, especially in nations where there are limits on free competition. Accelerating competition is likely to cause profit margins to continue to decrease and even become negative in various industries." Could investors use a little magic? 03/12/10 Graham Value Investing "Graham implied that he had back-tested this formula, saying that investors could expect a 15% or more annualized return plus dividends and minus commission expenses, but he didn't provide clear statistics in his interview for how his formula actually performed. However, according to investment firm Tweedy Browne's pamphlet "What Has Worked in Investing," finance professor Henry Oppenheimer ran Graham's screen for stocks listed on the NYSE and AMEX from 1974 through 1980. Oppenheimer found that an investor employing Graham's method over that time achieved an annual return of 38% compared with 14% per year return calculated by the Center for Research in Securities Prices, or CRSP, of NYSE-AMEX securities. A seven-year period doesn't completely prove the validity of a formula, but that time frame is arguably long enough to suggest that the formula may be onto something." James Montier interview 03/08/10 Montier Value Investing "Process is the one aspect of investing that we can control. Yet all too often we focus on outcomes rather than process. Yet ironically, the best way of getting good outcomes is to follow a sound process. The research shows that holding people accountable for outcomes tends to lead to suboptimal performance, generally because they spend all their time worrying about the things they can't control. I'd advise a far better approach to assess people on the criteria of adherence to process." Sears letter 03/08/10 Value Investing "Some contend that there is an inherent conflict between labor and capital, yet they fail to appreciate that without investment there will be no growth and no jobs. For there to be investment there needs to be an expectation of profit, and, for there to be an expectation of profit, there needs to be hope and belief in the future and confidence in the rules of the game." McElvaine annual 03/06/10 Funds Value Investing "Going forward, I expect that you will see more money invested outside of Canada and in larger companies. This is not particularly a change; I'm just going back to my Cundill roots to some extent. In the past couple of years, when Canadian ideas were slim, rather than invest outside of Canada, I superconcentrated and stayed invested in small caps. This clearly had painful results. While we will continue to have a significant small-cap portfolio, I am now finding interesting large-cap non-Canadian ideas." Patient Capital Q4 letter 03/06/10 Funds Value Investing "In essence do valuations reflect the risk of the current environment and do they provide an acceptable rate of return given those risks? In our estimation, current aggregate equity prices have run far ahead of economic fundamentals." Buying earnings and book value 03/02/10 Academia Value Investing "The paper shows that book-to-price facilitates the determination: for a given earnings yield, book-to-price indicates additional return associated with expected growth." Betting on the blind side 03/02/10 Funds Value Investing "Michael Burry always saw the world differently - due, he believed, to the childhood loss of one eye. So when the 32-year-old investor spotted the huge bubble in the subprime-mortgage bond market, in 2004, then created a way to bet against it, he wasn't surprised that no one understood what he was doing. In an excerpt from his new book, The Big Short, the author charts Burry's oddball maneuvers, his almost comical dealings with Goldman Sachs and other banks as the market collapsed, and the true reason for his visionary obsession." Vito Maida Interview 02/08/10 Value Investing "Jonathan Chevreau interviews Vito Maida of Patient Capital Management." Chanticleer's Q4 01/27/10 Value Investing "Waiting for the undiscovered, undervalued stock to approach intrinsic value can seem like you're a fisherman waiting for the fish to bite. Sometimes you just don't know when or how value will be realized but you suspect that dinner will eventually find its way into your boat." 7 of 10 robot picks beat market 12/29/09 Dorfman Value Investing "If only robots could skip, click heels or cock their elbows like celebrating hockey players. Surely our robotic stock selection tool would be that animated after posting such a great year. Ten stocks a robotic or automated filtering technique helped us choose for 2009 would have turned a million dollars into $1.685 million, if we hadn.t used play money." 8 Graham Stocks for 2010 12/24/09 Graham Stingy Investing Value Investing "Graham's time-tested strategy for defensive investors beat the market again this year. But that shouldn't come as a big surprise because it's bested the market, often by a wide margin, in eight of the last nine years." Is Mr. Market off his meds? 12/18/09 Graham Stingy Investing Value Investing "The market often behaves like a deranged manic-depressive and it was clearly off its meds this year. Just last winter it was in a deep funk, and panicky investors couldn't sell fast enough. Then all of a sudden, the gloom vanished, the market reversed course, and it shot skyward. It's all a bit zany. But how should you deal with such massive market swings? Benjamin Graham had the answer. You should help out manic-depressive investors. Buy when they rush to sell. Sell when they line up to buy." Montier on Value Investing 12/17/09 Graham Montier Value Investing "I've been thoroughly enjoying James Montier's new book Value Investing: Tools and Techniques for Intelligent Investment. I heartily recommend it to value investors. " A career spent finding value 12/16/09 Zweig Funds Tweedy Value Investing "'He was something of a collector,' said analyst A. Michael Lipper of Lipper Advisory Services. 'It took a lot of disappointment for him to get rid of an underperforming stock. Could somebody else have produced better results by getting rid of the losers? One might think so, but it wasn't [Tweedy, Browne's] style.'" Christopher H. Browne dies 12/14/09 Tweedy Value Investing "His firm, where he had worked since 1969 and which his father co-founded, occupied a special niche in Wall Street lore due its relationships with two legendary clients: Ben Graham, author of two seminal books on the subject of how to value stocks, and Mr. Graham's most famous pupil, Warren Buffett. Tweedy Browne brokered trades for Mr. Graham from the 1930s through the .50s and from that experience developed an extensive business relationship with Mr. Buffett." Rodriguez flouts 'small mind' investor rules 12/04/09 Funds Value Investing "Robert Rodriguez ignores most rules of the mutual-fund industry, an approach that's helped him beat all rival managers over the past 25 years." Think like Buffett 12/03/09 Value Investing "Buy-and-hold investing has its share of fans. If you admire Warren Buffett, Benjamin Graham, David Dodd, Charlie Munger, John Templeton, Joel Greenblatt or Seth Klarman, you're one of them." Has market got ahead of itself? 11/12/09 Vito Maida Value Investing "It's common to hear investing pros marvel at what they see as the passivity and fearfulness of the individual investor. But with the stock markets up from their bear market lows by about 50 per cent in just eight months, there are those in the financial world who think stocks have gotten ahead of themselves. Mr. Maida is one of them." Patient Capital Q3 11/12/09 Vito Maida Value Investing "Perhaps most worrisome is that the appetite for excessive risk has returned. Some market observers have commented that hedge funds and speculators are borrowing US dollars at close to zero interest rates and investing the proceeds in the financial markets. In Canada, we have witnessed a renewed interest in speculative resource investments. In the past this behaviour has not bode well for future equity returns." Cheap and ugly can be beautiful 10/21/09 Video Value Investing "Bruce Greenwald talks value investing in 2 parts." Solid investor Howson hands off reins 10/04/09 Funds Value Investing "Rick Howson, who excelled in managing the same value-style Canadian equity fund for two full decades until stepping down this week, was never what you would call a high-profile "star" manager." Kahn's top picks 10/04/09 Kahn Value Investing "Another Kahn favourite is pork processor Seaboard, which has managed to remain profitable even as larger competitors have stumbled. "I don't eat pork, but a lot of people do," he says." Jean-Marie Eveillard interview 09/14/09 World Value Investing "I'm old enough to remember when banking was a fairly simple, almost utility-type business, where the bank took deposits and made loans to the local businessman, to individuals, etc. And it was not a highly profitable business, and bank stocks sold cheaply, at book or slightly above or below book. They were looked at, I think, by most investors, a little bit like electric utility stocks, whereby you got a decent yield, there was not much growth, and the profitability was not great, but they were looked at as safe investments for widows and orphans. And then, as time went by, and I think beginning with a gentleman who used to run Citibank in 1970, when he said, "We're gonna grow our earnings per share 15% a year forever." Banks became something different in the past 10 years or more. They became disguised hedge funds because of the importance of proprietary trading, and for other reasons as well." Graham's Simple Way 2009 09/10/09 Graham Stingy Investing Value Investing "I like to use stock screens to find interesting value stocks and Benjamin Graham's Simple Way is one of my favourites. Regrettably, the bear market wasn't kind to the Simple Way over the last year. But I've high hopes that value stocks will stage a sterling comeback." Amgen, Smucker, Steelcase have value 07/21/09 Dorfman Value Investing "A stock that is rising while most are falling may be worth a look. If that stock is also inexpensive and has a good balance sheet, it might be an opportunity." Views on the economic crisis 07/11/09 Markets Value Investing "I do not believe that deflation would be a problem with the stimulus in place, and if necessary, there will be more stimulus put in place. The current stimulus is enough so that the economy will stabilize and start recovering. Some people say stocks are not as cheap as they were in 1974 and 1982, which is admittedly true, but at the same time, there is much less competition today from cash and treasury bonds than there was then. If I owned treasury notes or bond, I wouldn't sleep too well at night. To some extent they are an accident waiting to happen." Loving stocks the market left behind 07/07/09 Dorfman Value Investing "Last week, using Bloomberg stock-screening software, I combed through the 61 laggards. I eliminated 30 because their debt was greater than stockholders. equity. I chopped off another dozen because they sell for more than 15 times earnings. In a blasted market with lots of bargains, why pay so much? That left 19 stocks to consider. Here are four that I believe could make up for lost time and show significant appreciation in the next year." Case closed 06/15/09 Academia Value Investing "This article provides conclusive evidence that the U.S. stock market is highly inefficient. Our results, spanning a 45 year period, indicate dramatic, consistent, and negative payoffs to measures of risk, positive payoffs to measures of current profitability, positive payoffs to measures of cheapness, positive payoffs to momentum in stock return, and negative payoffs to recent stock performance. Our comprehensive expected return factor model successfully predicts future return, out of sample, in each of the forty-five years covered by our study save one. Stunningly, the ten percent of stocks with highest expected return, in aggregate, are low risk and highly profitable, with positive trends in profitability. They are cheap relative to current earnings, cash flow, sales, and dividends. They have relatively large market capitalization and positive price momentum over the previous year. The ten percent with lowest expected return (decile 1) have exactly the opposite profile, and we find a smooth transition in the profiles as we go from 1 through 10. We split the whole 45-year time period into five sub-periods, and find that the relative profiles hold over all periods. Undeniably, the highest expected return stocks are, collectively, highly attractive; the lowest expected return stocks are very scary - results fatal to the efficient market hypothesis. While this evidence is consistent with risk loving in the cross-section, we also present strong evidence consistent with risk aversion in the market aggregate's longitudinal behavior. These behaviors cannot simultaneously exist in an efficient market." The Liquidity Premium 06/11/09 Academia Markets Value Investing "Value tends to outperform growth over time. We've shown that less-liquid stocks outperform more-liquid stocks. In this section, we examine how liquidity interacts with value and growth." A superb fund rebounds 06/02/09 Funds Value Investing "Hawkins and Cates are self-assured stock pickers, as indicated by their willingness to pile a huge percentage of Longleaf's assets into just a handful of companies. As of March 31, multimedia entertainment conglomerate Liberty Media (LMDIA) made up 14% of assets. Once-dominant computer maker Dell (DELL) accounted for 10%. Chesapeake Energy (CHK), an oil-and-gas producer, and Sun Microsystems (JAVA), which is being acquired by Oracle Corp., together made up 16%." Reflections and outrage 06/02/09 Funds Value Investing "I believe superior long-term performance is a function of a manager's willingness to accept periods of short-term underperformance. This requires the fortitude and willingness to allow one's business to shrink while deploying an unpopular strategy. Additionally, in the low return changing world I foresee, a well diversified mutual fund of U.S. stocks will likely have a harder time outperforming the stock averages and index funds, as a result of its higher expense ratio. A more focused strategy will be necessary to excel. If active managers continue to adhere to their old practices, we should see a contraction in the active mutual fund management universe over the next five to ten years." Due for a comeback 06/01/09 Buffett Dreman Miller Funds Dorfman Value Investing "Some of the nation's best and most famous investors -- Warren Buffett, David Dreman, Ken Heebner and William Miller -- had hideous years in the bear market of 2008. I refuse to believe, though, that people with a long track record of investment prowess have suddenly become stock-market eunuchs." Value's Downside Risk 05/27/09 Tipsheet Value Investing "If you had invested in a very simple strategy of buying low price-to-book stocks over the last 40 years [based on the cheapest quintile of the largest 1000 stocks], you'd have made about 200 times your money versus about 60 times your money if you'd invested in the S&P 500. So it's a pretty successful strategy. Now, what I want to focus on are the eight times in the last 40 years that you would have lost 20% in a naive value strategy." Income 100: Summer 2009 05/26/09 Dividends Stingy Investing Value Investing "The good news is the top income stocks - those rated A - outperformed the Canadian Dividend ETF by 7.1 percentage points and they bested the S&P/TSX Composite ETF by a whopping 15.6 percentage points." Patient Capital May 2009 letter 05/25/09 Value Investing "We are willing to make one prediction; over the next five years long dated government securities will likely provide negative real returns. In our view, 'safe' government instruments are some of the riskiest investments available. Today three to five year Government of Canada bonds are yielding approximately 1.75% while bonds with a maturity of ten years or more are yielding 3.75%. These rates are substantially below long term averages and imply very little if any inflation in the future. We believe that the odds are very much against such a scenario." Longleaf annual presentation 05/25/09 Value Investing "The Longleaf Partners Funds are pleased to make excerpts from our May 7, 2009 Annual Presentation available to all shareholders online via Windows Media Player. These recorded sessions will allow those shareholders not able to attend the meeting to hear the comments and views of the Portfolio Managers." Mohnish Pabrai at Columbia 05/23/09 Value Investing Last bit of a lecture by Mohnish Pabrai at Columbia [video] David Winters interview 05/20/09 Value Investing "Winters says the best-of-breed businesses he favors are available today not only at 'the right price', but that they're actually 'very, very cheap'" The master of money 05/18/09 Books Buffett Value Investing "There is now a long shelf of books about Warren Buffett, but this is the first time he has gone to any trouble to add to it. Reportedly Buffett now regrets his decision--he has apparently put some fresh distance between himself and his official biographer. If so, it's not hard to see why. Alice Schroeder is a former Morgan Stanley research analyst, able to understand and to explain Buffett's money-making, but she declined to confine herself to the business at hand. She has sought to describe Buffett's psychological landscape as clearly as his financial one. For the reader, the results are pretty terrific--there are not a lot of 838-page narratives that leave you wanting more--but for Buffett they are no doubt upsetting." White swans, revulsion, and value 05/18/09 Montier Value Investing "Current market conditions, dire as they are, represent not a black swan but a predictable surprise. Unfortunately, behavioral impediments in human nature made most investors unwilling or unable to see this predictable surprise. But despite the uncertain state of today.s markets, the investment environment holds many opportunities for value investors who focus on the long term." [Only free for CFAs] Conoco, CBS, U.S. Steel are bargains 05/18/09 Dorfman Value Investing "Seven percent of all stocks sell for less than eight times earnings and also have total debt that I consider reasonably prudent (less than stockholders. equity). There are 171 stocks in this group. From among those 171, here are half a dozen that I think hold considerable investment interest now." Seth Klarman letters 04/24/09 Klarman Value Investing "Seth Klarman's letters from 1995-2001." Duke, Allstate, Dow ace book-value test 04/19/09 Dorfman Value Investing "With a nasty recession raging, 20 percent of all U.S. stocks with a market value of $250 million or more are selling below book value. This group includes household names such as Duke Energy Corp., Allstate Corp., Dow Chemical Co. and Time Warner Inc." Fairholme OID interview 04/16/09 Value Investing "I am more optimistic now than at any time. I can't tell you whether it's going to be 31 days or 31 months or longer before our portfolio companies begin to rise from the ashes. However, I do believe they will rise." Whitman buys American distress 04/10/09 Whitman Value Investing "For us, the principal test is credit-worthiness--don't buy common stocks of companies that need continuous access to capital markets. Or where customers or counter-parties can discontinue relationships at little or no cost." Depression survivors weigh in 04/10/09 Value Investing "The three Depression survivors aren't just notable because of their ages; they're good - very good. All three have been longtime successful money managers, and two were friends and students of the great Benjamin Graham. (Walter Schloss, for example, is one of the 'Superinvestors of Graham & Doddsville' that Warren Buffett referred to in his famous 1984 Columbia University speech.) Here's a summary of what they had to say" The manager who gave back his fees 04/02/09 Funds Value Investing "The mutual fund industry is going to hate this. Investors will be angry that they don't see more of it. Unhappy at the returns he has generated for clients, money manager Francis Chou is refunding almost all the management fees collected by his Chou Europe fund since it opened for business in September, 2003." Chou 2008 letter 04/02/09 Funds Value Investing "The examples show that the pricing of risk has changed 180 degrees from a couple of years ago. One can argue that corporate bonds, both investment grade and non-investment grade, are mispriced more than equities. In addition, if corporate bonds are cheap, the treasuries are in bubble territory. In our opinion, this is the worst time to hold cash and short-term treasuries unless you believe we are headed into a 1930's style depression. If you believe that you should redeem all of your Fund units." Genuine values 03/23/09 Dorfman Value Investing "I think investors will see some dramatic recoveries by banks, brokerage houses and insurance companies over the next two to three years. Three financial stocks that I like (and own) are Berkshire Hathaway Inc., Cullen/Frost Bankers Inc. and Goldman Sachs Group Inc." The Top 200 Canadian Stocks for 2009 03/04/09 Growth Investing Stingy Investing Value Investing "The market crash of the past few months reminds many people of the Great Depression. But we have a bit of different take on things. As Warren Buffett likes to say, you make money by being fearful when others are greedy and greedy when others are fearful. As agonizing as the past year has been, we think we are now in the middle of a tantalizing buying opportunity." The Top 500 U.S. Stocks for 2009 03/04/09 Growth Investing Stingy Investing Value Investing "Warren Buffett famously warned, "unless you can watch your stock holdings decline by 50% without becoming panic-stricken, you should not be in the stock market." Well, U.S. stocks are down nearly 50% in one of the worst bear markets ever. It's hard not to be a little panicky. But take a deep breath because there is reason to hope." Will value investors win the day? 03/04/09 Value Investing "In today's market, people may lose a lot of money before they make more. Yet even times like these could prove profitable in the long run for value investors." Value investors can't beat this bear 03/02/09 Value Investing "Usually, the silver lining for such a brutal market is that it creates plenty of opportunities for bargain-hunting investors. This downturn, however, has been especially cruel to "value" investors, those who search for companies they believe are priced lower than they should be." Piotroski profits 02/23/09 Value Investing "Piotroski sought companies trading with very low price-to-book value ratios. These are often financially distressed, which is why investors tend to steer clear of them. They are cheap because they deserve to be. But occasionally, they're solid companies that are being unfairly neglected and present real buying opportunities, if you can separate the trash from treasure." Fairfax Financial's 2008 coup 02/19/09 Watsa Value Investing "The year 2008 will go down as one of history's worst, but it was the best year in the history of Canada's Fairfax Financial Holdings Limited. Its Chair and CEO, Prem Watsa, and his team, were among the few money managers who forecasted, and profited, from the economic catastrophe. As a result, Fairfax has become one of North America's 10 largest property and casualty companies." Third Avenue Q1 2009 02/17/09 Whitman Value Investing "A Net-Net is defined as a common stock issue where the market value of high quality assets, usually readily saleable, exceeds by a comfortable margin the market value of the company's equity capitalization after deducting all liabilities. The concept of Net-Nets was invented by Graham and Dodd, the godfathers of value investing. Third Avenue has refined the Graham and Dodd definition of Net-Nets." Markets in 19th century Britain 02/16/09 Academia Dividends Value Investing "This article examines the size and value anomalies using an original dataset consisting of monthly information on stock prices and annual information on dividends for 1,051 stocks traded in the London Stock Exchange between 1825 and 1870. In this historical British stock market, smaller stocks are found to deliver significantly higher returns than the larger ones. Value stocks indicated by high dividend yield also have higher average returns than growth stocks. The empirical evidence from this article provides important and fresh new empirical evidence on the asset pricing anomalies, suggesting that the size and value anomalies are unlikely to be random events that just appeared by chance." Patience pays off 02/11/09 Value Investing "Maida, the son of Italian immigrants, grew up poor in Toronto's west end; he was that kid who owned just two pairs of pants. His father was a construction worker, and when his mother was sick, the family relied on help from social welfare agencies. 'Not being well off instilled in me the value of a dollar,' he says. 'That's really the crux of the whole adherence to value investing: don't lose money, because money is really hard to come by.'" The relative cash holdings premium 02/11/09 Value Investing "A hedge strategy that is long (short) stocks of firms with high (low) cash - to - assets ratios generates an average monthly return of 0.42%, before trading frictions. In other words, relative cash holdings may carry a positive premium for investors." Patient Capital Q4 2008 02/10/09 Value Investing "We believe that despite the current environment the profitability of most major businesses will be higher in five years than it is today. A look over the past century shows how resilient free market economies truly are; despite two world wars, a depression, an oil shock and a multitude of other crisis, businesses and stock markets have continued to grow. It is truly remarkable how the human spirit seems to triumph over all sorts of adversity." Longleaf Q4 2008 02/06/09 Value Investing "Academicians Eugene Fama and Kenneth French recently published a study that found that value stocks have declined two years in a row only five times: during the Great Depression in 1929-32; at the beginning of WWII in 1939-41; during the Arab oil embargo of 1973-74; when the Internet bubble popped in 2001-02; and now as the housing bubble deflates. Following the four prior periods, stocks snapped back by an average of 60% in the next 12 months." Using the price-to-book ratio 02/06/09 Value Investing "Price-to-book ratios have been studied extensively, with some studies suggesting a low price-to-book can lead to a strong stock price rise in the future." Value investing comes back into vogue 02/06/09 Buffett Value Investing "The celebrated value investor Warren Buffett stepped back on to the investment trail this week as his parent company Berkshire Hathaway injected SFr3bn ($2.6bn) in fresh capital into the struggling insurer Swiss Re. The deal, which will pay Buffett hefty annual interest and give him the right to raise his stake at an attractive price, is a sign that the billionaire investor has not lost his appetite for financial stocks." 19 Stingy Stocks for 2009 01/30/09 Stingy Investing Value Investing "In good markets and bad, I look for two qualities when hunting for bargain stocks. I want them to be cheap and relatively safe. Not surprisingly, the combination can be difficult to achieve." Buffett of Canada buying stocks again 01/22/09 Watsa Value Investing "A famed Canadian investor dubbed the "Buffett of the North" for calling several crashes and booms over the decades is dipping his toe into the stock market again." Money for nothing 01/20/09 Value Investing "Anyone attuned to the pop music scene during the roaring 1980s, will perhaps remember the above title was an era-defining big hit for the British group Dire Straits back in 1985. However, the intent of this essay is not to write about showbiz, nor about the sometimes surreal behaviour of its protagonists. Rather, focus will be directed towards the surreal behaviour of stock market players during the latest crash and how cash was demonstrably given away for nothing in return; Money for Nothing if you will." Dickensian days 01/16/09 Dreman Value Investing "The time to buy value stocks is now. This is not to say that the market will immediately rebound. I don't know where the bottom is, and neither does anyone else. I can simply be confident that value stocks will do well over the long pull and that you're better off buying them when Wall Street is despondent than when it is ebullient. This Dickensian tale could have a happy ending." Fundamental value investors 01/15/09 Academia Value Investing "We examine novel data on the detailed investment decisions of professional value investors. We find evidence that value investors are not easily defined: they exploit traditional tangible asset valuation discrepancies such as buying high book-to-market stocks, but spend more time analyzing intrinsic value, growth measures, and special situation investments. We also test whether fundamental value investors outperform the market in our sample (January 2000 to June 2008). Analyzing buy-and-hold abnormal returns and calendar-time portfolio regressions, we conclude that value investors have stock picking skills." 4 Graham Stocks for 2009 01/12/09 Graham Stingy Investing Value Investing "Over the past eight years I've used my take on Benjamin Graham's time-tested strategy for defensive investors to uncover undervalued U.S. stocks. I'm pleased to say that the overall results have been superb. Over the last year we handily beat the index. But even our 16.8 percentage point outperformance wasn't enough to turn a profit in what is shaping up to be a whopper of a bear market." Prudential, Valero headline bum-market bargains 01/09/09 Dorfman Value Investing "It's an ill wind that blows nobody good. The drop in home prices helps first-time home buyers. And the slow-motion crash in the stock market is good for value investors if they are fortunate enough to have some cash on hand. As the year begins, there are more than seven dozen stocks that meet three stringent bargain-hunting criteria" Value vs. Glamour 01/07/09 Academia Value Investing "In 1994, Josef Lakonishok, Andrei Shleifer, and Robert Vishny published a landmark study investigating the performance of value stocks relative to that of glamour securities in the United States over a 26-year period. Their research concluded that value stocks tended to outperform glamour stocks by wide margins. However, their study did not include the glamour-driven markets of the late 1990s and early 2000s. What effect might this period have on their conclusions? To find out, the Brandes Institute updated their Value vs. Glamour research, now through June 2008, to examine the comparative performance over a 40-year period. In addition, we also extended the scope of the initial study to include non-U.S. markets, seeking to determine if the value premium has been evident worldwide" Neff goes bargain hunting 01/06/09 Neff Value Investing "In a battered market, the former Windsor fund manager is finding stocks that meet his strict value standards." Leucadia's unmined potential 12/06/08 Value Investing "Leucadia National may be the closest thing to what Berkshire Hathaway was 20 years ago, before Berkshire became so large that Warren Buffett needed investments of several billion dollars to move the needle." Wall Street winner: buy now 11/28/08 Watsa Value Investing "With the S&P drop year-to-date of 50% -- not seen since 1931 -- and how worried the investment community is, it just seemed to us a lot of fear may already be discounted in the stock markets. You can't say this is the bottom, markets are a discounting mechanism and certainly still can go down some; however, we thought it was an appropriate time to close our equity index hedges." The reluctant CEO of the year 11/28/08 Watsa Value Investing "Only a handful of financial companies worldwide are in better shape now than before this crisis started. Fairfax Financial is one of them. CEO Prem Watsa managed to make $2 billion and thumb his nose at his opponents at the same time" Simply spectacular 11/21/08 Graham Stingy Investing Value Investing "It's been a rough year for investors. But you wouldn't have known it if you had followed Benjamin Graham's advice. Instead of bemoaning losses, you would be counting profits." Patient Capital Q3 11/20/08 Value Investing "The next several quarters are likely to be quite difficult but out of these difficulties will emerge the opportunity to create portfolios of great businesses that will offer the potential for a substantial return over the next five years. For the first time in a long time we are starting to feel excited about the returns available to the prudent and patient investor!" It's time to buy 11/20/08 Dreman Value Investing "First, do not flee the market by selling your quality stocks. Yes, it's the worst bear market since 2000--02, and stocks are trading at valuations not seen in decades, but equities will come back. Second, because credit is subject to unpredictable crunches and it's impossible to guess when this bear will end, don't buy on margin. Third, don't hold shares of companies that will need cash to expand or refinance. There is a good chance they won't be able to borrow." We're not dead yet 11/19/08 Growth Investing Value Investing "In our opinion someone who says quant equity investing has no future is basically saying that value and momentum will no longer work to pick investments. As we noted above we can see where people get this idea. Many investors using these strategies have had poor recent performance, and it.s clear that these strategies are no longer a secret. Although we can't 'prove' that quant investing has a future, we can demonstrate that quant strategies have had a successful long-term past - and that their recent performance is not inconsistent with this track record." Bill Miller Q3 2008 commentary 11/14/08 Markets Government Miller Value Investing "There is little dispute among knowledgeable investors that U.S. (and global) equities are extraordinarily attractive on a wide variety of measures based on historical standards. The worry is they may go a lot lower before they eventually recover, as the current crisis unfolds and as the economy undoubtedly gets worse. This worry is legitimate. After all, to most of us, stocks seemed quite cheap at the end of September, and now they are a whole lot cheaper. So what to do? The data indicate there is now a mountain of cash on the sidelines, enough in money market funds to buy about half the market capitalization of the S&P 500." Buy CBS shares 11/12/08 McElvaine Value Investing "CBS has $40-billion in assets and is trading at a price/earnings multiple of five times. Mr. McElvaine began nibbling away at the stock last Friday and bought more on Monday, when the Canadian stock market was closed for the Thanksgiving holiday. As he sees it, CBS is in a number of different businesses that, combined, are worth at least twice what the stock is trading at." Stocks below net current asset value 11/02/08 Graham Value Investing "One of Graham's investment fund strategies, as explained in his best-selling book The Intelligent Investor, was to buy stocks that are valued at a discount to their net current asset value. Graham called such stocks "bargain issues." In other words, Graham would look for stocks whose current assets less total liabilities was worth more than what the stock was trading at. This meant that any plant, property and equipment, goodwill and long-term investments were free." Ben Graham then and now 11/02/08 Graham Value Investing "In mid-1932, almost precisely at the bottom of the Great Crash, Benjamin Graham turned up as a freelance writer in the pages of FORBES. He was later to be known as the father of value investing and as a mentor to Warren Buffett. But at the time he was the manager of a fairly obscure hedge fund. That fund, which combined long and short positions but was mostly long, was hurting. It had tumbled 70% from its 1929 high. (The Dow was down 87%.) Stocks had got too cheap, Graham pleaded. The fact that profits were vanishing almost didn't matter. You could buy companies for less than their net liquidating value. You got the goodwill and the factories for nothing." Cheap Japanese markets 11/02/08 Graham Value Investing "The Japanese market has been hit so hard this fall that some of its corporate titans are trading at prices that value guru Benjamin Graham would find to be bargains." There are old-school investors ... 10/19/08 Kahn Value Investing "Market's panic 'not so new to me,' says 102-year-old disciple of Benjamin Graham. He and his son Thomas like such banged-up stocks as Pfizer and Bristol-Myers Squibb." Q3 2008 Oakmark commentary 10/18/08 Funds Value Investing "In fact, we believe the decline in the market has created a very attractive environment for investing new capital. For most people, the right question to ask after a big decline is: 'Should I be investing more?'" Whitman sampler of value stocks 10/18/08 Whitman Value Investing "Few investors in the market today are as bear-market-seasoned and savvy as Marty Whitman, 84-year-old founder of M.J. Whitman LLC, chairman and founder of Third Avenue Management and portfolio manager of Third Avenue Value Fund. Like Sam Zell, Leon Black and Eddie Lampert, Whitman's roots are in distressed-company investing." Concentrated value investing 10/18/08 Funds Value Investing "Mohnish Pabrai, the Managing Partner of the Pabrai Investment Funds, has outperformed market indices over the last nine years by consistently believing in concentrated value investing. Pabrai likes to hold fewer stocks positioned in industries that he understands well, paying attention to two key variables: the intrinsic value of a business and its current price." America for sale: price reduced 10/13/08 Value Investing "At the depths of the 1973-74 bear market -- the worst of the post-war period -- when the Dow Jones industrial average was approaching its low of 577, Warren Buffett told Forbes magazine that he felt like "an oversexed guy in a whorehouse. This is the time to start investing." Buffett's words may have been indelicate -- Forbes ended up changing the world "whorehouse" to "harem" when the interview ran -- but the CEO of Berkshire Hathaway was on the mark because that era produced some of the best bargains of the past 50 years." Think long 10/12/08 Montier Value Investing "It is also possible to see bargains at the individual stock level. Both BP and Shell have a dividend yield equal to, or higher than, their p/e: an old rule of thumb for value investors. True, the oil price is falling sharply, but shares in oil companies lagged well behind the crude prices when it was soaring to $147 a barrel." The market's silver linings 10/12/08 Value Investing "Bolton's reasons for optimism aren't macroeconomic; the UK is almost certainly in recession for the first time in almost two decades. But he believes the high level of dividend yields compared to gilt yields, and the large cash positions in mutual funds and hedge funds, are good indicators that the market's fortunes may be about to change. "In some sectors, I'm seeing the lowest valuations I've seen in more than 30 years," Bolton says. He says he likes the look of the consumer cyclical sectors, such as the general retailers and media stocks. "Media has underperformed the market for the last seven consecutive years, and both [retail and media] are unloved by institutional investors [at the moment]," he says." Eveillard proteges prowl for bargains 10/09/08 Value Investing "The two, who hunt the globe for companies whose worth they believe analysts have misjudged, viewed International Speedway more as a media company. It's a classic page out of the playbook of value investors, something that comes naturally to de Vaulx and de Lardemelle, who worked for years under one of the best: Jean-Marie Eveillard." Buying the bargains in health care, energy 10/09/08 Dorfman Value Investing "Dorfman noted that drug-company stocks are selling at similar multiples to tobacco stocks, "and the last time I looked, tobacco stocks didn't save people's lives." After five years of being sold hard, Dorfman likes the look of pharmaceutical stocks, and he also is interested in metals and energy stocks because they soared early in the year and have now been hammered to bargain levels. Dorfman also suggested that investors avoid the "glamour premium" of gold stocks." A contrarian gets the last laugh 10/01/08 Value Investing "Vito Maida says he's lucky. But he could just as easily say, "I told you so." More than four years ago, with stock prices roaring upward and a global real estate boom gaining pace, the Toronto money manager sat down to pen his thoughts on the markets, and realized that his views were out of step with the rest of the financial world." Value and momentum everywhere 09/13/08 Momentum Academia Value Investing "We study jointly the returns to value and momentum strategies for individual stocks within countries, stock indices across countries, government bonds across countries, currencies, and commodities. Value and momentum generate abnormal returns everywhere we look. Exploring their common factor structure across asset classes, we find that value (momentum) in one asset class is positively correlated with value (momentum) in other asset classes, and value and momentum are negatively correlated within and across asset classes. Long-run consumption risk is positively linked to both value and momentum, as is global recession risk to a lesser extent, while global liquidity risk is related positively to value and negatively to momentum. These patterns emerge from the power of examining value and momentum everywhere at once and are not easily detectable when examining each asset class in isolation." Ways to gauge value 09/10/08 Value Investing "It's what every analyst likes to cite and probably the most widely used tool on Wall Street. But the price/earnings ratio, or P/E, of a stock might not be the perfect gauge of its value, especially now." 10 questions for John Dorfman 09/02/08 Dorfman Value Investing "The Robot screen contains low P/E outliers. It calls our attention to some of the very cheapest stocks in the market, in the bottom percentile of price/earnings ratios. It screens out stocks that have excessive debt. From this screen we recently bought Om Group (OMG), the largest U.S. dealer in cobalt. It also deals in metal powers. The stock is selling for less than book value and less than six times earnings. We also bought some Cal-Maine Foods (CALM). It produces and sells eggs. Now that some of the crazier diet fads seem to be receding, I figure that eggs can rebound a little bit as part of a well-rounded diet for most Americans. The stock sells for 6 times earnings." An active value strategy in disguise 08/27/08 Academia Indexing Value Investing "In this paper we critically examine the novel concept of fundamental indexation. We argue that fundamental indexation is by definition nothing more than an (elegant) value strategy, because the weights of stocks in a fundamental index and a market capitalization-weighted index only differ as a result of differences in valuation ratios. Moreover, fundamental indices more resemble active investment strategies than classic passive indices, because (i) they appear to be at odds with market equilibrium, (ii) they do not represent a buy-and-hold strategy and (iii) they require several subjective choices. Last but not least, because fundamental indices are primarily designed for simplicity and appeal, they are unlikely to be the most efficient way of benefiting from the value premium. Compared to more sophisticated, multi-factor quantitative strategies, fundamental indexation is likely to be an even more inferior proposition." Longleaf Partners Q2 2008 letter 08/14/08 Value Investing "We do not know how long economic uncertainty and shareholder fear will last. Bear markets do not die of old age. The mispricing, however, is providing the opportunity to own high quality companies with terrific five year outlooks that imply high long-term IRRs. We are aggressively adding personal capital to the Funds and encourage our partners to do the same. Given that bullish sentiment is at its lowest level in 14 years and that some are recommending exiting equities altogether, there is plenty of panic in the air. Historically, the best time to invest has been when owning stocks has felt the worst." Third Avenue Q3 2008 letter 08/14/08 Whitman Value Investing "Distress securities seem to be trading at ultra attractive prices. Discounts have widened appreciably for the common stocks of very well-capitalized companies where the common stocks trade at meaningful discounts from readily ascertainable net asset values ('NAVs'); and where the prospects appear good that over the next five years, such NAVs will increase by not less than 10% per annum compounded. Admittedly, near-term outlooks are generally poor. But, TAVF focuses not on the near-term outlook, but on buying what is 'safe and cheap'. I have the unique perspective of being a distressed investor for many decades, and safe and cheap on a long-term basis seems to be about as attractive as it was in the 1970s." Value stock losers Buffett, Miller poised as winners 08/11/08 Buffett Montier Miller Funds Value Investing "The five prior times since 1952 that growth beat value two years in a row, the latter group recovered and won by 17 percentage points annually on average for seven years, the data from Societe Generale show. Cheap stocks are becoming more attractive because of tumbling commodity shares, which had led the five-year bull market that ended in October, according to Societe Generale's James Montier" CanWest woes may force Fairfax's hand 08/09/08 Watsa Stocks Value Investing "Fairfax Financial Holdings Ltd. has made a name as a patient, deep-value investor in the mould of Warren Buffett's Berkshire Hathaway Inc., so the company has been surprised to find itself cast lately in the role of an activist player." Robert Tattersall 08/09/08 Funds Value Investing "If you can tolerate double-digit losses like the ones we've seen recently, veteran fund manager Robert Tattersall suggests picking up a classic book on value investing and then just sitting tight. " Value funds may be poised for comeback 08/09/08 Funds Chou Value Investing "There's an old chestnut about value investors that says they're never wrong, they're just early. Unfortunately for the professional ones, when you run a mutual fund that gets marked to market every day though, it doesn't really matter. If you're early, you're wrong, and if you're wrong, you get redeemed as investors chase performance like a dog chases a rolling Frisbee." The plight of the value investor 08/09/08 Funds Miller Value Investing "This is a tough time to be a value investor. The value philosophy tries to outsmart the stock market by investing in companies that are deemed undervalued, often trading at a low multiple relative to earnings. It was developed by Benjamin Graham and championed by Berkshire Hathaway's (BRK.A) Warren Buffett" Patient Capital Q2 2008 08/04/08 Value Investing "As we had hoped these investor fears have provided us with some investment opportunities. Indeed we have invested some of our capital in what we believe to be very strong companies that offer the potential for excellent long [term] returns." Legg Mason Q2 letter 07/30/08 Buffett Miller Value Investing "A group of us were standing around a few weeks ago when Warren Buffett wandered over. Chris Davis had dubbed us the Value Support Group, as we all adhered to that approach to investing. We were commiserating over how badly we had done in this market, how valuation appeared not to matter and had not for the past couple of years, how it was all about momentum and trend, and how we were all losing clients and assets over and above our losses in the market. It seemed like we needed a 12-step program to cure us of our addiction to buying beaten-up stocks trading at large discounts to our assessment of their intrinsic value." Fairfax Financial beats bad markets 07/28/08 Markets Value Investing "Prem Watsa, Chair of insurance conglomerate Fairfax Financial Holdings Ltd., began to worry about a credit meltdown a few years ago. So he and his investment team devised a defensive strategy. Today, Fairfax is in great shape financially, despite lousy markets. The company has even defied gravity and two weeks ago its credit was upgraded. This reflected its stellar investment performance on its US$19.8 billion investment portfolio, good operations at its underlying insurance companies and a jump in shareholders. equity from US$2.856 billion in 2006 to US$4.8 billion today." The marks of a great value investor 07/23/08 Value Investing "John Templeton's market aphorisms was that "the time to buy is at the point of maximum pessimism", although I believe he has a good claim also to be the true originator of the saying that the four most dangerous words in investment are "this time it's different". Does he think that we have reached such a point in the credit crisis? Alas, we shall never hear his views again, following his death two weeks ago at the grand age of 95." Prepare to have a nose for a bargain 07/18/08 Graham Value Investing "Stocks should be bought like groceries and not like perfume. A few days ago, I was reminded of this advice from Ben Graham, the father of value investing, by David Shapiro, the manager of the value-orientated Collins Stewart UK Focus Fund. And with the FTSE 100 index falling 250 points between last Friday and this Wednesday . wiping more than 50bn off the value of the UK.s top companies . the equity market certainly seems more like Aldi or Lidl than an eau de toilette counter at Harrods. In fact, the scent wafting from most dealing desks has smelled suspiciously like Whiff of Fear." John Templeton 07/18/08 Value Investing "Sir John Templeton spent his life going against the flow. In September 1939, when the war-spooked world was selling, he borrowed $10,000 to buy 100 shares in everything that was trading for less than a dollar a share on the New York Stock Exchange. All but four eventually turned profits. In early 2000, conversely, he sold all his dotcom and Nasdaq tech stocks just before the market crashed. His iron principle of investing was 'to buy when others are despondently selling and to sell when others are greedily buying'. At the point of 'maximum pessimism' he would enter, and clean up." The Robot stalls 07/01/08 Dorfman Value Investing "Each stock we chose early in January had a market value of at least $500 million. They all had announced more than a penny of profit per share in the latest 12-month period. They had more shareholder equity than debt, and a low share price relative to earnings. We chose the cheapest stocks without having more than one in a particular industry sector." Seth Klarman interview 07/01/08 Klarman Value Investing "Seth Klarman is nobody.s idea of a fast-buck, quick-change investor. Since helping to found Boston-based Baupost Group in 1982 with $27 million pooled from four families, he has emulated prototypical value-investment role models like Warren Buffett and the late Benjamin Graham. He buys underpriced equities and securities of bankrupt or distressed companies and usually steers clear of leverage and shorting, though last year he made very profitable investments in credit protection and recorded his best-ever annual return (52 percent)." What we value 06/30/08 Montier Tilson Value Investing "A final reason for the dearth of value investors is the human desire to be part of the crowd. If you didn't own Internet stocks during the late 1990s, not only did you suffer lousy returns, but you also felt excluded. As Montier points out, "Contrarian strategies are the investment equivalent of seeking out social pain." That's not easy to do." Eveillard takes dim view of U.S. stocks 06/27/08 World Value Investing "Fed policies under Greenspan, Eveillard says, precipitated "one bubble after another" -- from the implosion of technology stocks in the late 1990s to the recent real-estate price collapse and the related financial-services industry meltdown. "In the last two or three years, the financial acrobatics were extraordinary," Eveillard said. "You could get a mortgage without having to document your income, your assets, or whether you had a job."When financial history is written five or 10 years down the road," he added, "Greenspan will be seen as the worst Fed chairman since the Fed was created in 1913."" Value investors: Beware the value trap 06/23/08 Stingy Investing Value Investing "Norm Rothery, chief investment strategist at Windsor, Ont.-based investment research and counselling firm Dan Hallett & Associates Inc., recommends investors avoid value traps by using a nine-point system developed by Joseph Piotroski, professor of accounting at Stanford University. According to his system, returns on assets and cash flow from operations should be positive. Also, there should be momentum in fundamentals: For example, gross margins and debt should be changing for the better. Still, it's inevitable even the best of the value practitioners will stumble into value traps on occasion." Rising from the stock market rubble 06/21/08 Funds Value Investing "The lock that commodities have on the Canadian market has made mutual funds with a value strategy a singularly awful investment in the past few years. But the Celestica story is a reminder that well-chosen value stocks do offer potentially fantastic rebound potential. What beaten-down Canadian stocks might be ready to pop? Let's nose around the portfolios of some of the country's top value fund managers and see what they're holding." Third Avenue Q2 2008 letter 06/17/08 Funds Whitman Value Investing "One of the important lessons from the Bear Stearns debacle for TAVF is to avoid owning common stocks where the businesses need to have relatively continuous access to capital markets in order to survive as going concerns." Credit crunch prepares feast for value hunters 06/15/08 Funds Value Investing "Value investors look at measures such as price-to-earnings and price-to-book ratios to find stocks that are trading at bargain prices. A key premise of value investing is that markets often overreact to negative news, pushing stocks below their true worth. The idea is to buy the stocks when nobody else wants them, so you can profit when the market comes back to its senses. Sound simple? It isn't. Buying stocks others are ditching requires a strong contrarian streak and loads of patience while you wait for the price to recover. Sometimes it takes years; sometimes it never happens." Value investing and behavioral finance 06/03/08 Behaviour Tweedy Value Investing "My partners and I at Tweedy, Browne have in the past been skeptical of academic studies relating to the field of investment management primarily because such studies usually resulted in the birth of financial paradigms which we believe have no relevance to either what we do or to the real world. A whole body of academic work formed the foundation upon which generations of students at the country's major business schools were taught about Modern Portfolio Theory, Efficient Market Theory and Beta. In our humble opinion, this was a classic example of garbage in/garbage out. One could have just as easily manipulated the data to show that corporations with blue covers on their annual reports performed better than corporations with green covers on their annual reports. Although none of the three of us was fortunate enough to have studied under the late Dr. Benjamin Graham when he taught at Columbia Business School, we were fortunate enough to have observed some of his best students who either worked at or were customers of Tweedy, Browne from the late 1950s through the present. Tom Knapp, who was a partner at Tweedy, Browne from 1958 until the early 1980s, both studied under Ben Graham and worked for Ben's investment firm, The Graham-Newman Corporation. Walter Schloss, another alumnus of Graham-Newman, has made his office at Tweedy, Browne since he set up his private investment partnership in 1955. Still going strong at 84 and still housed at Tweedy, Browne, Walter has what we believe is the longest continual investment record of any individual in our field. Among others, Warren Buffett was a frequent visitor to Tweedy, Browne in the 1960s and early 1970s. My father was the primary broker for Warren in his purchase of stock in Berkshire Hathaway, and I can remember posting trades in Berky at $25 per share when I started working in 1969. Our exposure to these legendary investors whose investment principles were based on the teachings of Ben Graham, was the reason for our skeptical view of more modern investment theories." Seth A. Klarman's 2007 MIT remarks 06/03/08 Klarman Value Investing "Institutional constraints and market inefficiencies are the primary reasons that bargains develop. Investors prefer businesses and securities that are simple over those that are complex. They fancy growth. They enjoy an exciting story. They avoid situations that involve the stigma of financial distress or the taint of litigation. They hate uncertain timing. They prefer liquidity to illiquidity. They prefer the illusion of perfect information that comes with large, successful companies to the limited information from companies embroiled in scandal, fraud, unexpected losses or management turmoil. Institutional selling of a low-priced small-capitalization spinoff, for example, can cause a temporary supply-demand imbalance. If a company fails to declare an expected dividend, institutions restricted to owning dividend-paying stocks may unload shares. Bond funds allowed to own only investment-grade debt would dump their holdings of an issue immediately after it was downgraded below BBB by the rating agencies. Market inefficiencies, like tax selling and window dressing, also create mindless selling, as can the deletion of a stock from an index. These causes of mispricing are deep-rooted in human behavior and market structure, unlikely to be extinguished anytime soon." Value strategies reward patience 06/02/08 Value Investing "The academic community has generally come to the conclusion that value investment strategies, on average, outperform growth strategies. Where the agreement ends is on the reasons behind the outperformance." Conventional wisdom, foiled again 06/02/08 Indexing Value Investing "It is widely assumed that a stock.s price will rise when it is added to a major stock market index. As is often the case with conventional wisdom about the stock market, however, the truth is more complicated. In fact, a new study has found that over the long term, stocks that are dropped from an index generally outperform those that are added." Chou runs his fund the way he runs his life 05/31/08 Funds Bonds Chou Value Investing "At lunch Francis lamented that "I've become a bond trader." He finds it is very time-consuming because "there is a lot of haggling that goes on." His days are now filled with calls from bond dealers who know that Francis is an interested buyer. He is on everyone's speed dial. In the 2002 Chou Fund report, Francis said "distressed securities involve companies that have one or more serious deficiencies including weak economics, stretched balance sheets, liquidity problems, incompetent management, accounting frauds, potentially mutant cockroaches - you name it."" Postcrisis bank stocks 05/29/08 Dreman Value Investing "It is time to ask: How could the managers of so many banks and brokerage houses have thrown out the rule book on risk?" Joining the dark side 05/27/08 Behaviour Montier Value Investing "So we have covered three potential sources of short ideas. What happens if we put them all together? The parameters I used to define my shorts were a price-to-sales > 1, an F score of 3 or less, and total asset growth in double digits. This proved to be a powerful combination. Between 1985 and 2007 a portfolio of such stocks rebalanced annually would have declined over 6% p.a. compared to a market that was rising at the rate of 13% p.a. in Europe" Patient Capital Q1 05/26/08 Value Investing "In fact we strongly believe that there is more trouble to come. Historically, there has never been a time when real estate values have declined dramatically without serious economic fallout." Is value dead? 05/22/08 Funds Hallett Chou Value Investing "The cookie-cutter office building stacked amid high-rise condos and streetside retail is not where you'd expect to find the man who oversees $1.2 billion in funds, and who is said to be Canada's top stock-market bargain hunter. Taped to his door is a plain piece of paper that has been run through a printer: "Chou Associates Management Inc.," it reads, implying that nothing of much importance is happening here. The door is locked, but jiggle the handle of the door and out pops Francis Chou, whom I have come to ask about the strange decline in the once-dominant school of value investing. It's an investing style once described by the late, great value guru Benjamin Graham as the equivalent of rifling through a store's discount bin. In other words, if you are patient enough to search endlessly and smart enough to know the difference between a true bargain and a bad knockoff, then you can make terrific money." Fixes for bad timing 05/14/08 Tilson Value Investing "Investing too early is one of the more common sins of value investors. Watching as that well-researched idea you loved a few months ago falls 20% to 30% can be painful and nerve-racking. Bruce Berkowitz, of the highly successful Fairholme fund, calls it "premature accumulation." Getting your timing wrong is inevitable -- especially in today's market, in which stock prices continue to plumb new depths in a wide variety of industries." Doubling down in financials 04/24/08 Value Investing "Do clients ever get upset with you? They read the paper and then see that their money manager is busy buying the financials. The single most common question I get: .Don't you read the newspaper? What is wrong with you?. So does the Pzena client need a strong stomach? Of course. We try and educate the clients before they open an account. We promise them that we will have these bad periods. Every single client, before they sign up, knows how badly we did in the last cycle. In the Internet bubble, the market was going up 30% a year, and we were going down. We were 60 percentage points behind the market, underperforming it for 10 consecutive quarters in '98, '99 and the first couple months of 2000. Now, that was extreme. The Internet bubble was extreme. We don't have such an extreme bubble today. But this is what we do: We buy bargains." Sequoia fund to reopen 04/24/08 Buffett Value Investing "The Sequoia Fund, after experiencing selling by investors, is reopening its doors May 1 to new investors for the first time since 1982. The $3.5 billion value fund is celebrated for outperforming the broader market during much of its 38-year history. For years, it was run by legendary stock picker William Ruane, who followed the same approach as Benjamin Graham and Warren Buffett." Looking up to Warren Buffett 04/22/08 Buffett Pabrai Value Investing "Our brains are in sync with the speed at which the market is moving and totally out of sync with the speed at which a business is moving. It seems obvious: The market is repricing a company's stock very quickly. I can process very quickly; therefore, I make decisions based on that. You have to learn to dramatically slow your brain, which is very hard for most people. The reality is that you should make decisions based on how that business is changing, and that's a very slow process." Leucadia's 2007 letter 04/21/08 Value Investing "One of us has been mumbling about Credit Armageddon for years and it seemed earlier this year that his fears were to be realized. At least for the time being, this nightmare has been avoided by strong government intervention. Unfortunately, we suspect that the wizards of Wall Street have not only made mischief in the mortgage market, but in all other loan markets as well and that the full effect of this is not yet visible. It seems that almost all financial institutions and investors have mispriced risk, and many financial institutions have found themselves carrying assets on their balance sheets at amounts considerably higher than market or their intrinsic worth. Recently, and often at the behest of regulators, financial institutions have been forced to sell these assets or to recognize the mark to market losses, all of which erodes net worth, forcing them to raise new equity capital and/or to reduce leverage, a process that has come to be known as deleveraging. It may take quite a while for the scrubbing of balance sheets and the unwinding of leverage to come to an end, and we suspect that not all will survive." The economic skies might be falling 04/19/08 Markets Watsa Value Investing "Investors around world saw sunny skies yesterday, but Prem Watsa is still prepared for a hard rain. The chair of Fairfax Financial Holdings Ltd. boasts that Canada's top-performing financial-services company of the past year is sitting on a billion-dollar life raft of cash and marketable securities - in case North America has the perfect economic storm." Looking beyond the bailout 04/17/08 Markets Dreman Value Investing "The government rescue of overleveraged financiers and underwater homeowners is still only beginning, and the signs that it will get bigger are manifold. The Federal Housing Administration has spent $21 billion since September staving off foreclosures. The House Financial Services Committee has proposed letting the FHA underwrite up to $300 billion in loans to borrowers. The last time the federal government stepped so directly into the mortgage business was at the bottom of the Great Depression. Congressmen from both parties are working on legislation to provide tax breaks and other help to much of the stressed homeowner population. The Administration has been reluctant to get involved in anything it would consider a bailout, but the rapidly darkening credit situation may leave it with no choice." Value investing is supposed to get ugly 04/09/08 Funds Hallett Value Investing "One of the tenets of value investing is there will be times when it's going to get ugly. Problem is, for a lot of established value firms, things have never looked uglier - leading some advisors to question the wisdom of the strategy. But fund analysts say there is merit to what value firms are doing right now and investors should wait before they write off their value holdings." Feast with the vultures 04/05/08 Value Investing "A more rewarding approach may be to invest in companies such as Leucadia. Like Berkshire Hathaway, these are publicly traded holding companies run by managers with histories of sniffing out value. Yes, the risks are more concentrated. But returns, on average, exceed those of the typical value fund over the past decade. Patience is crucial, since returns can fluctuate unpredictably, rising in years when managers sell profitable investments and stagnating when they hold a lot of cash. Because of the stock market sell-off, share prices of many of these players are cheap vs. historic norms. And after largely sitting on the sidelines during the bull market, many of the companies are flush with cash. They are positioned to take advantage of lower stock prices as well as a projected spike in the default rate for U.S. speculative grade bonds." Crossing the rubicon 04/04/08 Markets Value Investing "In light of the above comments, the partners of FPA came to a unanimous conclusion that the recent Federal Reserve actions and the potential new Congressional policies under consideration are likely to lead to a significantly higher level of long-term inflation in the U.S. We are more than disappointed in the substandard decision making that has taken place within the Federal Reserve and other governmental entities these last several years. The misguided monetary policies of the former Chairman of the Federal Reserve, Alan Greenspan, created an era of 'too big to fail' that has led to two major asset bubbles. With each successive bubble, the policy actions available to the Federal Reserve to reduce financial system risk have been systematically reduced. The extraordinary actions taken by the Bernanke Federal Reserve reflect acts of desperation rather than long-term policy solutions. The rapidly changing events within the capital markets are forcing the Fed to adopt policies that have the potential of long-term negative consequences." Graham's metrics still apply 04/04/08 Stingy Investing Graham Value Investing "Benjamin Graham, the father of modern security analysis, was a professor at Columbia University, taught Warren Buffett and wrote the most famous -- and arguably the best -- book on investing, The Intelligent Investor, first published in 1949. In a chapter on stock selection for defensive investors, he said they should look for large, dividend-paying companies with little debt and a consistent record of profitability, whose shares trade at low multiples to earnings and book value. We applied Graham's criteria to the Canadian market, using the FP Corporate Analyzer program to identify companies Graham would likely find attractive." How fund manager didn't lose a bundle 04/03/08 Funds Markets Value Investing "As for where Mr. Rodriguez is betting now? He's still bearish. He's on a "buyer's strike." But he is considering his next moves. He views the recent partial bailout of Bear Stearns as "a short term positive but a long term negative . for the dollar and for inflation." The reason? Once again those who behaved irresponsibly or worse are sticking everyone else with the tab. "This has expedited the socialization of risk and moral hazard, exponentially," he says. Stay tuned." Small stocks, big profits 03/27/08 Growth Investing Stingy Investing Value Investing "Each December I grade the largest stocks in Canada for the MoneySense Top 200 ranking. But, as a personal project, I've also been grading Canada's smaller stocks at the same time, using the same methodology. The result? Over the past three years the top small stocks have actually done better than their larger counterparts in the Top 200. In 2004 the top small stocks gained 54.8%. In 2005 the tiny superstars climbed 44.6%. In 2006 the pint-sized overachievers advanced a further 18.3%. If you had bought the top-rated top small stocks in 2004 and rolled your gains into the new bunch each subsequent year, you would now be up 170%, not including dividends. That compares to a gain of about 152% for the top-rated stocks in the Top 200." Chou's annual report for 2007 03/17/08 Funds Chou Value Investing "We are long term investors and, in general, our bias has been to concentrate on stock selections and not worry about currency fluctuations. With years like 2007, the question arises as to whether there have been major disparities in annualized returns over the long term between a hedged portfolio and an unhedged portfolio; in other words, does one offer more advantageous performance results during currency fluctuations? Two studies, one covering the period from 1975 through 1988 and the other from 1988 through 2003, confirm that with respect to the long term there have been no material differences in returns." How value investor Chou wins with bonds 03/15/08 Funds Chou Value Investing "When you read about investment stars, portfolio managers who score high double digit and even triple digit annual gains, managers of bond portfolios usually aren't there. The reason - bonds are a different game, one where risk is less courted than avoided. But when the dust settles after big market busts, it's often the bond managers who are still standing. Francis Chou, 52, of Chou Associates Management Inc., is one of those survivors. His $90-million Chou Bond Fund (US$), established in the fall of 2005, soared to the No. 1 spot among 65 funds in the high yield sector with an average annual compound gain of 10.4 per cent for the two years ended Feb. 29, 2008, far above the 1.5 per cent average annual compound gain of peers in the period." Third Avenue Funds Q1 03/05/08 Funds Whitman Value Investing "Obviously, I feel good about TAVF's investment in MBIA. The Fund ought to do well under almost any scenario. By any objective standard, the MBIA investments are attractive ones with the insurance subsidiaries deserving of an AAA-Stable rating. Yet, there exists a sense of discomfort due to the dangers of Rating Agency subjective considerations and capricious regulators." Asset growth and stock returns 02/28/08 Academia Value Investing "Asset growth rates are strong predictors of future abnormal returns. Asset growth retains its forecasting ability even on large capitalization stocks, a subgroup of firms for which other documented predictors of the cross-section lose much of their predictive ability. When we compare asset growth rates with the previously documented determinants of the cross-section of returns (i.e., book-to-market ratios, firm capitalization, lagged returns, accruals, and other growth measures), we find that a firm's annual asset growth rate emerges as an economically and statistically significant predictor of the cross-section of U.S. stock returns." Walter J. Schloss Q&A 2008 02/28/08 Schloss Value Investing "Mr. Schloss started his limited partnership in the middle of 1955. In 1963, he earned the Chartered Financial Analyst designation. Waller's son Edwin joined the partnership in 1973 and the fund changed its name to Walter & Edwin Schloss Associates. Over the period 1956 to 2000, Mr. Schloss and his son Edwin provided investors a compounded return of 15.3% compared with the S&P 500.s annual compounded return on 11.5%." Miscalculating the risks 02/23/08 Value Investing "Inside his boardroom, Prem Watsa keeps an unusual artifact: a bronze bust of Sir John Templeton, the 95-year-old legend of value investing. The item was a 50th birthday gift for the chairman of Fairfax Financial Holdings Ltd., but also serves as a source of inspiration. The Templeton principles, after all, underpin much of Fairfax's investment philosophy: Be flexible; search around the world for the best bargains; and above all else, go against the crowd - buy when others are pessimistic, and sell when optimism rules. It's the last of these that led Mr. Watsa - until recently one of the most beleaguered executives on Bay Street - to one of the most stunning investments of his career, and has given him a way to silence his many critics. Fairfax this week disclosed an annual profit of $1.1-billion (U.S.) for 2007, nearly four times what the insurance and investment company had earned in its best year the year before. Much of that was the result of a single, contrarian bet the firm made that the world had got it wrong about risk." Watsa says credit squeeze still in 'early days' 02/22/08 Value Investing "Fairfax, which owns Canadian and U.S. insurers, said earlier today that fourth-quarter net income tripled to $563.6 million, or $30.15 a share, from $159.1 million, or $8.45 a share, a year earlier. Annual profit more than quadrupled to $1.1 billion, the Toronto-based company said. Fairfax had gains of $705.2 million in the quarter after the company bought credit-default swaps to profit from asset writedowns at U.S. banks. Losses and writedowns among the world's largest financial companies have risen to at least $146 billion after the subprime mortgage market collapsed amid record loan defaults. Watsa, 57, said there are more losses to come." Seth Klarman's talk at MIT 02/14/08 Value Investing "Many investors lack a strategy that equips them to deal with a rise in volatility and declining markets. Momentum investors become lost when the momentum wanes. Growth investors - who pay a premium for the fastest growing companies - don't know what to do when the expected growth fails to materialize. Highly leveraged investors, like some quant funds in the headlines, were recently forced to sell regardless of value when their methodology produced losses rather than gains. Counting on a government bailout for every market crisis seems a dicey proposition, especially when supposedly impossible events happen on Wall Street every few years. By the time the market drops and bad news is on the front pages, it is usually too late for investors to react. It is crucial to have a strategy in place before problems hit, precisely because no one can accurately predict the future direction of the stock market or economy. Value investing, the strategy of buying stocks at an appreciable discount from the value of the underlying businesses, is one strategy that provides a road map to successfully navigate not only through good times but also through turmoil. Buying at a discount creates a margin of safety for the investor.room for imprecision, error, bad luck or the vicissitudes of volatile markets and economies. Following a value approach won.t be easy for everyone, especially in today.s media-dominated, short-term oriented markets, in that it requires deep reservoirs of patience and discipline. Yet it is the only truly risk averse strategy in a world where nearly all of us are, or should be, risk averse." 5 Stingy Stocks for 2008 02/12/08 Stingy Investing Value Investing "I look for two qualities when hunting for bargain stocks: they must be cheap and relatively safe. Not surprisingly, it is often difficult to find stocks that are both cheap and safe." Income 100 Update 02/10/08 Stingy Investing Value Investing "Looking for a steady cash flow? We've rated the best Canadian stocks and trusts for income investors. We've assessed 100 income trusts and 100 income-generating stocks for their ability to provide generous income for a reasonable price. The top firms get an A; good ones land a B. Our grades are based on market capitalization, yield (how much they pay out), reliability (how safe is the payout), and value (lots of assets at a low price). Use our grades as a starting point for your own research. Like any investment screen, the Income 100 is intended to help you hit upon a few good ideas that may deserve a place in your investment portfolio." Patient Capital Q4 02/08/08 Value Investing "The possibility of faltering earnings in a weakening environment coupled with a whiff of inflation has put market participants in a skittish mood. As a result, investors that were recently very optimistic are now frightened. We view economic contractions as a very normal part of the business cycle and welcome such times as an opportunity to purchase excellent businesses at very attractive prices." Experience: Walter Schloss 01/27/08 Schloss Value Investing "Walter Schloss has lived through 17 recessions, starting with one when Woodrow Wilson was President. This old-school value investor has made money through many of them. What's ahead for the economy? He doesn't worry about it. A onetime employee of the grand panjandrum of value, Benjamin Graham, and a man his pal Warren Buffett calls a "superinvestor," Schloss at 91 would rather talk about individual bargains he has spotted. Like the struggling car-wheel maker or the moneylosing furniture supplier. Bushy-eyebrowed and avuncular, Schloss has a laid-back approach that fast-money traders couldn't comprehend. He has never owned a computer and gets his prices from the morning newspaper. A lot of his financial data come from company reports delivered to him by mail, or from hand-me-down copies of Value Line, the stock information service." Why it's fair weather for Fairfax investors 01/21/08 Value Investing "There was one reason Fairfax, a holding company with subsidiaries in the property and casualty and re-insurance business, landed in the company of the "recession-proof" fast-food restaurant and the seemingly unstoppable value investment vehicle run by the Oracle from Omaha Mr. Buffet: Credit Default Swaps. Analysts are twigging to Fairfax's portfolio of credit default swaps, with a "notional" value of US$18.5-billion against a purchase price of US$343-million, perhaps the perfect hedge against the economic turmoil that led to yesterday's dramatic stock market sell-off." Robot Portfolio displayed human frailties 01/08/08 Dorfman Value Investing "Dorfman named his company Thunderstorm Capital in honour of those stocks that rise in popularity after a "frightening but temporary event that usually passes without lasting damage." The Canadian stocks we selected using his method each had a market value of more than $500 million. They had reported more than a penny of profit per share in the previous four quarters, and had more shareholder equity than debt. Their share price was low relative to recent earnings." The Top 200 Canadian Stocks for 2008 01/01/08 Growth Investing Stingy Investing Value Investing "This is the fourth annual MoneySense Top 200 and we are pleased to say that connoisseurs have dined out very well on our past reviews. In each previous edition, we picked what we call All-Around All-Stars - stocks that score well on both our growth and value tests. Our All-Stars have consistently produced double-digit returns. The 2006 team achieved average returns of 16%, while the 2005 All-Stars gained 38%, and the 2004 squad soared an amazing 58%. An RRSP investor who put $10,000 into the 2004 picks and rolled his or her gains into the new All-Star team each subsequent year would now have $25,200. And those results don't include the generous dividends that we picked up along the way." Third Avenue Q4 2007 12/29/07 Funds Whitman Value Investing "The mortgage meltdown-housing collapse seems nothing new for the U.S. economy. During the last 60 years, virtually every sector of the American economy has gone through depressions as bad as anything that occurred in the 1930s. Remember the melt-downs during the past 40 years for, inter alia energy, banks, real estate, savings & loans, Wall Street brokerages, row crops, steel, automobiles, machine tools, etc. Unlike the 1930s, all these depressions occurred without domino effect. The probability seems to be that the next ten years in the U.S. will be more like the last 40 than they will be like the 1930s. Put otherwise, the odds favor overcoming the current crisis in residential housing and residential housing finance without underlying damage to the U.S. economy." 5 Graham Stocks for 2008 12/28/07 Stingy Investing Value Investing "Over the past seven years I've used my take on Benjamin Graham's time-tested strategy for defensive investors to uncover undervalued U.S. stocks. I'm pleased to say that the overall results have been stellar and last year's numbers were outstanding. The performance of each year's Graham stocks, the performance of the S&P500 (as tracked by the SPY exchange-traded fund), and the difference between the two is shown in Table 1. You can see that the Graham stocks have beaten the S&P500 in six of the last seven years and often by a substantial margin. An investor who bought each year's Graham stocks, sold, and then bought the next crop of stocks would have gained 507% (or 32% annually**) whereas a buy and hold investment in SPY units would have gained only 22%." Value that sizzles 12/27/07 Momentum Stingy Investing Value Investing "I bought into Fairfax Financial when it was hit by a tsunami of bad news in 2002. Short sellers were betting it would collapse - which is one reason I thought it was a buy. I like beaten-down stocks because I'm a contrarian and a value investor. I think that desperate situations such as Fairfax in 2002 are the ones that hold the potential for the biggest profits. Most people, though, hesitate to wager a big chunk of their hard-earned money on distressed stocks - and for understandable reasons. One problem with investing in companies like Fairfax is that you may have to wait years to see a profit. Another problem with deep-value investing is that it's not at all unusual to buy into a beaten-down firm, then watch it get even more beaten up. This can be deeply stressful. A good way to sidestep these problems is to marry the frugality of value investing with the price action of momentum investing. You buy cheap stocks, but only after their prices have rebounded. By looking for stocks with a bit of price momentum, you are waiting for the market to signal that the worst is over for the firm." Marty Whitman's big bets 12/21/07 Funds Whitman Value Investing Whitman interview on CNBC. RDN, MTG, MBI, and ABK. Now that's distressed investing! The Top 500 U.S. Stocks for 2008 12/14/07 Stocks Growth Investing Stingy Investing Value Investing "Some extraordinary qualities are needed to make our list of top stocks. On the value front, all our chosen stocks pay a dividend and sell for modest price-to-sales and price-to-book-value ratios. On the growth side, they demonstrate strong increases in sales per share and earnings per share. In addition, most generate healthy returns on equity, carry relatively little debt, and enjoy rising share prices. Keep in mind, though, that these stocks are controversial. After all, strong growth is rarely to be had at rock-bottom prices without some risk." Value's day once more 12/08/07 Grant Value Investing "Is anyone happy? Well, value investors ought to be. To their way of thinking bear markets are heaven-sent. Of all people, the disciples of Benjamin Graham and David L. Dodd understand the investment appeal of everyday low prices. They like it when stocks and bonds go on sale. They are the Wal-Mart shoppers of Wall Street." The prince of value 12/05/07 Tweedy Value Investing "If there's such a thing as an aristocracy of American investing, Christopher Browne is a full member. He's one of five managing directors of Tweedy Browne, a firm co-founded by his father, who brokered stock trades for Benjamin Graham, the creator of modern securities analysis. Later, when Graham's most illustrious pupil, Warren Buffett, wanted to take a controlling interest in a then sleepy textile company called Berkshire Hathaway, Tweedy Browne bought the stock. Given this lineage, it's hardly a surprise that Browne would become a spokesman for Graham's and Buffett's investing philosophy." Graham's Simple Way 11/23/07 Graham Stingy Investing Value Investing "Warren Buffett's insurance company GEICO is currently running a series of humorous ads featuring the line, 'So easy even a caveman can do it'. In a curious twist of fate, Buffett's mentor Benjamin Graham developed a way to pick stocks that even cavemen would appreciate. Graham described his Simple Way in a 1976 article called The Simplest Way to Select Bargain Stocks that can be found in Janet Lowe's book The Rediscovered Benjamin Graham. Given its recent success, these days stock-picking cavemen are dining out on mammoth steak." He has never been more bearish 11/23/07 Value Investing "Mr. Watsa never lost his image as a skilled investor. Hamblin Watsa Investment Counsel, Fairfax's internal money management firm, earned 17.7 per cent returns, compounded annually, on its stock investments between 1997 and 2006. "If they can make 7 per cent [on the whole portfolio, including bonds], the earnings power is ridiculous," said Wade Burton, a portfolio manager at Mackenzie Financial Corp.'s Cundill Investment unit, which is one of Fairfax's largest shareholders. "They're in a really good place right now." Mr. Watsa suggested the decision to put 75 to 80 per cent of Fairfax's portfolio into government debt - "for the first time, I think, ever" - reflects his view that credit markets will take a long time to digest the problems in the U.S. real estate and mortgage business." My Hero, Benjamin Grossbaum 11/22/07 Graham Value Investing "I am a frankly worshipful admirer of Graham's. I love him for his heart as much as for his head. Between 1929 and 1932, his investment partnership lost 70% of its value. Not until 1936 did it recoup all it relinquished since the Crash. Yet Graham persevered and, along with his partner, Jerry Newman, went on to achieve a brilliant long-term investment record - not excluding those three disastrous years. We have all heard the platitude, "The first rule of investing is not to lose money and the second rule is not to forget the first." Very helpful. Well, Graham shows that a debilitating loss is no reason to give up. . . . Never quit." 2007 Chou Lecture 11/18/07 Funds Chou Value Investing "Mr. Chou has operated two of the country's most successful funds, Chou Associates Fund and Chou RRSP fund, for the last 18 years." A seasoned pro scoops up mortgage stocks 11/11/07 Value Investing "As mortgage insurance stocks have gone into freefall over the past month, speculation has been intense about whether a deep-pocketed investor would step in and start buying, in the belief that the stock prices had fallen too far. Old Republic International, a sleepy Chicago-based insurance company led for the last 17 years by Aldo Zucaro, has made that bet." Accounting for leverage 11/11/07 Value Investing "The B/P ratio can be decomposed into an enterprise book-to-price (that pertains to operations and potentially reflects operating risk) and a leverage component (that reflects financing risk). The empirical analysis shows that the enterprise book-to-price ratio is positively related to subsequent stock returns but, conditional upon the enterprise book-toprice, the leverage component of B/P is negatively associated with future stock returns." Patient Capital Management's Q3 2007 letter 10/30/07 Value Investing "Which asset class has performed better since PCM's inception in March of 2000; T-Bills or the S & P 500? T-Bills have outperformed the S & P 500 during the March 31, 2000 to September 30, 2007 period. The S&P 500 has generated a compound annual rate of return of only 1.92% compared to an average yield of 3.18% for T-Bills over the same period. This fact may be a surprise to many because of the strongly ingrained belief that equities always outperform fixed income instruments." 3 bargain stocks 10/23/07 Funds Whitman Value Investing ""Safe and cheap" makes for a comforting mantra. Rather than timidity, though, Whitman's approach actually calls for remarkable fortitude. It requires the nerve to pick through distressed companies that others are ignoring and demands the conviction to see big gains come to fruition." So simple it works 10/14/07 Graham Stingy Investing Value Investing "Value investing is so easy that your grandfather can do it - that is, if he follows the advice of Ben Graham, the grandfather of value investing. Back in 1976, Graham, a Wall Street financier and Columbia University professor, developed what he called The Simplest Way to Select Bargain Stocks. Investors who followed his approach have been riding the gravy train ever since." The high dividend yield return advantage 10/03/07 Tweedy Dividends Value Investing "There is an abundance of empirical evidence which suggests that portfolios consisting of higher dividend yielding securities produce returns that are attractive relative to lower yielding portfolios and to overall stock market returns over long measurement periods." The lone raider 09/29/07 Value Investing "Over the past three years, the 47-year-old Armoyan has been on a tear, seizing control of a dozen mostly beaten-up but asset-rich companies, including Versacold Income Fund, a refrigerated warehousing/trucking outfit; Royal Host Real Estate Investment Trust [RYL.UN-T], a hotel owner and franchisor; and General Donlee Income Fund [GDI.UN-T], which makes aircraft components. Armoyan's modus operandi is the same in almost every case: He quietly starts accumulating shares through his principal public investment vehicle, Clarke Inc. [CKI-T] Then, when he crosses the 10% threshold that requires him to publicly disclose his holding, he demands seats on the target's board of directors and input into management. The goal is to gain control and then engineer a turnaround, or sell off the company for a profit as soon as opportunity knocks." Dreman interview 09/24/07 Dreman Value Investing "I guess the key word is yet. I think we'll have some really major opportunities in the stock market. But I think there will be -- we'd like to see a little more unwinding. Actually, the stock market is fundamentally very strong." Absence of fear 09/24/07 Value Investing "There have been several studies as to how inflated housing prices had become prior to the present correction. According to the work done by Gary Shilling.s firm, home prices would have to correct between 22% and 28% to return to the equivalent of the median asking rent or to the trend line of the CPI. Prior to 1996, both of these measures approximated the rate of increase in home prices. According to Robert Shiller of Yale University, his real quality-adjusted existing house price index would have to correct nearly 45% to bring it back into alignment. My initial reaction to this estimate was one of disbelief and that it appears excessive; however, home prices would appear to have a considerable way to fall, given the high level of total homes available for sale. With nearly 4.5 million homes for sale in 2007, this compares to an average of approximately 2.5 million homes since 1990 or an excess of approximately 2 million homes. Since 1965, the median dollar volume of single-family homes sales as a percentage of nominal GDP has averaged 8.4% versus 16.3% at the 2005 peak, according to Northern Trust Global Economic Research." Take-home lessons on value investing 08/31/07 Value Investing "If price volatility isn't a proper measure of risk, fluctuations can afford an investor the opportunity to purchase a business for less than it's worth, according to value investors like Pabrai. When the market smells trouble and sends a stock's price down, value investors smell a potential overreaction and get to work valuing the business." Why disciplined value investing is so difficult 08/29/07 Value Investing "Ask yourself a simple question, Jean-Marie Eveillard says. "If Warren Buffett is the second-richest man in the world, why aren't there more professional value investors?" The evolution of the idea of 'value investing' 08/21/07 Value Investing "Benjamin Graham and David L. Dodd's Security Analysis, first published in 1934, brought structure and logic to the field, creating an intellectual framework for sound investment. In an area where much looks foolish shortly after publication, Graham's principles have proved reliable for over sixty-five years." The Income 100 08/13/07 Dividends Stingy Investing Value Investing "A year ago we helped you target Canada's best income trusts in our second All-Canadian Trust Guide. We ranked the largest trusts in Canada and assigned each a letter grade depending upon how its financial numbers stacked up. Despite the carnage in the trust sector as a result of new tax rules introduced in late 2006, our picks hit the bulls-eye. Our top-flight trusts - those rated either A or B - gained an average of 11.7% over the past year. That continues a streak of strong performance. Since we started ranking trusts in 2005, our top trusts have gained a total of 44.9%." In the risk-reward game, Hartco worth holding 08/12/07 Value Investing "A general rule of investing is the higher the potential rate of return, the greater the degree of risk. One way that this relationship expresses itself is when people chase yield. We did exactly that with our purchase of Hartco Corp. at prices from $3.02 to $3.46 over the past year or so." Prem Watsa Intelligent Investing Lecture 08/05/07 Value Investing "The topic of Mr. Watsa's keynote speech was Ben Graham and Bubbles." The value of Fundamental Indexing 07/25/07 Indexing Value Investing "Proponents of market benchmarks weighted by such factors as dividends, earnings or sales claim that an investment management revolution is afoot. But is the concept really new - or is it just a cleverly repackaged version of the discipline known as value investing?" Robot stock portfolio rides high again 07/10/07 Stocks Dorfman Value Investing "Our picks by the data machine for 2007 each had a market value of more than $500 million, more than a penny of profit per share in the latest four quarters reported, more shareholder equity than debt and the lowest share price on the market relative to recent earnings." The bargain basement isn't empty 07/01/07 Value Investing "Jeremy J. Siegel, a professor of finance at the Wharton School of the University of Pennsylvania and an adviser to WisdomTree Asset Management, is also a believer. He said that value stocks "have been bid up a bit more than they have in the past," but that "it is not a time to abandon value and go for growth. In the long run, value stocks have done better."" 2007 Whitman Lecture 06/30/07 Funds Whitman Value Investing "Mr. Whitman has agreed to talk about three issues (1) What is Safe & Cheap Investing (2) Advantages of Safe & Cheap Investing, and (3) Problems with Safe & Cheap Investing." Tight times for deep value investing 06/22/07 Value Investing "Barbee keeps a watch-list of companies with share prices trading below book value, or net worth (essentially, a company's assets minus liabilities). When the overall market bottomed in late 2002 and early 2003, Barbee found that some 500 stocks were trading below book value (he screens for all stocks with market values of $70 million and up). By early 2004, the number had shrunk to about 100 and has stayed there ever since. "Everyone's had a chance to sift through the bathwater," Barbee says. As for the remaining bargain-bin merchandise, the average discounts are not as large as they once had been, and the quality of the typical company is not as strong." Eveillard: A value maestro's encore 06/19/07 Value Investing "For almost 30 years, global fund manager Jean-Marie Eveillard made a lot of money bucking trends. After a two-year break, he's back." In a rocky stock market, play it safe 06/18/07 Value Investing "Up and down Wall Street, traders' screens are green, signaling that these are great times for stock market investors. The S&P 500 and the Dow Jones Industrial average are setting all-time highs. So much cash is sloshing around the sidelines, and borrowing costs are so low, that practically each day brings news of asset sales or corporate takeovers. Reuters. Chrysler. Stuyvesant Town. MGM. It all seems like the late 1990s." Some 'value' stocks are just losers 06/17/07 Value Investing "Most veteran value investors have a story about the stock they wished they had let get away. The shares looked attractive and the company's worst troubles seemed behind it. But instead of a quick fix, they got quicksand; the stock languished, a waste of money and time. For John Linehan, manager of the T. Rowe Price Value Fund, such disillusionment comes from a stake in Boston Scientific. The medical-device company appeared to have healthy demand for its products and its costs were under control, he says, but tough competition and an expensive acquisition of heart-device maker Guidant has proved otherwise." Fairfax braces for meltdown 05/27/07 Value Investing "Prem Watsa says investors around the world are not being paid enough for the inherent risk in stocks, bonds and real estate. The chair of Fairfax Financial Holdings Ltd. is not crying poor for successful capitalists like himself, though. He is sounding a warning call to investors, big and small. The renowned but recently embattled sleuth of under-valued assets . an acolyte of Depression-era investment theorist Benjamin Graham . has acted on his concern to protect his stable of general insurance and re-insurance companies." Patient Capital Q1 2007 05/15/07 Value Investing "Charts 2 and 3 show the Dividend Yields of the TSX and the S & P 500 over long time frames. The dividend yield is our preferred aggregate market valuation method. Cash dividends paid to shareholders are real; there are no debates about methodology and quality of earnings when compared to the Price/Earnings ratio nor relevance when discussing the market's Price/Book ratio. As my accounting professor used to say "if it doesn't jingle it doesn't count!"" Watsa's foray at Torstar 05/07/07 Value Investing "What is he doing? That has been the reaction in some quarters to the recent news that Prem Watsa's Fairfax Financial Holdings Ltd. has bought a good-sized position in the class B nonvoting shares in Torstar Corp., a company controlled by the owners of its class A voting shares. It's not known what value investor Watsa plans to do with what is his first such foray, but there are precedents for such activity." Canadian stocks that Benjamin Graham might like 05/01/07 Graham Stingy Investing Value Investing "I like to hunt for U.S. value stocks using Benjamin Graham's criteria for defensive investors. The method focuses on solid companies trading at modest prices. You can read all about it in Graham's book The Intelligent Investor which deserves a spot on every investor's bookshelf. But I'm often asked for Canadian stocks that pass Graham's test. This month I've found five candidates that the master might like." Aegis Fund overcomes 'worst stock pick' 04/12/07 Value Investing "Barbee, who has managed Aegis Value since it opened in 1998, buys companies trading at a discount to book value, or assets minus liabilities. The average market capitalization of companies in his fund is $869 million, compared with the $1.3 billion average for those in the Russell 2000 Value Index, which tracks the smallest U.S. companies." Investing by the book 03/16/07 Stingy Investing Value Investing "Investors love profits - the bigger the better. But when evaluating potential stock buys, it's important to consider more than just how much a company earns. You should also take a gander at what it owns. You can often spot valuable opportunities when you find solid assets selling for low prices. One way I like to look for bargains is by examining a company's book value. This is the historical value of all its assets minus its liabilities. The price-to-book-value ratio (P/B) that you see quoted on many financial websites compares this book value to the current price of the company's shares. If you buy stocks with low P/Bs, you're buying assets at a bargain price." Top funds stand by subprime bet 03/09/07 Value Investing "In recent weeks, as mortgage defaults have risen, shares of subprime lenders have plunged. Countrywide Financial, one of the nation's largest subprime lenders, sank 16.1 percent in the past month. Similarly, homebuilder stocks continue to slump - Pulte Homes, for one, is down 19 percent over the past year. This debacle has damaged the returns of many of the best fund managers around, including Bill Miller of Legg Mason Value (with a loss of 1.6 percent year to date), Ron Muhlenkamp of the Muhlenkamp fund (- 3.7 percent), and Wally Weitz of Weitz Hickory (- 0.7 percent). All three have held on to these stocks in the belief that real estate will rebound. How did these smart stock-pickers make such a big mistake? Well, actually, they don't see it that way. For these managers being out of step with the market is a sign that they are doing their jobs. After all, the best way to earn returns is by spotting opportunities long before everyone else." Master of the turnaround 03/07/07 Value Investing "It turns out that what Williams meant by invoking baboons is that he has a method of investing that has become as natural and comfortable as his own skin. So, sure, to him it seems easy. To learn about those methods, we chatted with Williams at his firm's Manhattan headquarters. We found Williams, who had come in for the day from his office in suburban Essex, Conn., east of New Haven, to be disarmingly unassuming and an investor who likes to keep things simple." Are good companies bad investments? 02/26/07 Value Investing "From 1983 to 2006, the mean annualized return of the less admired companies was 17.8 percent, beating the more admired group's 15.4 percent return. Interestingly, both groups beat the S&P 500's 11.2 percent return over the same period." Patient Capital Management Q4 02/16/07 Value Investing "As we enter 2007 we are again witnessing a period when investors are greedily buying. The absence of fear and complacency towards risk truly astounds us. As is usually the case, the cause for optimism and complacency is rooted in sharply rising short term security prices." A wing and a prayer 02/16/07 Value Investing "Value investing has never been sexy. It involves poring over a lot of financial statements to find companies with shares that are priced below their historic norm or below the inherent value of the business. That slow and steady approach tends to generate solid gains over the long haul (just ask Warren Buffett). But over the short term it can look awfully stodgy compared to growth investing, which tries to identify companies that are poised for rapid expansion - think of Apple Computer since the introduction of the iPod in 2001 and its iTunes online music store in 2003." [Note: Apple was a good value in the summer of 2002 when it traded at a market cap just above the amount of cash it had in the bank. At least that was my view when I bought a few shares.] 5 Stingy Stocks for 2007 02/07/07 Stingy Investing Value Investing "Since a rocky start in 2001, the stingy stocks have provided a total gain of 183.6% assuming that the old stocks were sold and the new stocks purchased each year. In comparison, the S&P500 (as represented by the SPY exchange-traded fund) lagged by 151.3 percentage points over the same period." Value and momentum 02/06/07 Momentum Dorfman Value Investing "People who scour the stock market for bargains tend to buy too early, and I am no exception. To counteract this problem, some value investors look for stocks that show some upward price momentum. Twice a year for the past few years, I have been put together a list of stocks that I think have both value and momentum." The Top 200 Stocks 01/26/07 Growth Investing Stingy Investing Value Investing "Want to go hunting for buried treasure? Then join us as we once again dig up the shiniest prospects among Canada's largest 200 stocks in the third annual MoneySense Top 200. We're pleased to say that the first two versions of the Top 200 have been a great success. Look, for instance, at our All-Around All-Stars from last year. These were the handful of stocks that scored well for both good value and good growth prospects. Since we selected them in November 2005, they have gone up in price by an average of 37.6%. Fold in the 57.6% return from the 2004 version of the All-Around All-Stars and our top picks are up 116.8% over the past two years. Yes, you heard that right. Someone who invested in our All-Around All-Stars from 2004 then rolled their gains into our top picks from 2005 would have more than doubled their money in two years - and their 116.8% gain doesn't even include the dividends they would have collected along the way." Undervalued airline came in top of class 01/20/07 Value Investing "We all make mistakes. In fact, in May we hung out one of our own boneheaded moves, our "investment" in MRI manufacturer Fonar Corp. (FONR-Nasdaq). Though the stock had crashed to 26 cents from our purchase price of $1.25, we stuck with it because the chief executive officer had just bought shares at 55 cents, and management told a sweet story about the stock getting back over $1 by year end. No dice. We finally pulled the plug and took the tax loss at 30 cents, not far from its current trading price of 27 cents." Robot shows it pays to buy outcasts 01/17/07 Dorfman Value Investing "Canada has proven in the early going to be a profitable stomping ground for John Dorfman's robot stock selector. A portfolio of 10 out-of-favour stocks selected a year ago using the Boston money manager's automated filtering technique produced a hearty 31 per cent investment return. " Arnold Van Den Berg interview 01/01/07 Value Investing "Now there are basically four great psychological states you should look for. And you want to buy stocks that are selling for one of these four reasons. ... So you've got apathy, disgust, and fear and panic. But the ultimate state is anger." Eight Graham Stocks for 2007 12/29/06 Graham Stingy Investing Value Investing "Over the past six years I've used Benjamin Graham's time-tested strategy for defensive investors to uncover undervalued U.S. stocks. Overall the results have been stellar but last year the method hit a speed bump and posted a small loss." Short the exchanges 12/22/06 Dreman Value Investing "There's nothing better for piling up the cash to pay Wall Street bonuses than a hot stock offering. And since the market recovery began in late 2002, some of the hottest public offerings have been in securities exchanges themselves. Exchanges are the new Internet. That is, they are presumed to be capable of growing higher than the blue sky. That would make them good shorting candidates, if only you could get your hands on some borrowed shares." 10 mutt stocks that will shine in 2007 12/19/06 Value Investing "My Dog Star list contains some of the market's most-reviled names. These beaten-down but sound stocks should rise in price in the new year." Southern stars: The Top 500 U.S. Stocks 12/18/06 Growth Investing Stingy Investing Value Investing "If you're intrigued by the results of our Top 200 listing of Canada's largest stocks, you may be interested in extending your search for good investments beyond Canada's borders. If so, we invite you to join us as we embark on a road trip through the largest 500 stocks in the U.S. Our goal? To find tomorrow's stars today." Whitman profile 12/11/06 Funds Whitman Value Investing ""We're such cowards!" said Martin Whitman, the 82-year-old legendary superinvestor, at a seminar organized by New York Society of Security Analysts on February 16, 2006, "We only want to be the senior-most creditors in distressed situations. We only want to be the adequately secured lenders in Europe and overseas. We don't want to be subordinate to any of the asbestos or tobacco liabilities..." And he brilliantly calls himself the "safe and cheap" investor." These dogs are barking 12/11/06 Dividends Value Investing "At the beginning of this year, you would have looked foolhardy if you had piled into General Motors Corp., Merck & Co. Inc. or Verizon Communications Inc. All three stocks were beaten up, and they looked likely to receive more poundings in the months ahead. Amazingly, though, each one has since exceeded all but the most eccentric expectations. So far this year, GM shareholders are basking in an 80% share-price gain, while Merck and Verizon are up 43% and 23%, respectively. Those kinds of numbers would bring a smile to the lips of any investor. The problem is, who could have guessed that stocks that looked so bad at the start of 2006 would make such gains? Well, if you had followed the Dogs of the Dow stock-picking strategy when making your investments back in January, you would have put a good-sized chunk of money on GM, Merck and Verizon. And you would now be feeling pretty good about making calls that seemed to defy all common sense only a few months ago." Invest like the masters 12/01/06 Stingy Investing Value Investing "Want to invest like a master? Then look to the works of Warren Buffett, Peter Lynch, David Dreman, and James O'Shaughnessy. These four gentlemen are all great investors, and all of them have either written books on how to invest or, in Buffett's case, produced years of informative shareholder letters. Remarkably, none are shy about sharing their market-beating techniques. In this feature, we examine how each of these wizards thinks and we spell out what each looks for in a stock. But that's just for starters. We've also scoured the markets for stocks that our famous investors might be interested in buying right now." Steal this column 11/29/06 Value Investing "In the investing world, talk is cheap. We're bombarded by a never-ending stream of chatter in the form of newspaper articles, marketing material, television interviews and, yes, even magazine columns. Buy oil, sell gold, get out of the house builders, get into biotech stocks - how can an investor (especially one who is just starting out) make sense of this babble of often contradictory advice? It's easy. Stop listening to what the investment experts are saying. Look instead at what they're doing. While legendary investors like Warren Buffett won't take your phone calls, they are obligated by law to regularly report their major portfolio holdings. These days, thanks to the Web, you can click a few links and see exactly what these geniuses are up to. It's like being at a giant poker game, where you can peer over the shoulders of many of the smartest money managers on earth and see precisely what cards they're holding." A bullish bet on joe consumer 11/28/06 Value Investing "Q: What's another stock you like right now? A: Allstate (ALL). The company has had problems, but new management has come along and fixed it. They are at about eight times 2006 earnings, generating a lot of cash, and buying their own stock. But that is a company-specific play; I'm not buying insurance companies across the board. Q: What is the future of property and casualty insurers like Allstate that sell primarily through traditional brokers, given the success of companies such as Geico, which sells direct to consumers? A: I have no opinion. Q: You don't have an opinion, even though you see enough merits to the company to recommend it? A: If Allstate were 12 or 15 times earnings, those things become relevant. At eight times earnings, I don't care. It's a better company than it was; they fixed their problems and they are still selling cheap." Pattison goes deeper into the woods 11/18/06 Value Investing "But he has watched the sector for long enough from close up to know that when it seems beyond hope, that's probably the best time to put your money in. "We've been here [in B.C.] virtually all my life," he says. "Ever since I can remember, forest products has had its ups and downs and ups and downs . . . . Being up, you know it isn't going to last. And when it's down, hopefully it doesn't last." Some of the best value investors on the continent are thinking the same thing. Several have placed large bets that the red ink in the woods is bound to stop flowing, eventually, and that by investing now, they will reap huge gains in the recovery. Their theory, contrarian as it may seem, is that the industry's economics have been so bad for so long that it has no choice but to undergo massive change. Weak players will go bankrupt, scores of mills will close forever, and a wave of takeovers will knock out the smallest players." Browne searches for value: why don't you? 11/16/06 Tweedy Value Investing "Tweedy, Browne is money management's equivalent of the Republican cloth coat: nothing flashy, ever dependable, transcending style. It is an organization that was founded in 1920 to deal in thinly traded stocks, and which in the 1950s realized that more money was to be made in owning such typically undervalued shares than in trading them. The firm began to take in outside funds in 1968, and has grown to now managing over $13 billion. It did not hurt that one of the firm's earliest and best clients was Benjamin Graham, co-author in 1934 of the nearbiblical "Security Analysis." Indeed, the company's early association with Mr. Graham (and proximity they moved into office space down the hall from the revered investor) led also to a relationship with Walter Schloss, Warren Buffett, and Tom Knapp, who joined the firm in 1957 and spear-headed its entr e into the investment game. These are formidable value bloodlines." The rally builds steam 11/14/06 Dreman Value Investing "First, it's impossible to get a good grip on how far the housing slump will go. The optimists state the decline in new home sales is almost over and home construction will bounce back vigorously both next year and in 2008. That's a hard story to buy because of the strong headwinds that await this important industry. Even if new construction is cut back fairly sharply, there is still a large inventory of new units to work off. With diving house sales, stocks of home builders look cheap today. However, proceed with caution. My fellow columnist Laszlo Birinyi finds several a buy, despite weakening earnings. I'd wait a bit. Many builders have bought call options on new land. They would argue that they are thus protected if land prices drop because they do not own the land. That's true only up to a point. Call options on land are not free. A 12- to 18-month option to buy land can cost as much as 15% of the property's value. Let that option lapse and you eventually have a hit to earnings for the premium paid." NYSSA honors Walter Schloss 11/10/06 Value Investing ""I worked for Benjamin Graham for 9 1/2 years, and Ben said he was going to retire and move to California," began Schloss. "I had to get another job, so one of the people who was a stockholder of Graham Newman came to me and said, 'Walter, if you start a fund, I will put some money in it.' We ended up with $100,000. The structure was that I would not get paid unless we realized gains. The kind of stocks I bought were not growth stocks. Graham was really value-oriented. In those days he would buy stocks that were selling below working capital. There were less of them, but they were still around." "Since I only liked to buy stocks that were undervalued from a statistical point of view, they were not necessarily great companies. There was no particular point in hanging on to them indefinitely. We were buying companies on the way down and selling them on the way up. Not every company worked out, but enough of them did, so we had a pretty good record."" The Dodge & Cox mystique 11/04/06 Value Investing "In its 76-year history, Dodge & Cox has launched precisely four mutual funds. The firm doesn't advertise and has no marketing department. Yet investors are so taken with its funds that it has had to shut half of its tiny lineup to new customers to stanch the flood of money." Patient Capital Management Q3 10/27/06 Value Investing "In essence these two books instruct its readers on how to apply Mr. Graham's principles. His two primary methods were to calculate a firm's long-term 'earning power' and purchase the shares at a price to earnings multiple of less than 10x's or purchase shares at net-net working capital. Graham argued and proved through his investment partnership that a well diversified portfolio of securities that fit either of these two criteria would provide excellent long term results with substantially less risk than the market." Bill Miller's Q3 letter 10/26/06 Value Investing "Behavioral advantages are the most interesting because they are the most durable. The field of behavioral finance is still in its infancy yet has already yielded results that can be incorporated profitably into a sound investment process. The best part is that such results are likely to be systematically exploitable and not able to be arbitraged away as they become more widely known. That is because they represent broad findings about how large groups of people are likely to behave under well-defined circumstances. Until large numbers of people are able to alter their psychology (don't hold your breath), there is money to be made from prospect theory, support theory, cognitive psychology, and neuroscience." 10 hated stocks you'll love in 2007 10/20/06 Value Investing "Buy 'em when they're hated. I don't mean "out of favor" or "disliked." I mean HATED. And buy 'em at the end of the year. Not in November. Not in January. But around the middle of December. That's the simple foundation of the Dog Stars strategy" Old growth as value? 10/20/06 Value Investing "Investors looking to buy should look for four psychological states: apathy, disgust, fear, and anger. Of the four, anger is the most irrational--and offers a wonderful time to buy stocks." Noise reduction 10/04/06 Value Investing "Managing a $6 billion fund holding only 20 stocks requires strong conviction and an iron will - two traits Oakmark's Bill Nygren has in abundance." Interview Charles de Vaulx 09/28/06 Value Investing "Our featured guest this morning is Charles de Vaulx. He is the Chief Investment Officer at the First Eagle Funds Value Group, where he helps to manage about $32 billion. Charles' funds have had virtually no down years; he focuses on absolute rather than on comparative returns. He says if they don't find the security at the correct price, they are happy to just hold cash." Seminar in value investing 09/17/06 Value Investing "In this archive you will find recordings of guest lectures delivered by accomplished and world renowned investors. These individuals have generously contributed their time to share their insights with Columbia Business School students and have kindly agreed to have their lectures shared on this website as a valuable resource to the value investing community." Value veteran dances to his own tune 09/02/06 Value Investing "If you want to ask Tim McElvaine where stock markets are going, he will tell you that you've come to the wrong person. "I'm pretty sure that I am the only investor who missed the entire metals, minerals and oil and gas boom completely," says McElvaine, 43, manager of the $89.8-million McElvaine Investment Trust and president of Vancouver-based McElvaine Investment Management Ltd. "I joke with people that I dance to my own tune, in a corner," adds McElvaine, in his characteristic self-deprecating style. "Sometimes, out of sheer luck you will be in beat with the music and sometimes you will look awfully stupid. But at least you're enjoying yourself. That's where I am, dancing the foxtrot while everyone else is doing the rumba."" Value vs. glamour stock returns 08/18/06 Value Investing "This paper sheds further light into the discussion of whether the value premium is driven by risk or behavioral factors by providing out of sample tests using Canadian data, a search process that involves both P/E and P/BV ratios and a research methodology that minimizes any potential data snooping problems. We document a consistently strong value premium over the 1985-2002 sample period, which persists in both bull and bear markets, as well as in recessions and recoveries." Miller says fund 'clearly wrong' 08/06/06 Value Investing "Still, Value Trust is hanging tough on its key holdings, Miller and assistant portfolio manager Mary Chris Gay wrote in their quarterly letter to shareholders. "It is our willingness to own securities which other people regard as wrong which historically has been part of the long-term success of the fund," Miller and Gay wrote, adding that "in order to do better than the market longer term, you must be doing something different."" Weitz Q2 07/23/06 Value Investing " In this increasingly risky environment, we have focused on companies that can (1) survive financial market upheaval and (2) take advantage of distress sales of assets. Happily, in this increasingly speculative market, large growth companies with very strong balance sheets (e.g. Wal-Mart, AIG) have been out of favor and available at prices that value investors are willing to pay. Thus, as we have upgraded the overall financial strength of our portfolios, we think we have also increased the upside potential for our Funds. As for companies with the capacity to take advantage of capital markets weakness, we start with Berkshire Hathaway. Berkshire holds over $42,000 per share in cash and bonds that is available for investment and Warren Buffett is equally at home buying individual securities and whole businesses." 5-star stocks from the Markel portfolio 06/23/06 Value Investing "In my view, Markel's success is largely due to its strict adherence to a timeless investment philosophy that seeks to invest only in profitable businesses with ample reinvestment opportunities that are also run by competent management teams. In addition, the executives at Markel have both the long-term orientation and patience to wait for these types of companies to become attractively priced. As a result, Markel rarely overpays, and its investments usually compound at least at the growth rate of the underlying business." Deep value 06/21/06 Value Investing "We based this screen on what Benjamin Graham recommends for the "defensive investor" in his 1949 classic, The Intelligent Investor. Among other things, we insisted that each stock's price be no more than 15 times its average earnings per share over the past three years, and that the overall portfolio have a P/E of no higher than 13." Miller, Hodges bet on housing slump end 06/15/06 Value Investing "The biggest slump in U.S. homebuilder stocks since 1994 has spurred investors with some of this decade's best records to snap up shares of Centex Corp., KB Home and Toll Brothers Inc. So far their confidence has been unrewarded." Weighing options with Robert Olstein 06/12/06 Value Investing "Hey home-gamers, don't beat yourself up for missing the options-backdating scandal. Even renowned stock sleuth Robert Olstein says it was nearly impossible to spot." The magic money machine 06/09/06 Value Investing "Whatever you think of its Magic Formula strategy, The Little Book offers one of the most succinct and straightforward explanations of value investing that we've read. It's even funny at times. But can it make you rich? Frankly, we're not sure. But what we do like about Greenblatt's system is that it's logical and builds on the writings of Benjamin Graham and Warren Buffett, two of the most successful value investors in history. As we discovered in a recent interview with Greenblatt, he pulls no punches when it comes to defending his strategy." Muhlenkamp's methods 06/09/06 Value Investing "Yes. I've been going to auctions since I was five years old. We sold calves and pigs at auctions when I was a kid. We'd do our Christmas shopping at auctions. I find myself telling people more and more, 'If you want to understand the stock market, go to auctions.' When I ask someone why he goes to auctions, he usually says something like, 'Every now and then you can get a good deal' Nonetheless, if one of something you own happens to sell for half price at an auction - and that auction is in the stock market - the headlines read, 'Stocks Cut In Half!' Bullshit. That day, there just happened to be no buyers. That happens at auctions all the time. But you can also get carried away at auctions. I've seen used bicycles sell for more than Sears charges for a new bike, just because two people happened to want that blue bicycle that day. That's just normal at auctions. A lot of people nowadays look at you sort of funny when you suggest going to auctions to understand the stock market, but back in the Midwest, where you and I come from, there didn't used to be much mystery about auctions. They were commonplace, anytime a farm was sold or a house broken up, there was an auction. And the bottom line is that people go to auctions for the volatility. If you want to avoidvolatility, you go to Wal-Mart. You literally go to auctions to take advantage of the volatility." Book value bargains 06/06/06 Value Investing "About 2 percent of all U.S. stocks sell for less than book value -- that is, less than the company's per-share assets minus liabilities. This might appear to be a paradox. After all, if a company were liquidated -- selling all assets and paying off all liabilities -- there would seem to be more cash than the market value of the stock. What's the catch? Liquidation may be unlikely. And it's always possible that the liabilities are understated or the assets overstated. Therefore, buying stocks below book value isn't a sure-fire strategy. Yet it is often a good one." Value vs Glamour 05/29/06 Value Investing "During the 23, rolling five-year periods in our study, among large-cap stocks, the Russell 1000 Value Index ended ahead of the Russell 1000 Growth Index 15 times, representing 65% of the five-year periods. For small caps, the Russell 2000 Value Index outperformed the Russell 2000 Growth Index in 21 of the 23 five-year periods, or 91% of the time." FPA Annual 05/26/06 Value Investing "We know we are at odds with most of the mutual-fund industry. As an example, the average liquidity of all equity mutual funds recently hit an all-time low of 3.7%, versus your Fund's record high of 43.6%. While we are being cautious, our competition seems to be very confident, and this is reflected in low stock-market volatility measures. Wherever we look, it appears that most investors are highly confident. Volatility in the bond market recently hit an all-time low as well. Yield spreads are quite narrow throughout all credit segments of the bond market. There seems to be very little worry about credit risk. Again, while others seem to be highly confident, we believe that it is prudent to exercise a higher degree of caution." Global bargain hunter 05/23/06 Value Investing "From his office in Boston, Horn scours the globe, from Scandinavia to Mexico, in search of dull stocks that happen to be cheap. The first thing he looks for in a company is not net earnings but free cash flow, which he defines as cash flow from operations minus maintenance-level cap-ex. "It's useless to use net profits to compare companies globally," he says, as the figures can be easily manipulated or affected by local accounting and tax rules. A software company, for instance, could capitalize or expense the cost of software development, while steel companies' tax rates could vary based on the country in which they operate. But, says Horn, "There's either cash, or there isn't."" Value investors speak out 05/15/06 Value Investing "Last week concluded a nationwide tour for the disciples of famous value investors, such as Warren Buffett and Ed Lampert, that has become an annual tradition in finance circles." Patient Capital Management Q1 05/03/06 Value Investing "There is a famous story in investment lore about ambitious young men hoping to get rich. Several young men had just graduated from college in the mid forties. Having seen the hardships of the Great Depression they sought out advice. They wanted to know how to accumulate wealth. They wisely asked the most distinguished and successful investor of the time for a meeting. Surprisingly the gentleman agreed. Realizing their good fortune they diligently researched and prepared several questions expecting a long meeting filled with much advice and many "golden truths". On the day of the anointed meeting these young men presented themselves to the great man's assistant and were shown into the boardroom. They marveled at the oak paneled furniture and luxurious setting. They could barely contain their excitement; they were going to learn the secrets to becoming rich. After what seemed like a very long time a distinguished, grey haired man entered the room and sat at the end of the very long table. One member of the group could not contain his enthusiasm. Much to the embarrassment of his colleagues he blurted out that they were interested in amassing a great fortune just as he had. Without hesitation the investor simply stated . . ." Leucadia letter 04/23/06 Value Investing "We have been unhappy with the GAAP reporting of tax assets mentioned above for some time. Early in the 1990's, the accountants adopted a rule, SFAS 109. Under this rule, which we disparaged back then, companies are required to recognize the non-present value of their NOLs and put them on the balance sheet as something called a Deferred Tax Asset. For up to the next twenty years, or as long as we have NOLs, we will report an income tax expense and the Deferred Tax Asset will be reduced by the same amount, but we will not pay cash taxes. This large asset may not become a reality until sometime in the future and we cannot begin to project when that will be. We long for the pre-SFAS 109 days when the NOLs rested peacefully in the footnotes until sometime in the future when they would be called upon to deflect taxation. Too much complexity robs simplicity and thus, understanding." Traditions in value investing 03/14/06 Value Investing "Value investing is partly a state of mind. It is characterized by habitually relating the price of a stock to the value of the underying business. Basic principles of fundamental analysis are the tools. They arise from three traditions" Talking panic buying with Joe Feshbach 03/14/06 Value Investing "Hedge fund manager Joe Feshbach looks for value in crisis. The manager of Joe Feshbach Partners seeks out companies that are in trouble, anything from accounting scandals to criminal investigations to management turmoil. In short, Feshbach likes to buy when everyone is selling." 5 key lessons from Bill Nygren 03/01/06 Value Investing "Buy stocks only when they sell for at least a 40 percent discount from their fair market values. If things do not go as well as you expect with an investment, this provides downside protection. If things go well, this gives a slingshot effect on the upside as the market closes the gap between a firm's price and its value." The price of victory 02/23/06 Value Investing "Call him the bad-news bull. As chief investment officer of the $1.8 billion Olstein Financial Alert Fund (OFALX), Bob Olstein has made a career out of digging into the numbers and buying up the stocks everyone loves to hate." A meeting with Mr. Greenblatt 02/15/06 Value Investing "I have gravitated towards Buffett over the years. Good things happen to good businesses. I prefer good to cheap. But I do not categorize companies very often. I look at the spinoff area, for instance, but I am mainly looking for good businesses. I am an "equal opportunity money maker." It's all investing. Figure out what something is worth and pay a lot less." The magic money machine 02/15/06 Value Investing "In November, Joel Greenblatt, a hedge fund manager in Manhattan and now an adjunct professor at Columbia Business School, zoomed onstage with the fanciest money machine yet. Greenblatt, who is no fan of delicate understatement, calls his the Magic Formula and espouses it in his newly published treatise, modestly entitled The Little Book that Beats the Market. The Magic Formula consists of picking U.S. stocks that are both highly profitable (as measured by their return on capital) and also relatively cheap (as measured by their earnings yield)." The best investor of his generation 02/12/06 Value Investing "He walked away from Goldman, racked up better returns than Buffett...and talked kidnappers into letting him go." How Eddie Lampert picks his stocks 02/12/06 Value Investing "Like Warren Buffett, Eddie Lampert calls himself a "value investor," meaning he buys into companies whose assets he calculates are worth more than the current trading price. "The idea is that I'm going to pay this price and great things may happen, but they don't have to happen for me to do okay," he says." Patient Capital Management Q4 02/09/06 Value Investing "The overvaluation is even more evident when trying to find specific undervalued securities. In a Canadian universe of approximately seven hundred publicly listed companies with a market capitalization of greater than one hundred million we could only find thirty eight candidates with a debt equity ratio of less than one and a price to book ratio of less than 1.2x. During more typical market conditions this group would yield approximately two hundred prospects. In depressed markets this screen would provide more than four hundred possible investment opportunities." Templeton's Mobius outlasts critics 02/05/06 Value Investing "Mobius says his "buy-and-hold" strategy helps him to avoid chasing gains that may not last and to develop the wherewithal to invest in markets that have underperformed. "I'd love to be a stock jockey, but that implies that you're able to anticipate events that happen from one day to the next, and that's really impossible," he said. "We tend to take a longer view and not go overboard in any one direction."" Value investing and the business cycle 01/22/06 Value Investing "Empirical evidence suggests that value investing based on high valuation ratios (that is, book-to-market ratio, earnings-to-price ratio, cash flow-to-price ratio, and dividend yield) tends to outperform growth investing based on low valuation ratios. This superior performance is robust for all economic conditions, meaning that investors will be better off investing in stocks with high valuation ratios versus stocks with low valuation ratios regardless of economic conditions. The benefits of value investing are even greater during periods of contraction than during periods of expansion." The little essay that beats the market 12/27/05 Value Investing "So, what should you think? If you want to be a successful stock market investor, you should think about buying pieces of "good" businesses at "bargain" prices. Yes, that sounds simple, but if you actually could find a good business at a bargain price, wouldn't it make sense to buy it? Doesn't that sound like an investment strategy that should work!" Peter Cundill in 1998 12/27/05 Value Investing "For example, if you adjust for the market value of their share portfolios, today 35% of the 3,000 companies listed in Japan are trading below book value. Roughly 10% are trading below net-net working capital. And many of them trade below net cash (which I'll come back and define) and at big discounts to their intrinsic value if their businesses are worth 6 times EBIT." Still going strong 12/19/05 Value Investing "Kahn, the chairman of Kahn Brothers, a low-profile New York investment firm, might be Wall Street's oldest active investor. He's in the office every business day, reading scientific periodicals, annual reports and newspapers in search of undervalued stocks in the tradition of his friend and mentor, Benjamin Graham, widely considered the father of value investing." Few bargains left 12/16/05 Value Investing "Based on a price-to-cash flow basis, Europe and Asia are around 9 1/2 times, versus 12 1/2 times, roughly, U.S. At 12 1/2 times, the U.S. is not cheap by historical measures. We are very much valuation-driven, as opposed to outlook-driven. Not that the outlook seems very rosy, by the way, but it is more because of valuation. Five years ago, the beauty was we had a bifurcated, two-tier market with very expensive growth stocks and tech stocks on the one hand and quite a few cheap small and mid-cap value stocks on the other. That gap has disappeared, so everything looks quite expensive in the U.S." Web site suggests financial planners 12/04/05 Value Investing "He is a passionate about value investing, investing in seemingly cheap stocks: "Certain patterns are obvious," he says, "and one is that virtually every successful investor over any 10-year period has been a value investor. It doesn't take a genius to figure that out." Something can go wrong with even the best companies and that's the time to buy, when there is a "margin of safety," he said, quoting Benjamin Graham." Audio interview with Irwin Michael 11/26/05 Value Investing Find out what the ABC maestro is buying today. [MP3] Patient Capital Q3 11/11/05 Value Investing "Income trusts have also increased in value because interest rates have declined. In effect they have behaved like fixed income instruments; rising as interest rates fall. It should follow then that as interest rates rise income returns should at best be muted. In our view, the combination of unsustainable distributions, very high valuations and rising interest rates spell the potential for a substantial loss of capital in the future." Disentangling size and value 11/11/05 Value Investing "When we separate the size effect from the value-versus-growth effect, we find that size as measured by market capitalization is far less powerful than is generally believed. And, reciprocally, the value effect - because some of its efficacy has been siphoned off by the mislabeled size effect - is far more powerful and more consistent than is generally believed." 5 Dow dogs about to have their days 11/09/05 Value Investing "The traditional Dogs of the Dow theory no longer works, so here's a better way. Track down giants like Wal-Mart and Home Depot that are snapping up their own stock." Better than Buffett 11/07/05 Value Investing "Companies mired in bankruptcy and turmoil may look ugly to some investors, but to Ian Cumming and Joseph Steinberg they're downright foxy. Using their publicly traded investment firm, Leucadia National, the duo have built a reputation as master takeover artists who buy distressed companies at discount prices, revive them and sell them for hefty profits." Investing 'cult' could use more members 10/31/05 Value Investing "Most business schools emphasize modern portfolio theory, the central tenet of which is that the market is so efficient it cannot be beaten with any regularity. Portfolio theory stresses, sensibly enough, diversification as the best way to spread market risk, but it also generally holds that because the market is efficient, those who beat it are lucky rather than skilled. As Buffett put it to me recently, ''You couldn't advance in a finance department in this country unless you taught that the world was flat.''" Digging for deep value 10/28/05 Value Investing "The basic idea of that approach is to find stocks that are attractively priced in relation to expected future earnings growth. And sometimes, the market hands value investors opportunities that are almost too good to resist. We'll call these kinds of stocks "deep value"." Bill's bad bet 10/18/05 Value Investing "As Miller sees it, "Five thousand years of commodity-price history" says that oil should be priced at the "marginal cost of production"--the price at which it makes sense for companies to find and extract it from the ground. And that, Miller says, is currently about $40 per bbl." Weitz buys Wal-Mart, Tyco 10/06/05 Value Investing "Weitz has managed the fund since 1986 and sticks to the value- investing philosophy developed by the late Benjamin Graham and adopted by Buffett, the world's second-richest man according to Forbes magazine's annual survey. He buys shares of companies he views as inexpensive that have products or services he understands, excess cash and limited competition." FPA's Robert Rodriguez likes cash 09/20/05 Value Investing "If I look at the marketplace in general, we see the market as being very flat in valuation. So therefore, the undervaluation in small- and mid-caps has effectively been eliminated in the last five years because of their superior performance vs. large-caps. There may be some value in the micro-caps. But we still think that the earnings expectations are still overstated on average. We have been saying for a while that earnings in large-cap stocks will be disappointing, and you are starting to see that now." Betting against the crowd 09/20/05 Value Investing "For contrarians like Wadhwaney, 51, investing is a matter of avoiding manias and searching instead for bedraggled castoffs that are cheap precisely because the In crowd won't touch them. "I don't buy prime merchandise," he says. "I buy stuff that's fraught with discomfort. I buy some terrible things." Terrible things that produce terrific returns." Omaha's other oracle 09/18/05 Value Investing "Although he operates with a decidedly lower profile than his Omaha neighbor Warren Buffett, Wally Weitz's investment record speaks volumes. His flagship Weitz Value fund has returned an average 15.7% per year for the 10 years through June 30, vs. 9.9% for the S&P 500. Since founding Wallace R. Weitz & Co. with $11 million in assets in 1983, Weitz now manages more than $7 billion. Weitz is finding plenty to invest in these days" Olstein Annual 09/13/05 Value Investing "We believe that any fund that doesn't admit to being a value fund (seeks to buy undervalued companies) is by admission willing to buy overvalued companies. Funds not paying attention to value (growth at any price, momentum, crowd psychology, etc.) are relying on the foolishness of other investors to make money and we believe only a select few can be successful at this greater fool's game. Admittedly, funds that are capable of consistently outguessing the psychology of crowds will probably have the highest returns. However, we believe that a fund that buys only growth companies at any price is playing Russian roulette with its shareholders' money." Clipper Semi-Annual 09/08/05 Value Investing "In the long struggle between mice and men, the rodents are winning. Their victory will create lower costs for most investors and lower income for some humans." Cash is trash 09/03/05 Value Investing "What to do with all that cash? Some value fund managers, flush with an influx of new money from clients, are letting it pile up rather than investing it in value stocks they view as too pricey. While they wait for a better day, other value managers say letting money sit around in cash is sinful, and they swear good buys still can be had." Sequoia Fund shareholders' meeting 08/30/05 Value Investing "I would add that while we have been pretty good at avoiding mistakes of commission, we have made significant errors of omission. I think that if I had to point to one big mistake we made, it was putting undue emphasis on possible macro economic problems and overreacting to some that seemed overwhelming at the time but were dealt with reasonably well." Jeremy Siegel's buy list 07/22/05 Value Investing "There's ample evidence that seeking above-average yields (and picking up value-priced bargains in the process) leads to outsized returns; this is basically the "dogs of the Dow" strategy played out on a larger field. Siegel reports that a portfolio owning the 100 top-yielding S&P stocks beat the index by 3 percentage points annually and smacked the lowest-yielding 100 by nearly 5 points. And so much for reward being earned by taking risk: The highest-yielding quintile was slightly more volatile than the index, but the lowest-yielding stocks were the riskiest of all." A born gambler rolls the dice at 88 06/10/05 Value Investing "Ever since Kirk Kerkorian revealed last month that he was buying a major stake in General Motors Corp., people have been speculating about his motives. Here's one safe bet: The wealthiest man in Los Angeles is not acquiring shares in the biggest and sickest automaker out of any special affection for cars." Patient Capital Management Q1 06/03/05 Value Investing "In March of 2000 we truly believed that over a typical five-year period we would be presented with enough attractive investment opportunities to get us into a fully invested position. As we have come to see the past five years have been anything but typical. While the technology based NASDAQ declined sharply the broader based TSX Composite and S & P 500 have remained largely unchanged. In addition, volatility in the share prices of the businesses that interest us have been unusually muted. Not surprisingly, the high quality investments that we seek have not reached our buy prices." Clipper Fund's Q1 05/01/05 Value Investing "Start with profits. After-tax profit margins on the Standard&Poor's Industrials are at a record high. Measured as a percentage of GDP, corporate profits are back to levels last seen in 1929. For capitalists, but not workers, these are the (relatively) good old days. It gets better.Not only are profits at historically high levels, but investors are willing to capitalize those profits at generous price-to-earnings ratios. Not only have (note the past verb tense) the prices of stocks been bid up, so have the prices of other long-term assets such as bonds and real estate. While owners have been getting richer, they also benefit from the conspicuous absence of one sometimes fatal fear that historically has afflicted the rich." Find your investing edge 04/14/05 Value Investing "Investing is competitive. There is a seller for every buyer, and transactions often reflect a difference of opinion. Buyers believe the prospective return on an investment is attractive relative to the risk entailed. Sellers usually disagree. One party will fare better than the other, and in my opinion the winners aren't random. How are they determined?" The nature of risk 04/12/05 Value Investing "We've come a long way these seven decades since Ben Graham first emphasized the margin of safety in Security Analysis. Unfortunately, the wrong direction." The hunt for intrinsic value 04/10/05 Value Investing "An investor, like a gambler doesn't know in advance whether a specific investment will make or lose money. But, unlike gambling, investing has expected returns that are positive. Unlike the average gambler, give an average investor enough time, and he or she will usually make a profit. One of the challenges in investing is to prevent acting emotionally and reducing those expected gains." Jeremy Siegel's buy list 04/06/05 Value Investing "Siegel suggests investors pursue what he calls "corporate El Dorados"--firms that maintain attractive growth and returns over very long periods. In Siegel's words, "persistence of good earnings growth is better than a transience of superb growth." Altria (NYSE:MO), Tootsie Roll (NYSE:TR), Colgate-Palmolive (NYSE:CL), and Royal Dutch Petroleum (NYSE:RD) would earn that label." Bargain hunter 03/28/05 Value Investing "Several findings are apparent from examining the table. First (and of foremost importance to me) is that buying cheap stocks did indeed outperform. Simply buying an equal weighted basket (assuming equal distribution of stocks across portfolios) of the lowest 20% of PEs within the MSCI World index generated significant outperformance (9.7% p.a. on average). Such a strategy would have only resulted in absolute losses in only five out of the thirty years in our sample." Are big cash stakes bad for four prominent funds? 03/24/05 Value Investing "In investing, the four-letter word that causes the most consternation is cash. It was almost heresy to mention it in the late 1990s, as equities soared to never-before-seen highs. In the subsequent downswing, cash suddenly came back in fashion. Now, after two years of heady gains, it's a bad word again. After all, if you hold cash in a rising market, there's a good chance you'll be left behind." Small-cap contender 03/23/05 Value Investing "Manager Curtis Jensen, 42, is a disciple of firm founder Marty Whitman's "safe and cheap" school of investing. That means he looks for companies with low debt, plenty of cash and lots of high-quality assets -- to ensure they can get through the tough times. What's more, Jensen won't buy a company unless its stock is selling for a fraction of what he estimates as its real worth." Big stocks could have big year 03/20/05 Value Investing "Large caps tend to be more stable, to have greater international exposure (a good thing when the dollar is weak, as it is now), to pay higher dividends and to hold up better than small caps during market declines." Market phobia? Try value investing 03/13/05 Value Investing "Some value managers just shrug and buy stocks that are cheap compared with all the others. Others load up on cash. When that happens, it's worth noting." Century Management Q4 03/05/05 Value Investing "The scope of this publication is greater than any we have written in our 30-year history. The purpose in writing this report is to point out that financially speaking, we are living in historic times. It is extremely unusual for all major asset classes (stocks, bonds, and real estate) to have been bid up to what appears to us as unsustainable levels, all at the same time." If past bubbles are any indication... 03/05/05 Value Investing "We're going to talk about bear markets. ... And while everybody thinks they're short term, they last somewhere between 15 and 20 years once they get going." Sequoia Fund Q4 03/03/05 Value Investing "We're less concerned with the annual movement in share prices than we are with the earnings progress exhibited by our holdings. If earnings grow, the stock price eventually follows." - 75% of the fund is in only 6 stocks Whither the value investors? 03/02/05 Value Investing "It's been popular to say lately that is now a stock pickers market. It probably is to a large extent; in fact, most of the time it is. Your success will primarily depend on what you pick. Don't forget that the best value managers don't always get the fundamentals right, just be wary of sweeping generalizations about them." Clipper Q4 03/01/05 Value Investing Lightning strikes twice at Marsh & McLennan Sir John Templeton reveals the future 02/24/05 Value Investing "Templeton sought out the best opportunities anywhere in the world he could find them. When he began investing globally in the 1930s, Templeton was truly a pioneer. Many Americans thought it unwise to invest outside the United States and therefore forfeited a world of opportunities. John Templeton's results, however, are the stuff of legend." A worthy successor's worldly views 02/22/05 Value Investing "Statistically, the best values today are in South Korea, but because South Korea is next to North Korea and has some corporate-governance issues, we don't want to have too much there. The net cash per share of some of the smaller companies there is equal or higher than the market capitalization, so you get the business for free. There is also pretty good value in Japan, which on average trades at 8.2 times after-tax cash flow. What Europe has going for it is that there's still somewhat of a valuation gap between small and big stocks. Small stocks in Europe often are ignored by local institutional investors, which provides opportunity for us." Dull, but worthy 02/17/05 Value Investing "There's an important lesson here for investors in stocks. As a shareholder, you should always think of yourself as an owner, or a partner, in a business. "Focus on companies, not stocks," writes one of my favorite sages, H. Bradlee Perry of Babson Capital Management. The businesses that produce American millionaires deserve your attention. Dull, in other words, is good." Emotion, neuroscience and investing 02/02/05 Value Investing "It is the long-term investor, he who most promotes the public interest, who will in practice come in for the most criticism... For it is in the essence of his behaviour that he should be eccentric, unconventional and rash in the eyes of average opinion -- John Maynard Keynes" Fund manager focuses on worn stocks with potential 02/01/05 Value Investing "A bargain hunter, Rodriguez looks for beaten-up stocks with potential to turn around. At the heart of his philosophy is the question, "Am I being compensated for the risks I perceive in this investment?" If the answer isn't "yes," he looks elsewhere - even if that means parking money in cash or money market securities." Interview with Tim McElvaine 01/21/05 Value Investing "I think most people can come up with 10 reasons to own a stock. The key is instead to come up with the 2 or 3 key reasons to own a stock. Less equals more." Manager Monitor: Richard Howson 01/21/05 Value Investing "A long-time value investor and manager of the $337.2-million Saxon Stock, Richard Howson uses a three-pronged process to identify and profit from attractive companies." Legg Mason Forum 01/20/05 Value Investing "I'd like to turn it over to the panel now. But first, here's a picture taken last week of Bill Miller with Paul Samuelson, the Nobel Prize winner from 1970, who is still active at Harvard at the impressive age of 90. Bill had the honor to be the keynote speaker at Harvard's annual Behavioral Finance Conference. Bill went to the first one about a decade ago, at which Charlie Munger was one of the speakers. Samuelson gave the keynote that night. He got up in front of the audience and told them that he had studied a lot of investors and they don't do what they say they do. He didn't doubt that they were good investors; but he argued that what they say they do is not what they're actually doing. So Bill got up to talk with a bit of trepidation, knowing that Samuelson was in the audience." Oakmark Q4 commentary 01/13/05 Value Investing "I could see my son's relief: after years of frustration from a father's job that was difficult to understand, much less explain, finally a payoff. Since this is Dad's profession, he can help me win the contest!" Tastes, distress, and jocks 01/13/05 Value Investing "Decades of empirical research using almost any balance-sheet metric you care to shake a CRSP shtick at yield the same monotonous result: value stocks have higher returns than growth stocks. It doesn't matter when-pre-Compustat or post-Compustat-and it doesn't matter where, whether in the U.S., other developed nations, or in emerging markets. While this concept was a tough sell in the late 1990s, anyone arguing against it now will wind up buried under a mountain of affirmative data, to say nothing of recent returns." Requiem for a brewer 01/06/05 Value Investing "In this View from Burgundy, we will examine the latest pratfall in Molson's history. While it is modestly instructive on a stand-alone basis, we would also like to draw some broader conclusions about diversification from this sad tale. We will conclude by giving a shareholder's view of how management should invest the cash flow from a superior business." Schloss archives for value investing 01/05/05 Value Investing "The Walter Schloss Investing Archive provides historical resources for scholars and showcases the unique history of the value approach." Fund legend Gabelli shares insights, lessons 12/07/04 Value Investing "Similar to one of his heroes, Warren Buffet (see below), Gabelli was a disciple of the investment approach taught by Graham and Dodd. He shared a clip of a series of lectures he had recorded from his former Professor at Columbia University in the 1970s discussing the concept of "Private Market Value." "Was private market value merely intrinsic value dressed up to make it more appealing?" The difference was that Private Market Value equaled intrinsic value plus a control premium. Valuation of companies using this concept is now the basis for the way Gabelli researches each stock." Pickings remain slim for FPA's Rodriguez 12/01/04 Value Investing "Overall, the funds are run with a value orientation, though Rodriguez is the biggest cheapskate of the bunch. And unlike many shops which aim to remain fully invested in the market regardless of the conditions, FPA managers aren't afraid to build big cash stakes if they're unable to find attractive values." Value skeptics 11/30/04 Value Investing "Of course, it's very easy to talk about waiting and having patience, but it's very hard to actually do that. Many feel guilty or unproductive when they're not doing something. Their mind set is geared to change. Buffett tries to soothe the restless anxiety of some by saying that one of the wonderful things about the investment game is that you don't have to be right on everything. You only have to get a good idea every year or two. If you're right on a very few things in your lifetime, you can do very well as long as you never make big mistakes. As he's said many times, you just have to wait for the fat pitch." The Third Avenue Management investor conference 11/23/04 Value Investing "We were pleased therefore to have the opportunity to hear from four notable value investors including Marty Whitman, Chris Browne, Jean-Marie Eveillard and Mario Gabelli at a recent event in New York City." Oddball investing 11/18/04 Tweedy Value Investing "It all started with Forrest Berwind "Bill" Tweedy in 1920... Bill was a strange fellow. No one really knows where he came from or when he was born. And if you saw him today, you would probably laugh. The man wore suspenders, had a bushy mustache and a good-sized potbelly. He never married or had kids. He ate lunch at the same place at the same time every day. He was an oddball, to put it bluntly. And if you happened to walk past 52 Wall Street, chances are, you would see Tweedy working at his cluttered desk - busy writing letters and looking through company reports." Veteran value manager took a big risk 11/15/04 Value Investing "In recent years, mutual-fund manager Jean-Marie Eveillard went from being revered, to reviled, then back to being revered againall without changing his self-described "quirky" investment strategy." Patient Capital Management Q3 11/09/04 Value Investing "Many would be surprised to learn that the TSX Composite Index is extremely concentrated in just three sectors. Approximately seventy per cent of the TSX Composite Index is comprised of three industry groups; Energy at 18.5%, Materials at 17.5% and Financials at 33%. For those expecting diversification this index is not it! Canadian investors are unwittingly incurring this "concentration risk" through index funds and active money managers who mimic the index." The best way to buy dividends 11/07/04 Value Investing "A stock with a growing dividend is the investment of a lifetime. Own the shares of a company that regularly increases its dividends and you put yourself in a position to receive an ever-growing flow of income and benefit from a rising share price. The total return possibilities over a long period of time are just amazing." Unorthodox approach builds a winner 10/23/04 Value Investing "Mr. Michael's investment approach is bottom-up and purely value-driven, with no strictures on company size. "We're an all-cap deep value fund," he says, adding hard work and a focused perspective are keys to the fund's success." Searching for rational investors in a perfect storm 10/21/04 Value Investing "In 1991, I wrote a book, Sense and Nonsense in Corporate Finance, in which I set out several criteria for selecting fund managers. The secrets haven't changed. Funds should (a) hold no more than 20 stocks; (b) hold their stocks on average for at least two years; c) eat their own cooking, i.e., the managers should personally invest in the fund, and of course (d) invest on Graham-and-Dodd principles" Interlopers on the value-stocks turf 10/19/04 Value Investing "Studies have shown that the most relatively undervalued 10 percent of stocks have outperformed the most expensive 10 percent by more than 10 percentage points annually. The problem is that value stocks can also suffer from long periods of underperformance. Michael Hughes, portfolio manager of the JPMorgan Fleming Europe Strategic Value fund, said that value stocks underperformed the market about 35 percent of the time. "Many investors do not have the patience to live though a long downturn," he said. Also, when value investing is in vogue, it can be more difficult to find genuine value plays." Value Hunting 10/09/04 Value Investing "Columbia students bet on ugly ducklings" Why the sidelines are looking good to managers 08/15/04 Value Investing "Anyone who wants insight into the stock market but has no interest in parsing technical trend lines may want to consider this simple fact: Some of the most successful value stock fund managers have moved a large portion of their assets off the playing field. While the average stock fund has just 5 percent or so of its assets in cash, Robert L. Rodriguez, manager of the FPA Capital fund, currently has a 39 percent cash stake, while Mason Hawkins and his co-managers at the Longleaf Partners fund are at 29 percent. James Gipson and his team at the Clipper fund are 27.5 percent in cash." Identifying franchises 08/13/04 Value Investing "So I think the answer is that franchises are different now, but I don't think they're any less present. And people aren't as good at managing them. So the irony is that where these franchises are concerned, where you've got a dominant market position, that in a global world -- because it's almost impossible to dominate big global markets (the example people got undermined are the auto companies) -- but in a big global world, you have to think locally. Because the only markets that you're going to be able to dominate are local markets." Patient Capital Management Q2 08/09/04 Value Investing "Although more than four years have passed it seems like nothing has actually changed. Then as now equity returns in the previous year had been in the double digits and stock prices were expected to grow to the sky. Then as now enthusiasm for equities was very high. Investors and advisors were very bullish, mutual fund cash positions were very low and market commentators were touting the promise of long-term equity returns. As well, surprisingly nothing has really changed with respect to the price levels of the major North American indices. They are at essentially the same levels today as in the summer of 2000." Value Investing 101 08/09/04 Value Investing "Warren Buffett and Walter Schloss are not the typical guest lecturers at a business school class. Then again, the Columbia University Graduate School of Business isn't just any business school, and professor Bruce Greenwald's class is anything but ordinary. Greenwald teaches Columbia's value investing course and also authored a book on the topic. In part one of this five-part series, Greenwald shares with Fool contributor Matt Logan the three steps of value investing." Lots of cash, little to buy 07/22/04 Value Investing "What sets the cash-heavy funds apart? Many of them, including FPA Capital Value and Longleaf Partners, are value investors that look for good, and even troubled, companies whose share prices have fallen below their actual worth. These funds found a wealth of opportunities during the sharp market downturn in 2001 and 2002, and reaped rich rewards in the strong recovery last year. But cash positions have ballooned this year as investors continue to throw money at the top value performers despite a chorus of warnings from their managers that prices are now too high and that little fits their criteria." Keep your eye on a few basics 07/03/04 Value Investing "Although investing is a subtle and complicated endeavor, everyone can benefit from a simple set of rules and principles." Insights from the monsters of stock 05/13/04 Value Investing "Whenever value investors get together to talk about stocks, the usual topics come up: margins of safety, intrinsic value, price/book, and economic moats. While those subjects were raised here as well, there were some new insights I gleaned from listening to the masters speak. Here are a few of them." In defence of dividends 04/27/04 Value Investing "Share buybacks may be easily sold to analysts, but do shareholders really win when money is returned to them as BP is proposing to do?" Why legendary investors are drowning in cash 04/19/04 Value Investing "By the same token, when several of the very best managers all say they are having an extremely difficult time finding anything to buy at prices that make sense -- not just in the U.S. stock market, but in the bond arena and foreign markets, too -- it's worth paying attention. In fact, it's remarkable how many top-flight managers currently have more than 20% of assets in cash and say they find compelling opportunities scarce to nonexistent." Russell gains are no small thing 04/10/04 Value Investing "Towle, a deep-value investor who usually does most of his prospecting among small-caps, says he can't find anything to buy." Value stocks become more difficult to find 03/31/04 Tweedy Value Investing "it's making life increasingly difficult for veteran value-hunters such as John Spears, who helps manage the Tweedy Browne American Value mutual fund in New York. Asked if he can find cheap stocks in this market, Spears doesn't hesitate. "No. None," he says." The herd mentality - and how to avoid it 03/28/04 Value Investing "It is amazing how stock investors get taken in by the herd mentality. When markets are surging furiously, everyone wants to buy stocks; when the markets begin to plummet, investors flock to sell their holdings with or without any valid reason." Clipper annual: amnesia in action 03/26/04 Value Investing "Four years ago the stock market really divided into two groups - technology and dotcom startups versus everything else. We actually found more cheap stocks then than we find now. Today's rising tide of stock prices has lifted all boats, leaky pirate vessels included." Spring training for value investors 03/26/04 Value Investing "The Berkshire Hathaway annual letter is a unique resource for students of value investing. However, this time of year also features annual letters from many other great value investors, providing the opportunity to learn from the market's heaviest hitters." Some fund managers seek 'deep value' 03/17/04 Value Investing "A company with great prospects hits hard times, a top executive winds up in court and the stock starts to tank. That's when smart investors run, right?" A walk on the wild side 03/16/04 Value Investing "Over the past few years, we at Contra the Heard have tweaked our methodology to emphasize a corporation's margin of safety in the selection process and avoid the crash-and-burn stories. After all, sometimes out-of-favour stocks deserve to be neglected. They are, as described by our friend Norman Rothery, who edits Stingyinvestor.com and the Rothery Report, "cigarette-butt" stocks: cheap, easy to pick up, but only okay for a puff or two." Third Avenue Funds shareholder letters 03/14/04 Value Investing "the most idiosyncratic letters still come from the fund industry's boutiques. Perhaps the most sophisticated writer is Third Avenue Value's Martin Whitman." Patient Capital Management Q4 03/11/04 Value Investing "We are not convinced that the strong growth registered in the latter stages of 2003 and expected to continue into the current year is sustainable. We remain concerned about weak employment growth in the U.S., low capacity utilization rates and unprecedented amounts of debt at all levels of the economy. The very large trade and current account deficits that have led to a rapid decline in the value of the U.S dollar also pose a serious risk. More importantly, our analysis of many companies gives rise to concerns over the quality of earnings, capital structures and valuation levels. Indeed, valuation levels during the previous market bottom did not approach those of earlier bear markets and today's valuations are still considerably above long-term historical averages." Maida one heretic worth heeding 03/10/04 Value Investing "While almost everyone else is enthusiastic about stocks -- Canadians bought an astounding $5-billion in mutual fund units in February, the industry's biggest month in four years -- he could hardly be less bullish. The cash is piling up again, for the simple reason that Mr. Maida can hardly find a single stock that he likes." Dinner and tips 02/28/04 Value Investing "Tilson, nevertheless, is a curmudgeon -- a young curmudgeon. He is part of an informal gang that's often called Graham-and-Doddsville, after the two financial geniuses Benjamin Graham and David Dodd, who in 1934 wrote the classic book "Security Analysis," which urged investors to "look for a margin of safety" when they bought stocks." Investors can be their own worst enemy 01/25/04 Value Investing "Success in investing doesn't correlate with I.Q. once you're above the level of 25. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing." Buffettesque Superinvestors 01/24/04 Value Investing "Whitney Tilson talks about 12 up-and-coming, mostly unknown investment managers whom he believes will substantially outperform the market over time. They manage money in very different ways, but all are from the intellectual village of Graham-and-Doddsville. Individual investors stand to learn a thing or two from them." Dig deep for hidden value 01/17/04 Value Investing "The trick to value investing is to buy good companies when nobody else wants them, which requires a strong contrarian streak -- and buckets of patience. It is not a game for day traders or investors with weak stomachs." A scary time for stocks 01/09/04 Value Investing "So, without further ado, my opinion on these three factors is quite bearish. In contrast to the current cheery consensus, I think that the economy is not as strong as it appears, interest rates have nowhere to go but up, and high stock valuations already reflect a best-case scenario, so there's little upside and substantial downside." Value Investing by Damodaran 01/03/04 Value Investing "Value investors are bargain hunters and many investors describe themselves as such. But who is a value investor? In this chapter, we begin by addressing this question, and argue that value investors come in many forms. Some value investors use specific criteria to screen for what they categorize as undervalued stocks and invest in these stocks for the long term. Other value investors believe that bargains are best found in the aftermath of a sell-off, and that the best time to buy a stock is when it is down. Still others adopt a more activist approach, where they buy large stakes in companies that they believe are under valued and push for changes that they believe will unleash this value." Value Investing overview by Damodaran 01/03/04 Value Investing "A value investor is one who pays a price which is less than the value of the assets in place of a firm." A value investor's secret 12/21/03 Value Investing "Value investors come in all shapes and sizes. Some invest in real estate, others in bonds (generally distressed ones), still others in stocks. Some specialize in certain industries or countries, while others are generalists. But most value investors have two things in common: (1) They seek to buy at a significant discount to intrinsic value (the proverbial dollar bill for 50 cents); and (2) They generally sell once intrinsic value has been reached." Is there still value in the book-to-market ratio? 12/11/03 Value Investing "There is one advantage of BtM relative to its peers that should be mentioned. Since book value is a "stock" variable, while earnings, cash flow and sales are "flow" variables, there is a tendency for BtM rankings to be somewhat more stable over time than the rankings based on the other three variables. This reduces portfolio turnover for strategies that are based on BtM rankings. So, in addition to providing at least as much return dispersion as its competitors, BtM may also reduce the number of transactions that are triggered by stocks moving in and out of the portfolio's buy range. This can be especially important for taxable investors." The value view 12/02/03 Value Investing "Value managers come in many shapes and sizes. Some are more price focussed and are often drawn to cheap but troubled companies. While a notably larger camp, the GARP managers, conduct an ongoing search for the less typical combination of quality and price. This week is a summary of the opinions and views of what I feel are some of Canada's most skilled money managers." Market prices right 11/27/03 Value Investing "So does Miller. His turnover is about 4% a year, meaning that his average holding period is 25 years. For an undervalued stock, the sweet spot is typically three to five years, and that period can include some scary corrections, Miller suggests. Meanwhile, the average mutual fund is turning over its portfolios entirely in 11 months, because, citing a lesson from behavioural economics, "people overwhelmingly overvalue current information," or what the analysts are saying now. Analysts rarely put a stock on their recommended list before it has shown signs of resurrection, by which time most investors have missed a significant portion of the rebound." To sell or not to sell 11/25/03 Value Investing "Ah, but all other things aren't always equal. Companies and industries change. New information surfaces. Assumptions can prove to be inaccurate. Stocks often decline for very good reasons, and you might be correct in concluding that there are better places for your capital, even though the stock has become cheaper. The key is figuring out which stocks are mistakes and which represent opportunity. That's not easy, but it is certainly much easier if you can overcome the natural human tendency to irrationality cling to losing stocks." Munger on human misjudgments 11/25/03 Value Investing "Behavioral finance -- which examines how people's emotions, biases, and misjudgments affect their investment decisions -- is one of the least discussed and understood areas of investing." Avoiding value traps 11/25/03 Value Investing "Companies and their stocks fall on hard times for any number of reasons. Sometimes hard times spell buying opportunities, other times you're better off keeping your distance. The hard part is telling the difference. Whitney Tilson shares some tricks of the trade." The bull is back! 11/10/03 Value Investing "It's true. Just ask your local broker. Listen to the cheery business commentators on the television and radio. Better still ask your boy genius fund manager; he too believes that it's true. Listen closely ... all you will hear is bull." Dividend policy and market movements 10/22/03 Value Investing "Using S&P 500 monthly returns as a proxy for market conditions, we investigate whether investors prefer dividend-paying stocks to non-dividend-paying stocks in declining markets. We find that dividend-paying firms have higher returns than non-dividend-paying firms, especially in declining markets. These results are robust for adjustments for risk using CAPM adjusted deciles, CAPM excess returns, the Fama-French three-factor model, and dividing the sample into size and book-to-market quartiles. Furthermore, we find that the simple payment of dividends, and not the level of the dividend yield, drives returns' asymmetric behavior relative to market movements, consistent with the signaling hypothesis of dividends." Tweedy, Browne Annual 05/23/03 Tweedy Value Investing "Favorable or unfavorable historical investment results in comparison to an index are not necessarily predictive of future comparative investment results. In Are Short-Term Performance and Value Investing Mutually Exclusive?, Eugene Shahan analyzed the investment performance of seven money managers, about whom Warren Buffett wrote in his article, The Superinvestors of Graham and Doddsville. Over long periods of time, the seven managers significantly outperformed the market as measured by the Dow Jones Industrial Average (the "DJIA") or the Standard & Poor's 500 Stock Index (the "S&P 500") by between 7.7% and 16.5% annually. (The goal of most institutional money managers is to outperform the market by 2% to 3%.) However, for periods ranging from 13 years to 28 years, this group of managers underperformed the market between 7.7% and 42% of the years. Six of the seven investment managers underperformed the market between 28% and 42% of the years. In today's environment, they would have lost many of their clients during their periods of underperformance. Longer term, it would have been the wrong decision to fire any of those money managers." Patient Capital Management Q1 05/22/03 Value Investing "Our long-term focus leads to low transaction costs and is tax efficient. These benefits are very tangible and go directly to your portfolio's bottom line return. A very low turnover strategy such as ours is beneficial in many other ways. We do not spend much time on the phone executing transactions. This allows us to focus on analyzing companies and searching for value instead of monitoring the minute-by-minute movement of stock prices. Our investment philosophy allows us to run Patient Capital very efficiently." Strong selling point 04/27/03 Value Investing "A company's P/S ratio is simply its market value divided by total annual revenue. A company with a low P/S ratio is experiencing one of two types of selling: the good kind, when it moves more product to pump up the "S," or the other kind, when investors dump its stock, driving down the "P." Either way, if the ratio gets low enough the stock may be a bargain, or at least worth a look." A conversation with Marty Whitman 02/21/03 Value Investing "In the final analysis, value investing means being price conscious rather than outlook conscious. You buy what is cheap and safe. Most everybody else is outlook conscious, or price unconscious. But growth investing is a misnomer. When people talk about growth investing, they mean generally recognized growth. We do real growth investing in value, but we don't pay for it. You can't do generally recognized growth without paying for it. Growth investing entails a willingness to pay up front. If you concentrate on growth investing, you concentrate on the outlook, rather than the price. Most people want to buy a stock that will go up; they don't care if it's cheap or not." Patient Capital Q4 02/19/03 Value Investing "What we do advocate is that the practice of providing quarterly earnings forecasts and guidance be stopped. This would eliminate the pressure to match or exceed quarterly estimates. The pressure of meeting expectations can lead to short term business decisions at the expense of important strategic considerations." Buying the wrong stock for the right reason 02/03/03 Value Investing "We explore whether the Wall Street adage, 'Never catch a falling knife' is advice to be followed under all circumstances." The ABC perspective 01/09/03 Value Investing Buying Toonies for Loonies from Irwin Michael Patient Capital Management Q3 12/14/02 Value Investing "Ever since the market bubble burst accountants and analysts have been blamed for the huge losses that have been incurred. In our view, investors (particularly institutional investors and mutual fund managers) have nobody to blame but themselves. It is their fiduciary duty to carry out the proper analysis and due diligence before making an investment decision on behalf of the clients who have entrusted their capital to them. To now blame the accounting establishment and brokerage analysts for the losses experienced over the past two and one half years is extremely inappropriate." Private Capital Management Q3 11/29/02 Value Investing "The bull market's decline began early in 2000, after the NASDAQ/Internet bubble reached its zenith in March. For some time we had warned of valuation excesses, particularly within the technology sector. Still, the magnitude of the mania seems all the more remarkable in retrospect." High dividends are now a predictor of growth 11/19/02 Value Investing "It may seem too good to be true, but companies that pay the highest dividends are also likely to grow the fastest. For years, many finance professors have taught just the opposite. Reinvesting current earnings back into a company is supposed to promote earnings growth. Higher payout ratios are supposed to be followed by lower earnings growth. But research conducted by Robert D. Arnott of First Quadrant and Clifford S. Asness of AQR Capital Management reveals a very different picture. For the overall stock market between 1871 and 2001, corporate profits grew fastest in the 10 years following the calendar years in which companies had the highest average dividend payout ratio. In contrast, the 10-year real earnings growth rate was the lowest following years with the lowest average payout ratios." Patient Capital 1st Quarter 11/14/02 Value Investing "The figures provided in the following table show the valuation of the Dow Jones Industrial Average at market lows. Today's valuations are substantially above the average and those of every individual bear market bottom. Just as interestingly, valuations have been far lower than they are today at even lower levels of interest rates." Running with the 'Dogs of the Dow' 11/07/02 Value Investing "Just as a contrarian would have predicted, the strategy started working just as disillusionment with it peaked. The formula beat the Dow in both 2000 and 2001. While the jury is still out on this year for the strategy, it is running neck and neck with the blue-chip index itself through the end of this third quarter." Cognitive biases in market forecasts 11/01/02 Value Investing "There is no statistically significant relationship between dividend yields and P/E ratios and returns in the subsequent one or two years. The relationship between P/E ratios and dividend yields and stock returns over 10-year periods is much stronger, but it offers far less than perfect reliability." Boeing's set to fly solo 09/27/02 Value Investing "Boeing has decided to go it alone in the flight-training business and will buy out Berkshire Hathaway's 50 percent interest in the 5-year-old FlightSafety Boeing joint venture." Third Avenue's 3rd Quarter Report 09/23/02 Value Investing "The title of the Op-Ed article said it all - 'Government Can't Make The Market Fair.' I agree. The solution to this problem for OPMIs is to buy in at prices far, far lower than is usually available in negotiated transactions or in purchasing control." Computer buff follows value faith 08/12/02 Value Investing The Globe's profile of Buffett follower and creator of The Toronto Investment Club website. Asset allocation is key for retired chemist 08/12/02 Value Investing Shakespeare's Globe & Mail profile. Check out his website for more info. Long live dividend yield 07/23/02 Value Investing "And at a time when more questions are surfacing about companies' financial procedures, a return to dividend payments and analysis could offer a more accurate portrayal of a company's growth pattern. " Buffett's emergency quiz 07/22/02 Value Investing Before selling your stock funds take Warren's quiz. Double whammy 07/04/02 Value Investing "The theory goes like this: If the market is dropping, high yielding stocks at least offer high cash flows to offset any decline in value. Nice theory, too bad it doesn't work in real life." Boom-era valuations are creating fake stock bargains 06/21/02 Value Investing "To the simple price of stocks and (relatively) low price-to-earnings ratios, you can add price-to-book value to the list of metrics that are down from the peak, but shouldn't automatically be assumed to be attractive." Third Avenue's semi-annual report 06/05/02 Value Investing "Those who think of options as an expense have it wrong, at least from the Company and Creditor points of view. Warren Buffett is quoted as saying, 'If options are not a form of compensation what are they? If compensation isn't an expense, what is it? And if expenses shouldn't go into the calculation of earnings, where in the world should they go?' Frankly, the Buffett statement is an overgeneralization, even though most finance academics, and among others, Alan Greenspan, seem to be wholly in concurrence." Dividends do matter 04/25/02 Value Investing "What Modigliani and Miller proved perfectly in the 1960s was the proposition that under perfect market conditions, shareholders should be indifferent as to whether a company pays a dividend or retains the cash, since retaining the cash should just directly translate into future dividends. And of course, we have a perfect market. Everybody translates everything, sees through the way everything's expressed. There isn't any accounting fraud anywhere. There are no problems. The whole thing works beautifully. All is wonderful. Until you meet the real world." Third Avenue Funds Q1 Report 04/11/02 Value Investing "There is plenty of blame to go around for the apparent accounting frauds that led to Enron Corporation filing for relief under Chapter 11 of the U.S. Bankruptcy Code. In assessing blame, though, it would be a shame if conventional security analysts, conventional money managers and conventional finance academics were left out of the mix. Whatever their other talents - and these people tend to have many other talents - analysts, money managers and finance professors seem notoriously unqualified to be intelligent, responsible users of GAAP who actually understand the uses and limitations of financial statements." [PDF] Loving the unloved 04/11/02 Value Investing "James generally sticks to the microcap arena - which includes stocks with market caps of $300 million or less - and zeroes in on companies that have been neglected by both analysts and the stock market. He favors firms that were former market favorites but have encountered short-term difficulties. " Study links profit to dividends 02/25/02 Value Investing "Throughout the booming 1990s, dividends fell out of favour as investors turned their focus to rising stock prices and juicy capital gains. Corporate North America convinced investors that profits were best spent expanding businesses rather than paying out fat dividends, leading to stronger growth in years ahead. But new financial research argues the opposite is true; that low dividend payouts lead directly to poor profit growth." The great eight 01/25/02 Value Investing "The goal was to find companies with sound fundamentals - and not necessarily rapid earnings growth - for investors with long time horizons. According to a study by the Leuthold Group, a Minneapolis research firm, a $10,000 investment in large-company growth stocks in 1974 would be worth $405,500 today. That's impressive, but consider this: If you had put the same amount in large-cap value stocks, you'd have $639,200." Ten lectures by Benjamin Graham 11/27/01 Value Investing "These lectures are from the series entitled Current Problems in Security Analysis that Mr. Graham presented at the New York Institute of Finance from September 1946 to February 1947." The virtues of value investing 11/16/01 Value Investing "A classic, according to Mark Twain, is a book that people praise and don't read. Let's be honest: For most of us, Security Analysis, the 1934 classic on value investing by Benjamin Graham and David Dodd, falls into that category." What!?!? Security Analysis is one of the best investment books that I've ever read. Ask Santa for a copy this Christmas and you won't be disappointed. The allure of dividends 11/02/01 Value Investing The Fool's chat about why high dividends are a good thing and make a couple picks. Value investing guide 10/18/01 Value Investing The Globe has just posted its third annual value guide which contains all sorts of useful data for stingy investors. 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