The Stingy News Weekly (02/14/2015)
New from StingyInvestor
Rummaging through the stock bargain bin
"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."
Why the high street is overdosing on caffeine
"He found that even a market full of independents will seem a little too crowded. This is because firms will keep showing up and looking for customers until there is not enough demand to cover their costs. The last entrepreneur to enter is the one that just breaks even, scraping together enough customers to pay for the cost of setting up the business. She is indifferent to whether she is in business or doing something else entirely. However, every other entrepreneur in the crowded market is wishing that she had stayed away." [Economics]
Nestle is getting paid to borrow money
"Once upon a time, you actually had to pay lenders to borrow money. It was an archaic ritual called 'interest'" [Bonds]
Piotroski Score Backtest Part 2
"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." [Value Investing]
"As investors engage in an increasingly desperate global competition for higher-yielding securities, debt issuers appear to be taking advantage of the extraordinary demand by manipulating one of Wall Street's favorite metrics of profitability." [Accounting]
Concentrated P/B does badly
"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." [Value Investing]
Martin Whitman interview
"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] [Whitman]
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