Case Studies

Focusing on the Investment Process

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“It is the basics. It is focusing on selection, low prices, and reliable, convenient, fast delivery. It’s the cumulative effect of having this approach for 14 years. I always tell people, if we have a good quarter it’s because of the work we did three, four, and five years ago. It’s not because we did a good job this quarter.” – Jeff Bezos, 2009 The new year is always a good time to review your investment process. The other day, […]

Case Studies

Valeant, Short Selling, and the Too-Hard Pile

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In general, I find reading short reports to be a very valuable exercise. I don’t do much shorting in my partnership, but I find that for the most part, short sellers provide a useful service to the capital markets and I think that the good short sellers (who are few and far between) often do more thorough investigative analysis than the vast majority of long-only investors. For a good book on shorting, I recommend reading Scott Fearon’s book called Dead […]

Books

David Einhorn and Reasons Why Widely Followed Stocks Get Mispriced

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Over the weekend I was reading David Einhorn’s book Fooling Some of the People All of the Time. I’ve had it on my bookshelf for some time, and it has always taken a back seat to other books until I decided to pick it up recently. It’s an entertaining read, basically recounting his short thesis on Allied Capital in great detail. It is a good book because it provides a glimpse into the significant amount of research and due diligence […]

Case Studies

Focus on the Key Variables of an Investment

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Earlier this year I watched Lang Lang play Grieg’s Piano Concerto in A Minor—one of my all-time favorite pieces of music. The concerto is a monster—full of big octaves, virtuosity, excitement and power. It has around 30,000 notes, but the music is tied together with a simple 10 note melody that is repeated throughout the piece. I am currently working on a few different investment ideas that have numerous moving parts, but as I conduct my research, I continue coming back to […]

Case Studies

Michael Burry: Focus on Bargains and not Stock Market Valuations

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Michael Burry’s story is captivating. And in fact so good of a story that excellent financial storytellers like Michael Lewis and Greg Zuckerman turned it into main portions of best-selling books on the financial crisis. The story goes something like this: Burry was just a guy writing a blog (before people knew what a blog was). He was discussing his ideas in early internet chat rooms. He picked stocks. He was a value stock picker at a time when value […]

Case Studies

Risk and Portfolio Management Similarities between Joel Greenblatt and Stanley Druckenmiller

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I have been busy over the past couple of weeks. My wife gave birth to twins about two weeks ago, and now that I am back in the office, I am catching up on some reading. While we were in the hospital for about a week, I did have some time to do some reading, and I have some comments on two annual reports of current holdings of mine—JP Morgan and Markel—which I may turn into brief posts. But briefly, […]

Case Studies

Portfolio Turnover–A Vastly Misunderstood Concept

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A while back I wrote a post about how the gap between 52 week high and low prices presents an opportunity for investors in public markets. I mentioned that this simple observation (the huge gap between yearly highs and lows) is all the evidence you need to debunk the theory that markets are efficiently priced all the time. I think the market generally does a good job at valuing companies within a range of reasonableness, but there is absolutely no […]

Case Studies

Sears and Seven-Foot Hurdles

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A few weeks back I came across an article that someone had posted on Sears. It is a fascinating read for a few different reasons. One, I think Sears is an excellent case study of the retail industry and the difficulties of investing and allocating capital in that type of business, and two, the article was written in the summer of 1988. This post is not a prediction of the demise of Sears, or an indictment against those who find value […]

Case Studies

Importance of ROIC Part 5: A Glance at the Last 42 Years of Wells Fargo

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“Experience, however, indicates that the best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago… a business that constantly encounters major change also encounters many chances for major error. Furthermore, economic terrain that is forever shifting violently is ground on which it is difficult to build a fortress-like business franchise. Such a franchise is usually the key to sustained high returns.”   –Warren Buffett, 1992 Shareholder […]

Case Studies

10 Years of Google and the Importance of Long Term Thinking

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“Google has a huge new moat. In fact, I’ve probably never seen such a wide moat.” – Charlie Munger, 2009 Google celebrated the 10 year anniversary of its IPO last week. Google is a company that I’ve never owned (unfortunately), but really admire. There are a few businesses I almost root for, like a fan of a football team. Costco, Fastenal, and Walmart among others are on the list. These are really high quality businesses that have made their shareholders wealthy […]