Bruce Berkowitz: 15 Books That Every Investor Should Read

Johnny HopkinsBruce Berkowitz, Investing BooksLeave a Comment

We recently started a series called – Superinvestors: Books That Every Investor Should Read. So far we’ve provided the book recommendations from:

Together with our own recommended reading list of:

This week we’re going to take a look at recommended books from superinvestor Bruce Berkowitz. Taken from his writings, interviews, lectures, and shareholder letters over the years. Here’s his list:

1. Security Analysis, 6th Edition (Benjamin Graham and David Dodd)

2. The Essays of Warren Buffett (Lawrence Cunningham)

3. Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger (Peter Kaufman, Charlie Munger)

4. The Intelligent Investor (Benjamin Graham)

5. Influence: The Psychology of Persuasion (Robert B. Cialdini)

6. The Tipping Point. How Little Things Can Make a Big Difference (Malcolm Gladwell)

7. Extraordinary Popular Delusions and the Madness of Crowds (Charles Mackay)

8. Reminiscences of a Stock Operator (Edwin Lefevre)

9. Benjamin Franklin (Carl Van Doren)

10. The Last Lion: Winston Spencer Churchill: Visions of Glory, 1874-1932 (William Manchester)

11. Ubiquity: Why Catastrophes Happen (Mark Buchanan)

12. The Great Crash of 1929 (John Kenneth Galbraith)

13. Traders, Guns and Money: Knowns and unknowns in the dazzling world of derivatives (Satyajit Das)

14. The Organized Mind: Thinking Straight in the Age of Information Overload (Daniel Levitin)

15. The Mind of Wall Street: A Legendary Financier on the Perils of Greed and the Mysteries of the Market (Leon Levy, Eugene Linden)

This Week’s Best Investing Reads 11/30/2018

Johnny HopkinsValue Investing NewsLeave a Comment

Here’s a list of this week’s best investing reads:

Battling Entropy: Making Order of the Chaos in Our Lives (Farnam Street)

My favorite analogy for stocks vs the economy (The Reformed Broker)

Why BRK? (The Brooklyn Investor)

The Stock Market Doesn’t Care About You (A Wealth of Common Sense)

Selfish Writing (Collaboratve Fund)

The Nifty Fifty (The Irrelevant Investor)

The Fed Warns The ‘Drop In Asset Prices Might Be Particularly Large’ (The Felder Report)

On Writing Better: Sharpening Your Tools (Jason Zweig)

Wrong Again! (Howard Lindzon)

Richard Bernstein: Income-Chasing a Losing Approach (Validea)

4 Signs of Short-Term Thinking (Robert Greene)

Bubbles & Hot Potatoes (Hussman Funds)

Patient Capital: The Key To Long-Term Wealth Creation (Financial Samurai)

Daylight Robbery (Humble Dollar)

What You Can’t Buy (Of Dollars & Data)

Bitcoin Billionaire? Bitcoin as now constituted can NOT be money (csinvesting)

From Greed To Fear (Pension Partners)

Is Your Portfolio Dangerously Diversified? (Value Stock Guide)

Categorization and classification – Fundamental to finance and investing (DSGMV)

What We Learned from Our Biggest Mistake in 2017 (MOI Global)

What Can Investors Do About Overconfidence? (Behavioural Investment)

Why You Would Not Have Invested With Warren Buffett (Behavioral Value Investor)

What Millennials Want: Not What You Think (CFA Institute)

But What About October? (Cliff Asness)


This week’s best investing research:

The Uranium Bull Market’s Now Beginning as Global Production Plummets (Palisade Research)

Only Reason For Stock Market Correction (Price Action Lab)

Targeted by an Activist Hedge Fund, Do the Lenders Care? (papers.ssrn)

The Economics of Le’Veon Bell’s Gamble (Pragmatic Capitalism)

2019 Economic Setup Looks Unfavorable (UPFINA)

Equal Weight F.A.N.G. (Advisor Perspectives)

Trying To Save The Economy With Lower Oil (Macro Tourist)

A Proxy for the Unobservable Global Market Portfolio (Alpha Architect)


This week’s best investing podcasts:

Episode #131: David Rosenberg, “If Next Year is Not a Recession, It’s Going to Feel Like It” (Meb Faber)

TIP218: Understanding Body Language w/ FBI Expert Joe Navarro (Stig Brodersen & Preston Pysh)

Animal Spirits Episode 57: Passive Income (Ben Carlson & Michael Batnick)

Sophie Grégoire Trudeau- Authenticity, Kindness, and Self Love (Shane Parrish)

Hunter Walk – Building Picks and Shovels – [Invest Like the Best, EP.112] (Patrick O’Shaughnessy)

Mark Baumgartner – Luck, Risk and Uncertainty at the Institute for Advanced Study (EP.77) (Ted Seides)

TAM Stock Screener – Stocks Appearing in Tepper, Greenblatt, Dalio Portfolios

Johnny HopkinsStock ScreenerLeave a Comment

Part of the weekly research here at The Acquirer’s Multiple features some of the top picks from our Stock Screeners and some top investors who are holding these same picks in their portfolios. Investors such as Warren Buffett, Joel Greenblatt, Carl Icahn, Jim Simons, Prem Watsa, Jeremy Grantham, Seth Klarman, Ray Dalio, and Howard Marks.

The top investor data is provided from their latest 13F’s (dated 2018-9-30). This week we’ll take a look at:

Lam Research Corporation (NASDAQ: LRCX)

Lam Research manufactures equipment used to fabricate semiconductors. The firm is focused on the etch, deposition, and clean markets, which are key steps in the semiconductor manufacturing process. Lam’s flagship Kiyo, Vector, and Sabre products are sold in all major geographies to key customers such as Samsung Electronics and Taiwan Semiconductor Manufacturing.

A quick look at the price chart below for Lam Research shows us that the stock is down 31% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 6.69 which means that it remains undervalued.

(SOURCE: GOOGLE FINANCE)

Superinvestors who currently hold positions in Lam Research include:

Cliff Asness – 1,928,965 total shares

Lee Ainslie – 1,601,501 total shares

David Tepper – 1,175,000 total shares

Jim Simons – 998,956 total shares

Joel Greenblatt – 231,160 total shares

Ken Griffin – 72,938 total shares

Jim O’Shaughnessy – 39,216 total shares

Paul Tudor Jones – 31,900 total shares

Ray Dalio – 16,817 total shares

Joel Greenblatt: Q32018 Top 10 Holdings

Johnny HopkinsJoel Greenblatt, Portfolio ManagementLeave a Comment

One of the best resources for investors are the publicly available 13F-HR documents that each fund is required to submit to the SEC. These documents allow investors to track their favorite superinvestors, their fund’s current holdings, plus their new buys and sold out positions. We spend a lot of time here at The Acquirer’s Multiple digging through these 13F-HR documents to find out which superinvestors hold positions in the stocks listed in our Stock Screeners.

As a new weekly feature, we’re now providing the top 10 holdings from some of our favorite superinvestors based on their latest 13F-HR documents.

This week we’ll take a look at Joel Greenblatt’s Gotham Asset Management, (9-30-2018):

The current market value of his portfolio is $7,240,825,000.

Top Ten Positions

Security Current
Shares
Current Value
($)
WMT / Walmart, Inc. 904,970 84,986,000
AAPL / Apple, Inc. 369,055 83,310,000
VZ / Verizon Communications, Inc. 1,484,445 79,255,000
HD / Home Depot, Inc. (The) 356,512 73,851,000
AMZN / Amazon.com, Inc. 36,118 72,344,000
CSCO / Cisco Systems, Inc. 1,403,046 68,258,000
MDT / Medtronic plc 663,551 65,274,000
INTU / Intuit Inc. 281,492 64,011,000
LOW / Lowe’s Companies, Inc. 545,290 62,610,000
MU / Micron Technology, Inc. 1,382,601 62,535,000

Charles Munger: A Parody About The Great Recession

Johnny HopkinsCharles MungerLeave a Comment

One of the best articles ever written about the ‘Great Recession’ is Charles Munger’s – Parody Describing The Contributions of Wantmore, Tweakmore, Totalscum, Countwrong, and Obvilious To The Tragic ‘Great Recession’ in Boneheadia and The Thoughts of Some People Relating To The Disaster.

While the entire article is six pages long it’s a must read for all investors. Here’s an excerpt from the article:

In the country of Boneheadia there was a man, Wantmore, who earned his Income as a home mortgage loan originator. Wantmore operated conservatively. All his home loans bore interest rates of 6% or less, and he demanded of all borrowers large down payments, documented proof of adequate income and an immaculate credit-using history. Wantmore sold all his loans to life insurance companies that, before closing purchases, checked loan quality with rigor—then held all loans to maturity.

As Wantmore prospered, he eventually attracted the attention of Tweakmore, a very bold and ingenious investment banker. There was no other investment banker quite like Tweakmore, even in the United States.

Tweakmore had become the richest person in Boneheadia, driven by an insight that had come to him when, as a college student, he had visited a collection of hotels that contained gambling casinos located in a desert.

As Tweakmore saw immense amounts of cash pouring into cashiers’ cages surrounded by endless sand, in business operations that did not tie up any capital in inventories, receivables, or manufacturing equipment, he realized immediately that he was looking at the best business model in the world, provided one could also eliminate commitment of any capital or expense to hotel rooms, restaurants, or facilities providing parking or entertainment.

Tweakmore also saw exactly how he could create for himself an operation that possessed all the characteristics of his ideal business. All he had to do was add to Investment banking a lot of activities that were the functional equivalent of casino gambling, with the bank having the traditional “house advantage.” Such casino-type activities, masked by respectable sounding labels, Tweakmore foresaw, could easily grow to dwarf all the action in ordinary/casinos.

Determined to create and own his ideal business as fast as possible, Tweakmore quit college and entered investment banking. Within twelve years, Tweakmore was the most important investment banker in Boneheadia. Tweakmore rose so rapidly because he was very successful in convincing regulators and legislators to enlarge what was permissible.

Indeed, by the time Tweakmore called on Wantmore, any investment bank in Boneheadia could invent and trade in any bets it wished, provided they were called “derivatives,” designed to make counterparties feel better about total financial risks in their lives, outcomes that automatically happened. Moreover, an investment bank faced no limit on the amount of financial leverage it employed In trading or investing in derivatives or anything else.

Also, Tweakmore had obtained permission to use “Mark-To-Model” accounting that enabled each bank to report in its derivative book whatever profit It desired to report. As a result, almost every investment bank claimed ever-growing profits and had ownership of assets totaling at least thirty times an ever-swelling reported net worth. And despite a vast expansion of transaction-clearance risk, no big mess had so far occurred.

Tweakmore was pleased, but not satisfied, by what he had accomplished. And he now planned to revolutionize Boneheadia’s home mortgage loan business in a manner that would make Tvweakmore a national hero.

In his first proposal to Wantmore, Tweakmore held much of his Ingenuity in reserve. All he proposed was that Wantmore hereafter sell all his home loans to Tweakmore at a higher price than life insurers would pay. Tweakmore said that he planned to put all loans into trusts with no other assets.

Each trust would be divided into five “tranches” with different priorities in use of loan payments. Four tranches would use their shares of loan payments to pay off complex new fixed-interest-bearing, freely-tradable debt instruments, called CDOs . The fifth tranch got a tiny residue in case all home loan payments were received as due. The CDOs would be sold by Tweakmore, using a highly-paid sales force, to anyone who could be induced to buy, even highly-leveraged speculators and small Scandinavian cities In the Arctic.

To Wantmore, Tweakmore’s proposal at first appeared unfeasible. The planned operation seemed to resemble the operation of a meat vendor who routinely bought 1000 pounds of chuck roast, sliced It up, and then sold 950 pounds as filet mignon and the balance as dog food.

But Wantmore’s doubts melted away when Tweakmore revealed how much he would pay. Under the offered terms, Wantmore would double his income, something Tweakmore could easily afford because his own Income was going to be three times that of Wantmore.

After Wantmore accepted Tweakmore’s proposal, everything worked out exactly as Tweakmore had planned, because buyers of CDOs in aggregate paid much more than the life insurers had formerly paid.

You can read the entire article here – Charles Munger’s – Parody Describing The Contributions of Wantmore, Tweakmore, Totalscum, Countwrong, and Obvilious To The Tragic ‘Great Recession’ in Boneheadia and The Thoughts of Some People Relating To The Disaster.

Howard Marks: Avoiding All Losses Can Render Success Unachievable Almost As Readily As Can The Occurrence Of Too Many Losses

Johnny HopkinsHoward Marks, Investing StrategyLeave a Comment

In his 2014 memo – Dare To Be Great, Howard Marks says successful investing includes dealing with some losses saying:

“To succeed at any activity involving the pursuit of gain, we have to be able to withstand the possibility of loss. A goal of avoiding all losses can render success unachievable almost as readily as can the occurrence of too many losses.”

Here’s an excerpt from that memo:

The goal in investing is asymmetry: to expose yourself to return in a way that doesn’t expose you commensurately to risk, and to participate in gains when the market rises to a greater extent than you participate in losses when it falls.

But that doesn’t mean the avoidance of all losses is a reasonable objective. Take another look at the goal of asymmetry set out above: it talks about achieving a preponderance of gain over loss, not avoiding all chance of loss.

To succeed at any activity involving the pursuit of gain, we have to be able to withstand the possibility of loss. A goal of avoiding all losses can render success unachievable almost as readily as can the occurrence of too many losses. Here are three examples of “loss prevention strategies” that can lead to failure:

  • I play tennis. But if when I start a match I promise myself that I won’t commit a single double fault, I’ll never be able to put enough “mustard” on my second serve to keep it from being easy for my opponent to put away.
  • Likewise, coming out ahead at poker requires that I win a lot on my winning hands and lose less on my losers. But insisting that I’ll never play anything but “the nuts” – the hand that can’t possibly be beat – will keep me from playing lots of hands that have a good chance to win but aren’t sure things.
  • For a real-life example, Oaktree has always emphasized default avoidance as the route to outperformance in high yield bonds. Thus our default rate has consistently averaged just 1/3 of the universe default rate, and our risk-adjusted return has beaten the indices. But if we had insisted on – and designed compensation to demand – zero defaults, I’m sure we would have been too risk averse and our performance wouldn’t have been as good. As my partner Sheldon Stone puts it, “If you don’t have any defaults, you’re taking too little risk.”

When I first went to work at Citibank in 1968, they had a slogan that “scared money never wins.” It’s important to play judiciously, to have more successes than failures, and to make more on your successes than you lose on your failures. But it’s crippling to have to avoid all failures, and insisting on doing so can’t be a winning strategy. It may guarantee you against losses, but it’s likely to guarantee you against gains as well.

Here’s some helpful wisdom on the subject from Wayne Gretzky, considered by many to be the greatest hockey player who ever lived: “You miss 100% of the shots you don’t take.”

There is no formulaic approach to investing that can be depended on to produce superior risk-adjusted returns. There can’t be. In a relatively fair or “efficient” market – and the concerted efforts of investors to find underpriced assets tend to make most markets quite fair – asymmetry is reduced, and a formula that everyone can access can’t possibly work.

As John Kenneth Galbraith said, “There is nothing reliable to be learned about making money. If there were, study would be intense and everyone with a positive IQ would be rich. ”If merely applying a formula that’s available to everyone could be counted on to provide easy profits, where would those profits come from? Who would be the losers in those transactions? Why wouldn’t those people study and apply the formula also?

Or as Charlie Munger told me, “It’s not supposed to be easy. Anyone who finds it easy is stupid.” In other words, anyone who thinks it can be easy to succeed at investing is being simplistic and superficial, and ignoring investing’s complex and competitive nature.

Why should superior profits be available to the novice, the untutored or the lazy? Why should people be able to make above average returns without hard work and above average skill, and without knowing something most others don’t know ? And yet many individuals invest based on the belief that they can. (If they didn’t believe that, wouldn’t they index or, at a minimum, turn over the task to others?)

No, the solution can’t lie in rigid tactics, publicly available formulas or loss-eliminating rules. . . or in complete risk avoidance. Superior investment results can only stem from a better-than-average ability to figure out when risk taking will lead to gain and when it will end in loss. There is no alternative.

You can read the original memo here – Howard Marks 2014 memo – Dare To Be Great.

20 Of The Best Books On Investor Psychology – All Time

Johnny HopkinsInvesting Books, Investing PsychologyLeave a Comment

We recently started a series called – Superinvestors: Books That Every Investor Should Read. So far we’ve provided the book recommendations from:

Together with our own recommended reading list of:

This week we’re going to take a look at twenty of the best books on investor pyschology. Here’s the list:

1. Thinking Fast and Slow (Daniel Kahneman)

2. The Little Book of Behavioral Investing (James Montier)

3. Misbehaving: The Making of Behavioral Economics (Richard Thaler)

4. Nudge: Improving Decisions About Health, Wealth, and Happiness (Richard THaler)

5. Predictably Irrational (Dan Ariely)

6. Think Twice: Harnessing the Power of Counterintuition (Michael Mauboussin)

7. Irrational Exuberance (Robert Shiller)

8. Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism (George Akerlof)

9. The Winner’s Curse: Paradoxes and Anomalies of Economic Life (Richard Thaler)

10. Influence: The Psychology of Persuasion (Robert Cialdini)

11. Fooled by Randomness (Nassim Taleb)

12. Pre-Suasion: A Revolutionary Way to Influence and Persuade (Robert Cialdini)

13. Choices, Values, and Frames (Daniel Kahneman and Amos Tversky)

14. Antifragile (Nassim Taleb)

15. More Than You Know (Michael Mauboussin)

16. The Laws of Wealth: Psychology and The Secret To Investing Success (Daniel Crosby)

17. The Undoing Project: A Friendship That Changed Our Minds (Michael Lewis)

18. Phishing for Phools: The Economics of Manipulation and Deception (George Akerlof)

19. Extraordinary Popular Delusions and The Madness of Crowds (Charles MacKay)

20. The Art of Contrary Thinking (Humphrey Neill)

TAM Stock Screener – Stocks Appearing in Soros, Greenblatt, Dalio Portfolios

Johnny HopkinsStock ScreenerLeave a Comment

Part of the weekly research here at The Acquirer’s Multiple features some of the top picks from our Stock Screeners and some top investors who are holding these same picks in their portfolios. Investors such as Warren Buffett, Joel Greenblatt, Carl Icahn, Jim Simons, Prem Watsa, Jeremy Grantham, Seth Klarman, Ray Dalio, and Howard Marks.

The top investor data is provided from their latest 13F’s (dated 2018-9-30). This week we’ll take a look at:

HollyFrontier Corp (NYSE: HFC)

HollyFrontier is an independent petroleum refiner that owns and operates five refineries serving the Rockies, midcontinent, and Southwest, with a total crude oil throughput capacity of 457,000 barrels per day. It also has a 59% ownership stake in Holly Energy Partners, which owns and operates petroleum product pipelines and terminals principally in the Southwestern United States.

A quick look at the price chart below for HollyFrontier shows us that the stock is up 44% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 7.25 which means that it remains undervalued.

(SOURCE: GOOGLE FINANCE)

Superinvestors who currently hold positions in HollyFrontier include:

Cliff Asness – 9,453,335 current shares

Joel Greenblatt – 270,698 current shares

Ray Dalio – 99,731 current shares

Geroge Soros – 85,000 current shares

Jim Simons – 75,082 current shares

Jim O’Shaughnessy – 47,799 current shares

Mario Gabelli – 47,000 current shares

Ken Griffin – 33,429 currrent shares

This Week’s Best Investing Reads 11/22/2018

Johnny HopkinsValue Investing NewsLeave a Comment

Here’s a list of this week’s best investing reads:

There’s Seldom Any Traffic on the High Road (Farnam Street)

Surveying the Damage in Stocks (A Wealth of Common Sense)

Yards After Contact (The Reformed Broker)

To Succeed In The Markets You Must Become A ‘Second Level Thinker’ (The Felder Report)

Humble Exits (Collaborative Fund)

Price is set at the margin (csinvesting)

A Little Perspective (Humble Dollar)

Timing the Market (The Irrelevant Investor)

Four Things Leonardo da Vinci Can Teach Us About Investing (Of Dollars & Data)

On Writing Better: Getting Started (Jason Zweig)

Why “Many-Model Thinkers” Make Better Decisions (HBR)

Late Cycle Behavior (Broyhill)

Why We Sold Apple Stock (Vitaliy Katsenelson)

When Your Experience Fails You (Validea)

Whitney Tilson – Facebook investors could double their money in three to five years (CNBC)

An Evolve-or-Die Moment for the World’s Great Investors (Fortune)

Pop Quiz, Hotshot (Pragmatic Capitalism)

The Sixteen Silliest (and Most Dangerous) Things People Say About Stock Prices (Safal Niveshak)

An Introduction to the Bridgeburner Mental Model (Intelligent Fanatics)

Interview with Mohnish Pabrai and Guy Spier (Chai With Pabrai)

Don’t Short The QT Hangover (The Macro Tourist)

Jamie Dimon and Warren Buffett Have the Last Laugh on Bitcoin (Bloomberg)

Bill Miller: Market Observations (Miller Value Partners)

Directionally Right and Precisely Wrong (Flirting With Models)

Why It’s Better To Retire In A Bear Market Than In A Bull Market (Financial Samurai)

Value Investing Isn’t Dead Yet, Just Wounded (Knowledge Leaders Capital)

We were recently reminded of an old brain teaser (13D Research)

Dow plunges more than 500 points, erases gain for 2018 (CNBC)

The Scarlet Pimpernel (Barel Karsan)


This week’s best investing research:

Short volatility strategies are extensive and widespread (Alpha Architect)

The Periodic Table of Investments (bps and pieces)

Cash Outperforms Stocks & Bonds First Time Since 1992 (UPFINA)

Low-Vol Strategies Are Not the Same as Value, Profitability (Morningstar)

The Rise of Zombie Stocks – The Dead Versus The Living (All About Alpha)

‘Blowing Up’: How This One Fund Blew Up Overnight – And What We Can Learn From It (Palisade Research)

Can you improve on the 60/40 stock/bond allocation without changing the 60/40 allocation? (mrzepczynsk)

An Unconstrained Approach to Global Bond Investing (CFA Institute)

Why Some Investors Are Looking Again at Gold (Advisor Perspectives)


This week’s best investing podcasts:

Animal Spirits Episode 56: How to Ask the Right Questions (Ben Carlson & Michael Batnick)

Howard Lindzon – Fintech and Trend Following (Patrick O’Shaughnessy)

TIP217: Current Market Conditions & Analysis (Preston Pysh & Stig Brodersen)

Annie Duke – Thinking More in Bets (EP.76) (Ted Seides)

Aswath Damodaran: The One Thing You Need To Do To More Accurately Value Businesses

Johnny HopkinsAswath Damodaran, Investing StrategyLeave a Comment

Here’s a great presentation with Aswath Damodaran and the team at Google. During the presentation Damodaran reveals the one thing investors need to do to more accurately value businesses.

Here’s an excerpt from the presentation:

So here’s my final point about valuation. One of my favorite movies of all time is – The Wizard of Oz. Remember the story. Dorothy gets sucked out of Kansas. She gets dumped in Oz. She wants to go back to Kansas. Don’t ask me why. I’d have stayed in Oz.

So of course the movie starts with… I need to go back, and of course she’s given the classic advice – go meet the Wizard of Oz, he has all the answers. The entire movie is about her going on the yellow brick road and this motley crew of characters she collects.

The Scarecrow, who needs this, the Tin Man, the Lion. They all get to Oz expecting the Wizard to be this all-powerful person. They walk into the chamber. They each tell the Wizard what they want, and the Wizard has this deep voice, until the curtain drops and you realize it’s a small guy behind the curtain who’s been pulling… That there’s really no Wizard of Oz. But it turns out that they all got what they needed during the course of the journey.

What’s this got to do with valuation? I firmly believe that you learn valuation by doing!

You really want to learn valuation here’s what you need to do. Value a company. First time you do it, it will be like pulling teeth. Then value another company that’s different from the first company.

Next week I’m putting up a valuation. It’s a crowd valuation of Uber posts that I did on my website where at each stage I ask you to decide what Uber is. Is it a car service company or a transportation company? Is it a local networking benefit or a global networking benefit? I can tell you my story, but at the end of the process, based on your story, this is Uber’s value. And the value for Uber range is anywhere from $800 million to $95 billion depending on the story you tell.

When we get big differences in value it’s not because our numbers are different, it’s because we have different narratives. Not all of these narratives are equally likely and that’s really the question you’ve got to ask… What is the right narrative?

I promised I would not talk about Google, but I will leave you with this thought. If you’re thinking about Google as a company going forward as an investor, here’s the question I’m asking. What is the narrative I’m telling about this company? What do I see this company doing? Because that’s what’s going to drive the valuation of Google. Not the fact that, because of exchange rate movements you did not deliver the growth… Who cares!

In the largest scheme of things those things don’t change your narrative. If investors react to it let them react to it.  This is about telling a story and delivering the kinds of decisions that back up that story.


(Source: YouTube)

Charles Munger: The Trouble With Economists & Economics

Johnny HopkinsCharles MungerLeave a Comment

Some years ago Shane Parrish at Farnam Street did a podcast in which he read the full text of Charlie Munger’s presentation – Academic Economics: Strengths and Weaknesses, after Considering Interdisciplinary Needs. It’s a must listen to for all investors.

Here’s an excerpt from Munger’s presentation:

3) Physics Envy

The third weakness that I find in economics is what I call physics envy. And of course, that term has been borrowed from penis envy as described by one of the world’s great idiots, Sigmund Freud. But he was very popular in his time, and the concept got a wide vogue.

Washington Post case study

One of the worst examples of what physics envy did to economics was cause adaptation and hard-form efficient market theory. And then when you logically derived consequences from this wrong theory, you would get conclusions such as: it can never be correct for any corporation to buy its own stock. Because the price by definition is totally efficient, there could never be any advantage. And they taught this theory to some partner at McKinsey when he was at some school of business that had adopted this crazy line of reasoning from economics, and the partner became a paid consultant for The Washington Post.

The Washington Post stock was selling at a fifth of what an orangutan could figure was the plain value per share by just counting up the values and dividing. But he so believed what he’d been taught in graduate school that he told the Washington Post they shouldn’t buy their own stock.

Well, fortunately, they put Warren Buffett on the Board, and he convinced them to buy back more than half of the outstanding stock, which enriched the remaining shareholders by much more than a billion dollars. So, there was at least one instance of a place that quickly killed a wrong academic theory.

It’s my view that economists could avoid a lot of this trouble that comes from physics envy. I want economists to pick up the basic ethos of hard science, the full attribution habit, but not the craving for an unattainable precision that comes from physics envy. The sort of precise reliable formula that includes Boltzmann’s constant is not going to happen, by and large, in economics. Economics involves too complex a system. And the craving for that physics-style precision does little but get you in terrible trouble, like the poor fool from McKinsey.

Einstein and Sharon Stone

I think that economists would be way better off if they paid more attention to Einstein and Sharon Stone. Well, Einstein is easy because Einstein is famous for saying, “Everything should be made as simple as possible, but no more simple.” Now, the saying is a tautology, but it’s very useful, and some economist – it may have been Herb Stein – had a similar tautological saying that I dearly love: “If a thing can’t go on forever, it will eventually stop.”

Sharon Stone contributed to the subject because someone once asked her if she was bothered by penis envy. And she said, “absolutely not, I have more trouble than I can handle with what I’ve got.” (Laughter).

When I talk about this false precision, this great hope for reliable, precise formulas, I am reminded of Arthur Laffer, who’s in my political party, and who is one of the all-time horses’ asses when it comes to doing economics. His trouble is his craving for false precision, which is not an adult way of dealing with his subject matter.

The situation of people like Laffer reminds me of a rustic legislator – and this really happened in America. I don’t invent these stories. Reality is always more ridiculous than what I’m going to tell you. At any rate, this rustic legislator proposed a new law in his state.

He wanted to pass a law rounding Pi to an even 3.2 so it would be easier for the school children to make the computations. Well, you can say that this is too ridiculous, and it can’t be fair to liken economics professors like Laffer to a rustic legislator like this. I say I’m under-criticizing the professors.

At least when this rustic legislature rounded Pi to an even number, the error was relatively small. But once you try to put a lot of false precision into a complex system like economics, the errors can compound to the point where they’re worse than those of the McKinsey partner when he was incompetently advising the Washington Post. So, economics should emulate physics’ basic ethos, but its search for precision in physics–like formulas is almost always wrong in economics.

You can listen to the full presentation here:

(Source: Farnam Street)

Seth Klarman: Q32018 Top 10 Holdings

Johnny HopkinsPortfolio Management, Seth KlarmanLeave a Comment

One of the best resources for investors are the publicly available 13F-HR documents that each fund is required to submit to the SEC. These documents allow investors to track their favorite superinvestors, their fund’s current holdings, plus their new buys and sold out positions. We spend a lot of time here at The Acquirer’s Multiple digging through these 13F-HR documents to find out which superinvestors hold positions in the stocks listed in our Stock Screeners.

As a new weekly feature, we’re now providing the top 10 holdings from some of our favorite superinvestors based on their latest 13F-HR documents.

This week we’ll take a look at Seth Klarman’s Baupost Group LLC, (9-30-2018):

The current market value of his portfolio is 13,056,762,000

Top 10 Positions

Security Current
Shares
Current Value
($)
FOXA / Twenty-First Century Fox, Inc. 52,001,167 2,409,214,000
LNG / Cheniere Energy, Inc. 14,196,135 986,489,000
AGN / Allergan plc 4,950,000 942,876,000
VSAT / ViaSat, Inc. 13,732,068 878,166,000
PCG / PG&E Corp. 18,979,790 873,260,000
QRVO / Qorvo, Inc. 11,000,000 845,790,000
FOX / Twenty-First Century Fox, Inc. 17,320,922 793,645,000
PXD / Pioneer Natural Resources Co. 4,000,000 696,760,000
SYF / Synchrony Financial 16,332,929 507,627,000
AR / Antero Resources Corporation 26,587,791 470,870,000

Michael Burry: Measuring Money Managers By ‘Relative Performance’ Harms Their Ability To Invest Intelligently

Johnny HopkinsInvesting Strategy, MIchael BurryLeave a Comment

Seth Klarman has often spoken about the nonsense of measuring fund managers by their ‘relative performance’. That is, measuring the performance of their investments against various market benchmarks.

A quick read through Michael Burry’s Scion Capital shareholder letters shows that he’s also not a fan of relative performance as a performance indicator. Here’s an excerpt from his letters:

In order that this Fund’s performance escape the randomness of return that defines much of the investment management industry, it is imperative that I as manager respond only to the value of an individual investment when making capital allocation decisions.

Value is far from the only potential input in the typical portfolio manager’s investment process, however. Throughout the universe of public and private funds, managers are measured quarterly against one index or another, defined by statistics, and corralled into this category or that category so that fund of funds, pensions, and other institutions can make comforting — if not necessarily prudent — asset allocation decisions. Such forces restrict and otherwise harm the manager’s ability to invest intelligently and are entirely deleterious to performance. Managers who respond to such inputs fight an uphill battle.

The Fund is structured to allow its manager to ignore these secondary inputs. The less definition offered, the less positions revealed, the less statistics applied — all the better for the portfolio that aims for these supra-normal returns. Hence, the Fund’s individual portfolio positions may not be revealed except at the discretion of the manager.

You can read the Scion Capital Shareholder Letters here – Michael Burry – Scion Capital Shareholder Letters.

Value Invest New York – December 4th, 2018

Tobias CarlisleStock ScreenerLeave a Comment

Value Invest New York
will take place on December 4

View Conference Agenda

The line-up for Value Invest New York was announced last week and it will feature speakers who will give insights and investment ideas at the conference – with the presentation titles below. The line-up includes Joel Greenblatt, Howard Marks, Rajiv Jain, Dave Iben and others.

There’s still a $100 discount to attend the event until November 25 using the code (so long as there are tickets still available):  ACQUIRERS_MULTIPLE_NOV18

The presentation titles announced so far are below, click here to see the full agenda, with presentation titles and timings

David Iben – Kopernik Global Investors
The Value of Being Approximately Right in a Market that Appears to be Increasingly Precisely Wrong

Joel Greenblatt – Gotham Asset Management
Presentation Title TBC

Álvaro Guzmán de Lázaro & Fernando Bernad Marasse, azValor
Buying Deeply Undervalued Real Assets

Richard Chilton – Chilton Investment Company
A Private Equity Approach to Investing in High-Quality Stocks

Ronald Chan – Chartwell Capital
Finding a Spark in Japan

Howard Marks, Oaktree Capital
Mastering the Market Cycle: Fireside Chat and Audience Q&A

Hosted by Scott Wapner of CNBC

Rajiv Jain – GQG Partners
The Outsider’s View: “Value” Investing Through the Eyes of a Quality Growth Investor

Nigel Waller & Andrew Goodwin – Oldfield Partners
Value Investing in an Age of Disruption

Ben Preston – Orbis Investments
Vale: Blue Sky Mine

Bernard Horn – Polaris Capital
A Global Snapshot of Value Opportunities

Andrew Wellington – Lyrical Asset Management
Value Hidden in Plain Sight

Matt McLennan, First Eagle Investment Management
The Value of Scarcity and Resilience

Jonathan Mills – Metropolis Capital
Finding a Golden Nugget in a Muddy River

The speakers at the conference will provide valuable insights into the methods and approaches that have made them successful, comment on the investment climate and offer specific investment ideas.

Free eBook from Harriman House

The organizers are also offering one of the following free eBook’s to download directly from Harriman House when you sign-up for conference updates:

The Buffett Essays Symposium: A 20th Anniversary Annotated Transcript – by Lawrence A. Cunningham

The Warren Buffett Shareholder: Stories from inside the Berkshire Hathaway Annual Meeting– by Lawrence A. Cunningham and Stephanie Cuba

Harriman’s New Book of Investing Rules: The do’s and don’ts of the world’s best investors – by Chris Parker

Elon Musk: 8 Books That Every Investor Should Read

Johnny HopkinsElon Musk, Investing BooksLeave a Comment

We recently started a series called – Superinvestors: Books That Every Investor Should Read. So far we’ve provided the book recommendations from:

Together with our own recommended reading list of:

This week we’ve expanded the list to include book recommendations by famous entrepreneurs. Here are the recommended books from Elon Musk, taken from his writings, interviews, lectures, and twitter feed over the years:

1. Structures: Or Why Things Don’t Fall Down (J Gordon)
2. Benjamin Franklin: An American Life (Walter Isaacson)
3. Einstein: His Life and Universe (Walter Isaacson)
4. Superintelligence: Paths, Dangers, Strategies (Nick Bostrom)
5. Merchants of Doubt (Erik M. Conway, Naomi Oreskes)
6. Lord of the Flies (William Golding)
7. Zero to One: Notes on Startups, or How to Build the Future (Blake Masters, Peter Thiel)
8. The Foundation Trilogy (Isaac Asimov)

This Week’s Best Investing Reads 11/16/2018

Johnny HopkinsValue Investing NewsLeave a Comment

Here’s a list of this week’s best investing reads:

How This All Happened (Collaborative Fund)

Defensive Decision Making: What IS Best v. What LOOKS Best (Farnam Street)

Family Inc. (Humble Dollar)

Playing with Fire (The Reformed Broker)

What If You Retire At a Stock Market Peak? (A Wealth of Common Sense)

Why Warren Buffett Would Be Buying Precious Metals Again Today (If He Could) (The Felder Report)

Ray Dalio – What are the most important habits to build? (LinkedIn)

The GE End Game: Bataan Death March or Turnaround Play? (Aswath Damodaran)

Jeff Bezos to employees: ‘One day, Amazon will fail’ but our job is to delay it as long as possible (CNBC)

These Are the Goods (The Irrelevant Investor)

The Old Gods and the New (Of Dollars & Data)

Zoom Out, Baby, Zoom Out (Safal Niveshak)

Mohnish Pabrai – Keynote Speech at Annual Morningstar India Conference – Oct. 24, 2018 (Chai with Pabrai)

Sears’s Edward Lampert Was a Wizard. Now He’s Coming to Terms With Failure (NY Times)

One Expert’s Opinion (Jamie Catherwood)

Project Punch Card Investment Event December 7th in NYC–Hurry! (csinvesting)

Quick Takes – Key Insights From Swedroe, Asness & Gray (Validea)

CNBC’s full exclusive interview with Liberty Media chairman (CNBC)

50 Cent versus Kanye: Should Fiddy have used the Objectives and Key Results (OKR) system? (25iq)

Balance Is Underrated (Intelligent Fanatics)

Soul In The Game (Vitaliy Katsenelson)

Delay, Deny and Deflect: How Facebook’s Leaders Fought Through Crisis (NY Times)

Don’t Make These 5 Investing Mistakes That General Electric Investors Made (Behavioral Value Investor)

The Sicilian Offense (Epsilon Theory)

Twelve Investment Contradictions (Behavioural Investment)

The Pitfalls of Early Success – A Personal History (The Rational Walk)

Discretionary Investing in the Age of Artificial Intelligence (CFA Institute)

EURN or You’re Out (Barel Karsan)

Has the “Everything Bubble” begun to deflate everything? (13D Research)


This week’s best investing research:

Factor Investing Fact Check: Are Value and Momentum Dead? (Alpha Architect)

The Yield is Gravity (Flirting with Models)

Part 3: Keynes Beauty-Contest, Roundabout Investing, & Second-Level Thinking (Palisade Research)

Ambiguous Statistics and Esoteric Quant Analysis (Price Action Lab)

2019 Global Economic Recession Or Just A Slowdown? (UPFINA)

No diversification in Mudville – Time to try different risk premia styles (mrzepczynski)

How Rising Interest Rates Affect REIT Price Performance: Not As Bad As You Think (Financial Samurai)

Technology Companies’ Can’t Be Contained by Just One Sector (Advisor Perspectives)


This week’s best investing podcasts:

Michael Lombardi – Leadership Through Football (Ted Seides)

Episode #129: Meb’s Take on Return Expectations, Portfolio Construction, and Practical Market Approaches (Meb Faber)

Cliff Asness – The Past, The Present & Future of Quant (Patrick O’Shaughnessy)

Animal Spirits: How to Create the Perfect Fund (Ben Carlson & Michael Batnick)

Taking Time to Get It Right: My Interview with Award Winning Chef Dan Kluger (Shane Parrish)

TIP216: Commodity Investing w/ Marin Katusa (Stig Brodersen & Preston Pysh)

TAM Stock Screener – Stocks Appearing in Cohen, Greenblatt, Griffin Portfolios

Johnny HopkinsStock ScreenerLeave a Comment

Part of the weekly research here at The Acquirer’s Multiple features some of the top picks from our Stock Screeners and some top investors who are holding these same picks in their portfolios. Investors such as Warren Buffett, Joel Greenblatt, Carl Icahn, Jim Simons, Prem Watsa, Jeremy Grantham, Seth Klarman, Ray Dalio, and Howard Marks.

The top investor data is provided from their latest 13F’s (dated 2018-6-30). This week we’ll take a look at:

DXC Technology Co (NYSE: DXC)

DXC Technology is a vendor-independent IT services provider that started trading in April 2017. DXC was created via the amalgamation of Computer Sciences Corporation, or CSC, and Hewlett Packard Enterprise’s Services business. The combined company has enviable global scale, with annual revenue of around $25 billion, over 170,000 employees, operations across 70 countries, and broad industry exposure. In addition, the firm has roughly 6,000 clients, of which over 200 are within the Fortune 500.

A quick look at the price chart below for DXC Technology shows us that the stock is down 26% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 7.09 which means that it remains undervalued.

(SOURCE: GOOGLE FINANCE)

Superinvestors who currently hold positions in DXC Technology include:

Cliff Asness – 3,315,907 total shares

Steve Cohen – 1,687,338 total shares

Ken Griffin – 1,358,058 total shares

Lee Ainslie – 1,048,044 total shares

Joel Greenblatt – 572,440 total shares

Wally Weitz – 487,852 total shares

Jim Simons – 344,100 total shares

Leon Cooperman – 290,000 total shares

Chris Davis – 11,319 total shares

Warren Buffett: “Berkshire Could Be A Rest Home For Activists”

Johnny HopkinsActivist Investing, Warren BuffettLeave a Comment

Here’s a great interview with Warren Buffett at Fortune’s Most Powerful Women Conference in which he discusses why he’s not a fan of activists, and the importance of having good communication with your shareholders in the case of an activist surfacing.

Here’s an excerpt from the interview:

Buffett: Activism is a saleable form and therefore it gets sold. Wall street sells it. I would say there certainly has been a picking on pretty decent and well managed businesses because they’ve run out of the other kind.  I mean there’s only so many that are being mismanaged and that doesn’t stop the people that have now hundreds of billions of dollars to invest in the form.

I have one or two friends that have called me about an activist surfacing and I tell them just say – you’re going to run the company for the shareholder who is going to stay-in rather than the one that’s going to get out. Mean it and follow it.

Don’t try and do something that… some little wrinkle here or there… to supposedly satisfy them because it isn’t going to satisfy them anyway. Then I say if you finally get desperate send them over to Berkshire. We love activist merger. It’s just fun to joust with them. They’re not going to get any place. Maybe we could be sort of a rest home for activists.

To go one step further, it’s in Wall Street’s interest to scare management’s about activists. I mean you’ve got both investment bankers and law firms that are not dying to have an activist call on your door, but it doesn’t cause them to break out in tears either. Because you take them on and then they get all involved in the strategy and it’s their job, to some extent, to make you worry more. You probably shouldn’t even worry.

I mean it’s a commercial world out there in case you haven’t noticed. There are a lot of companies that I hear about that are paying significant amounts to people to sort of strategize to keep activists away. The best way to keep activists away is to perform reasonably well in your business and also to communicate well with your shareholders. I mean in the end you’ve got a bunch of owners out there and unbalanced they’re going to be on your side. Afterall they got their money with you but they should be treated as partners. That’s one thing we’ve always done at Berkshire and always will do.

I’ll give you one illustration. We had a vote a year ago. Somebody put on the ballot that Berkshire should pay a dividend. They were kind of nasty about it. They said,”Warren doesn’t need one but the rest of us do. So why don’t we both have a dividend”. Which was fine with us. So we put it on. We did not campaign. With over a million shareholders our shareholders voted 47 to 1 against paying a dividend. Now that only comes through years of communication and explaining to them why dividends really don’t make sense in our case at this time. The shareholders will be on your side but you shouldn’t expect them to only be on your side when you’re in trouble.

You want to keep communicating. You really have to have a partnership attitude and if you have a partnership attitude I think it gets through to the shareholders.

You can watch the entire interview here:

David Einhorn: Top 10 Holdings, New Buys, Sold Out Positions

Johnny HopkinsDavid EinhornLeave a Comment

One of the best resources for investors are the publicly available 13F-HR documents that each fund is required to submit to the SEC. These documents allow investors to track their favorite superinvestors, their fund’s current holdings, plus their new buys and sold out positions. We spend a lot of time here at The Acquirer’s Multiple digging through these 13F-HR documents to find out which superinvestors hold positions in the stocks listed in our Stock Screeners.

As a new weekly feature, we’re now providing the top 10 holdings, new additions to the portfolio, and sold out positions from some of our favorite superinvestors based on their latest 13F-HR documents.

This week we’ll take a look at David Einhorn (6-30-2018):

The current market value of his portfolio is $3,136,040,000.

Top 10 Positions

Security Current
Shares
Current Value
($)
GM / General Motors Company 21,160,843 833,737,000
BHF / Brighthouse Financial, Inc. 11,580,000 464,011,000
MYL / Mylan N.V. 6,859,000 247,885,000
GRBK / Green Brick Partners, Inc. 24,118,668 236,364,000
AER / AerCap Holdings N.V. 4,061,408 219,925,000
ESV / Ensco plc 20,000,000 145,200,000
VOYA / Voya Financial, Inc. 2,904,268 136,501,000
CNX.WI / CNX Resources Corporation 7,625,000 135,572,000
PRGO / Perrigo Company plc 1,852,920 135,096,000
YHOO / Yahoo! Inc. 1,764,300 129,164,000

New Positions

Security Current
Shares
Current Value
($)
DG / Dollar General Corp. 43,500 4,288,000
TJX / TJX Companies, Inc. (The) 45,000 4,284,000
AZO / AutoZone, Inc. 6,000 4,026,000
GPS / Gap, Inc. (The) 134,000 4,340,000
DLTR / Dollar Tree, Inc. 47,000 3,995,000
BBY / Best Buy Co., Inc. 51,600 3,849,000

Closed Out Positions

Security Prev
Shares
Prev Value
($)
TWX / Time Warner, Inc. 665,000 62,895,000
CNX / CONSOL Energy, Inc. 1,169,276 33,874,000
DDS / Dillard’s, Inc. 113,200 9,095,000
COH / Coach, Inc. 105,000 5,524,000
BLMN / Bloomin’ Brands, Inc. 218,000 5,293,000
FIVE / Five Below, Inc. 70,700 5,185,000
ANF / Abercrombie & Fitch Co. 212,500 5,145,000
PYPL / PayPal Holdings, Inc. 67,000 5,083,000
URBN / Urban Outfitters, Inc. 136,500 5,045,000
SFM / Sprouts Farmers Market, Inc. 207,000 4,859,000
ODP / Office Depot, Inc. 2,100,000 4,515,000
ROKU / Roku Inc 47,760 1,486,000

Stanley Druckenmiller: What Should Investors Do If They’re In A ‘Slump’

Johnny HopkinsInvesting Strategy, Stanley DruckenmillerLeave a Comment

Here’s a great interview with investing legend Stanley Druckenmiller at Real Vision in which he discusses the importance of investors knowing whether they’re currently ‘hot’ or ‘cold’ with regards picking investments. He also provides some great insights into what you should do if you find yourself in an investing slump.

Here’s an excerpt from that interview:

One of the lucky things was the way my industry prices. You price on in at the end of the year. You take a percentage or whatever profit you made for that year. So at the end of the year psychologically and financially you reset to zero.

Last year’s profits are yesterday’s news so I would always be a crazy person when I was down in a year. But I know, because I like to gamble, that in Las Vegas ninety percent of the people that go there lose… and the odds are only 33 to 32 against you in most of the big games. So how can ninety percent lose?

It’s because they want to go home and brag that they won money. So when they’re winning and they’re hot they’re very very cautious and when they’re cold and losing money they’re betting big because they want to go home and tell their wife or their friends they made money. Which is completely irrational.

So this is important because I don’t think anyone has ever said it before:

One of my most important jobs as a money manager was to understand whether I was hot or cold.

Life goes in streaks and like a hitter in baseball, sometimes a money manager is seeing the ball and sometimes they’re not. If you’re managing money you must know whether you’re cold or hot, and in my opinion when you’re cold you should be trying for bunts. You shouldn’t be swinging for the fences. You got to get back in a rhythm. So that’s pretty much how I operated it.

If I was down I had not earned the right to play big and the little bets you’re talking about were simply on to tell me had I re-established a rhythm and was I starting to make hits again.

The example I gave you of the Treasury bet in 2000, it’s a total violation of that which shows you how much conviction I had. So this dominates my thinking but, if a once-in-a-lifetime opportunity comes along you can’t sit there and go, oh I have not earned the right.

Now I will also say that was after a four-month break. My mind was fresh, my mind was clean, and I will go to my grave believing if I hadn’t taken that sabbatical I would have never seen that in September and I would have never made that bet.

It’s because I had been freed up and I didn’t need to be hitting singles because I came back and it was clear and I was fresh. It was like the beginning of the season so I wasn’t hitting bad yet. I had flushed that all out. But it is really really important if you’re a money manager to know when you’re seeing the ball. It’s a huge function of success or failure.

You can watch the entire interview here: