Bill Ackman: Top 10 Holdings

Johnny HopkinsBill AckmanLeave 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 Bill Ackman (9-30-2018):

The current market value of his portfolio is $5,208,720,000.

Top 10 Positions (Only 7 Positions held)

Security Current
Current Value ($)
QSR / Restaurant Brands International Inc. 20,843,919 1,235,628,000
LOW / Lowe’s Companies, Inc. 8,438,801 968,943,000
CMG / Chipotle Mexican Grill, Inc. 2,059,106 935,905,000
UTX / United Technologies Corp. 4,947,788 691,750,000
ADP / Automatic Data Processing, Inc. 4,029,427 607,073,000
PAH / Platform Specialty Products Corp. 40,451,506 504,430,000
HHC / Howard Hughes Corp. (The) 2,133,236 264,991,000

Steve Romick – Value Investing Has Morphed From The Days Of Graham and Dodd

Johnny HopkinsInvesting Strategy, Steven RomickLeave a Comment

We’ve just been listening to a great interview by Meb Faber with one of our favorite value investor’s – Steve Romick, Portfolio Manager for the FPA Crescent Fund. During the interview Romick explains how value investing has morphed from the days of Graham and Dodd saying:

Steve: Value investing is, to us, simply investing with a margin of safety, believing that you’ve made an investment where it’s hard to lose money over time. I mean, over any short periods of time, anything can happen. So that’s really what it stands for, for us, and it can wear a lot of different cloaks. And as you just mentioned in that quote from that shareholder letter that I had written a while back.

Value investing, though, when you think about it, has morphed over the years. There used to be a point in time where it was really all about the balance sheet. I mean, going back to Graham and Dodd and thinking about the margin of safety and buying net-nets, you know, the companies that are trading below net working capital.

Meb: The old cigar butts?

Steve: The old cigar butts. And that was a not-unreasonable way to invest, certainly. Today, the world’s changed and it’s changed because of technological innovation. The world changes so quickly, the life cycle of a company as it existed in an index, and the S&P 500, for example, is shorter or as short as it’s ever been and it’s continuing to decrease.

So businesses are being put out to pasture. I mean, just a very obvious conversation would centre around retail and the disruptive influences from the likes of Amazon and other online companies. So of late, we had Toys R Us’ bankruptcy this year. And we have Sears’ restructuring that’s currently…well, it remains to be seen whether it’s going to be a liquidation or it’s going to be a restructuring. And that’s because these businesses aren’t what they used to be, because of a competitor that’s come in…

In the last 50 years, we have seen more new inventions, more technological innovation, more ways to use the technology in a disruptive way than we’ve ever seen in history. And businesses, just by buying something on book value, book value can erode pretty quickly if you can’t get a return on that capital investment.

Let’s take Warren Buffett’s company, Berkshire Hathaway, a defunct textile mill. I mean, he made money on it because he bought it at such a good discounted margin of safety, but it got disrupted by manufacturing offshore.

And so, he was able to sell the land and the building for… at a profit to ultimately what he had paid for it. And so, it ended up being not his worst investment or he certainly didn’t lose money. But it certainly wasn’t his best investment, either. So when we think about making money, we think about value investing, we want to make sure that we have some kind of tale where the business is going to be better, at least, in 10 years than it is today, ideally.

You can listen to the interview by clicking on the play button below:

You can find the original podcast on Meb Faber’s website here – Meb Faber Interview with Steve Romick.

Joel Greenblatt – Great Value Investors Need To Be Cold Hearted JellyBean Counters

Johnny HopkinsInvesting Strategy, Joel GreenblattLeave a Comment

Here’s a great video with Joel Greenblatt at the CFA’s Distinguished Speaker Series. During the presentation Greenblatt recounts the story of how he was able to explain the stock market and value investing to a ninth grade class, using a big jar of jellybeans. Greenblatt says:

I have a friend who’s an orthopedic surgeon. He’s head of this group of orthopedic surgeons and they have a big dinner every year.

For whatever reasons he asked me to give a talk about investing for about a half an hour to the learned doctors in the room and take some questions.

So I explained how the stock market worked for about a half an hour and then I said, “Any questions?”.

First question was – Market was down 2% yesterday should I get out?

The second question was – Oil was up 1% yesterday should I get in?

My conclusion from those questions was that I had just crashed and burned and they didn’t understand anything I had just said about the stock market.

Luckily, a few days later I got asked to teach a ninth grade class. All the kids were from Harlem. An investing class, once a week for an hour teaching them about investing.

These doctors had a lot of degrees and they had to be really smart to get there. They were all surgeons. Pretty successful guys and women, but now I’m asked to teach ninth graders, who had no money or interest or background and no degrees yet.

I had failed with the doctors, so I said yes anyway and I thought I had a few weeks to prepare for the first class and I didn’t want to fail with the kids.

So I thought about it and I walked in the first day of class with a big jar of jellybeans. One of those old-time glass jars.

I passed the jar of jellybeans around the room and I passed out three by five cards and I told the kids to count the rows. Do whatever they had to do. Write down how many jellybeans do you think are in the jar. So they passed the jellybeans around. They did their counting or whatever they were gonna do.

I collected the three by five cards then I went one by one around the room and I said tell me how many jellybeans do you think are in the jar and you can keep your original guess or you can change your guess that’s completely up to you!

One by one around the room I said how many jellybeans are in the jar and I wrote down those answers.

So here are the results of that test. When I averaged the guesses from the three by five cards the average guess was 1771 jellybeans, and there were 1776 jelly beans in the jar, so that was pretty good.

But, when I went around the room one by one and asked them, that guess averaged to 850 jellybeans. I told the kids that the stock market was actually the second guess. Because everyone knows what they just heard. What they just watched. What they just read. Who they just talked to. They’re influenced by everything around them, and they didn’t make a very good guess.

When they were cold and calculating and independent their guess turned out to be much better.

So I think of ourselves as cold hearted jelly bean counters when we’re trying to value businesses and trying to cover our ears and close our eyes and trying to figure out valuation without being influenced by things around us.

What are the ways to do that is to use trailing numbers rather than our own projections. It turns out to work better and that’s very much how the stock market works and how you can go about beating the market.

Charles Munger – I Frequently Sit In A Room And Converse With Dead People While The People Around Me Are Irritated

Johnny HopkinsCharles Munger1 Comment

Here’s a great compilation on reading habits and books by Warren Buffett and Charles Munger. Our favorite quote from the video is when Munger is asked how he was able to concentrate and balance his reading with so many children around when his family was younger. His response is:

“I have the kind of mind that if I want to read something i can tune everything else out. In fact I frequently sit in a room and converse with dead people while the people around me are irritated. So I don’t think you should try my methods.”

You can check out the video here:

(Source: YouTube)

Happy Holidays

Johnny HopkinsStock ScreenerLeave a Comment

Tobias and I would like to wish all of our readers and subscribers a very Merry Christmas and a Happy New Year. We’re going to take a break from publishing articles on the blog for a couple of weeks over the holidays, but Tobias will still be posting on his Twitter feed @Greenbackd.

Happy Holidays!

This Week’s Best Investing Reads 12/21/2018

Johnny HopkinsValue Investing NewsLeave a Comment

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

The Spacing Effect: How to Improve Learning and Maximize Retention (Farnam Street)

Prediction vs. Preparation (A Wealth of Common Sense)

Unforced Errors (The Reformed Broker)

Did The Fed Just Make Another Mistake? (The Felder Report)

Why Value Investing Is Making A Comeback (US News)

Surveying the Damage (The Irrelevant Investor)

30 Principles from “Pre-Suasion” by Robert Cialdini (Samuel Woods)

After a Lost Decade, Will Value Get its Groove Back in 2019? (Advisor Perspectives)

Women of Jeopardy! on Defining Success (CFA Institute)

Just in Case (Humble Dollar)

The Biggest Benefits Of A Stock Market Meltdown (Financial Samurai)

Investing Ideas That Changed My Life (Collaborative Fund)

There Are No Atheists in Foxholes (Macro Tourist)

The Journey (Safal Niveshak)

2019 Free Lunch Portfolio (Mohnish Pabrai)

Big Swings in Stock Market Are at Their Highest Level Since 2011 (NY Times)

Expectation vs. Reality (Of Dollars & Data)

You have to be in the game.. (Oddball Stocks)

What do portfolios and teacups have in common? (Flirting with Models)

In Search of Temperament II – Contrarianism (Investment Innovation)

Let’s Talk About QE and Assflation (Pragmatic Capitalism)

50 Reasons Why We Don’t Invest for the Long-Term (Behavioural Investment)

Yield Curve Inversion Hysteria – Give It A Rest (DSGMV)

Timothy Geithner: The Financial Crisis 10 Years Later (CFA Institute)

This week’s best investing research:

Our 20th Anniversary Anthology (Cliff Asness)

A Backtesting Protocol in the Era of Machine Learning (Research Affiliates)

Is Current Stock Market Sentiment A Contrarian Indicator? (UPFINA)

The Game Of Higher Open Followed By Lower Close (Price Action Lab)

Truce Be Told (Advisor Perspectives)

A Protocol to Prevent “Quants Gone Wild” (Alpha Architect)

Favoring Recession-Resistant Equities and Cash (MOI Global)

This week’s best investing podcasts:

Animal Spirits Episode 60: Everyone Should Earn 3% (Ben Carlson & Michael Batnick)

MarketFox interview with Tadas Viskanta – Abnormal Returns (Daniel Grioli)

Keith Rabois – If You Can’t Sell Them, Compete with Them (Patrick O’Shaughnessy)

Episode #134: Chris Cole, “Volatility Is The Instrument That Makes Us Face Truth” (Meb Faber)

TIP221: Commercial Real Estate Investing w/ Ian Formigle (Stig Brodersen & Preston Pysh)

Daniel Kahneman on Cutting Through the Noise (Ep. 56— Live at Mason) (Tyler Cowen)

Tim McCusker – Consistency and Creativity at NEPC (EP.80) (Ted Seides)

TAM Stock Screener – Stocks Appearing in Wachenheim, Dalio, Miller 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:

PulteGroup, Inc. (NYSE: PHM)

PulteGroup is one of the largest homebuilders in the United States, operating in 47 markets across 25 states. The company mainly builds single-family detached homes (88% of unit sales) and offers products to entry-level, move-up, and active-adult buyers. PulteGroup offers homebuyers mortgage financing and title agency services through its financial services segment. The company is headquartered in Atlanta.

A quick look at the price chart below for PulteGroup shows us that the stock is down 24% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 7.02 which means that it remains undervalued.

(Source: Google Finance)

Superinvestors who currently hold positions in PulteGroup include:

Ed Wachenheim – 6,985,895 total shares

Cliff Asness – 2,813,796 total shares

Bill Miller – 2,271,600 total shares

James O’Shaughnessy – 2,044,009 total shares

Ray Dalio – 1,051,770 total shares

Ken Griffin – 389,759 total shares

Mario Gabelli – 335,000 total shares

Paul Tudor Jones – 20,218 total shares

Stanley Druckenmiller: What Characteristics Do You Need To Be A Great Investor

Johnny HopkinsInvesting Strategy, Stanley DruckenmillerLeave a Comment

Here’s a great interview with Stanley Druckenmiller speaking to Bloomberg’s Erik Schatzker in which Druckenmiller provides his thoughts on the economy, stocks, bonds, trump, algos, and the Fed.

Druckenmiller was asked what sort of personality you have to have to be a successful investor. He says:

“I think you have to be a little sceptical and a bit of a contrarian… Bulls make more money than bears, so if anything being an optimist about life and about things in general is a great attribute to have as an investor. You just can’t be starry eyed and naive. I think a better characteristic would be, being able to control your emotions…”

“You need to be intellectually curious, and really, really open minded, and you need to have courage. When I say courage, you need the courage to bet big, and to bet concentrated, but also the courage to fight your own emotions. I’ve never made a buy at a low that I didn;t just feel terrible and scared to death making it. It’s easy to sell at the bottom. You can home that night and it relieves you of your nerves.”

“There’s another saying Drellus used to have… “The higher they go the cheaper they look”. So when things are going up it’s easy to buy them. When they’re going down, it’s hard to buy them”.

You can watch the full interview here:

David Einhorn: Q32018 Top 10 Holdings

Johnny HopkinsDavid Einhorn, 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 David Einhorn (9-30-2018):

The current market value of his portfolio is $2,368,304,000.

Top 10 Positions:

Security Current
Current Value
BHF / Brighthouse Financial, Inc. 11,580,000 512,300,000
GM / General Motors Company 14,881,043 501,045,000
GRBK / Green Brick Partners, Inc. 24,118,668 243,598,000
AER / AerCap Holdings N.V. 3,789,678 217,982,000
ESV / Ensco plc 20,000,000 168,800,000
VOYA / Voya Financial, Inc. 2,049,053 101,777,000
YHOO / Yahoo! Inc. 1,472,598 100,313,000
CCR / CONSOL Coal Resources LP 5,488,438 98,518,000
IAC / IAC/InterActiveCorp. 435,150 94,306,000
XELA / Exela Technologies, Inc. 8,384,629 59,782,000

Charles Munger: Investing In Shares Is Much Easier Than Investing In Real Estate, Here’s Why

Johnny HopkinsCharles Munger, Investing StrategyLeave a Comment

Here’s a great little video in which Charles Munger is discussing why investing in shares is better than investing in real estate. Munger says:

“The trouble with real estate is that everybody else understands it, and the people who you’re dealing with and competed with, they’ve specialized in a little twelve blocks or a little industry. They know more about the industry than you do. And you’ve got a lot of bullshitters and liars and brokers. So it’s not a bit easy. It’s not a bit easy!”

“You don’t even see the good opportunities in real estate. They show those to the big investors they’re dealing with. It’s not an easy game to play against. Whereas stocks you’re equal with everybody, if you’re smart. In real estate you don’t even see the good opportunites when you’re starting out. They go to others. The stock market’s always open.”

You can watch the video here:

(Source: YouTube)

Forbes: Contrary To Popular Belief, Value Investing Is Not Dead

Johnny HopkinsValue InvestingLeave a Comment

Here’s a great article at Forbes discussing the recent performance of value investing saying:

“However, a hundred years worth of data says value investing works. One cycle doesn’t change that.”

Here’s an excerpt from that article:

Many people think value investing is dead. It’s not.

Style leadership rotates across cycles. Also, adjusting how you measure ‘value’ can make a huge difference.

Style leadership is dynamic

Traditional value investing has endured a lost decade.

Growth stocks like Amazon and Netflix have been star performers in the recent bull market, while value stocks (i.e. statistically cheap shares) have risen at a more tepid pace. The chart below compares performance of the Russell 3000 Value and Growth Indices since 2009.

Russell 3000 Growth Index vs. Russell 3000 Value Index (2009 – 2018) SILVERLIGHT ASSET MANAGEMENT, LLC

But if we look a little further back at these same indices, we see that in the previous cycle, it was value that outperformed growth. Cumulative performance over the combined cycle is nearly a draw.

Russell 3000 Growth Index vs. Russell 3000 Value Index (2000 – 2018) SILVERLIGHT ASSET MANAGEMENT, LLC

If one style outperformed all the time, everyone would pursue it, and the edge would vanish. That’s why investing styles will always rotate in and out of favor.

One tailwind for growth stocks in recent years has been the economic environment. Specifically, low interest rates have persisted for longer than normal. That benefits firms with strong earnings growth, because future earnings are more valuable at a lower discount rate.

Fed is raising rates 3x slower than normal. SOURCE: FEDERAL RESERVE, HIDDENLEVERS

Sector biases also play a role. Banks are the highest weighted value sector in the past 10 years, and they’ve struggled as lending margins have compressed.

However, the macro environment is ever-changing. There’s less slack in the U.S. economy now, which could foreshadow rising inflation pressure over the intermediate-term. That shift would change the interest rate dynamic and help lay a foundation for a value turnaround.

There are different ways to define value

Whether or not value investing still “works” also really depends on what kind of value investor you are.

If your portfolio is overweight low price-to-book firms, for example, you probably haven’t done well lately. But if your primary value compass is the amount of free cash flow a firm generates in proportion to enterprise value, chances are you’re doing much better. That metric has worked this year, and comes out on top over the last 15 years.

Here is how an assortment of value metrics have historically performed. Notice there’s quite a bit of variance.

Net long-short quantile spreads. Data source: Bloomberg L.P. SILVERLIGHT ASSET MANAGEMENT, LLC

P/E ratios and dividend yields are probably the most well known value metrics. Free cash flow yield is less well known, but it’s an important measure to be aware of if you invest in individual stocks.

Many professional investors prefer to use free cash flow over net income as an earnings proxy. Cash flow is more objective, whereas earnings-per-share numbers are easier for management to manipulate with discretionary accounting techniques.

Common yardsticks such as dividend yield, the ratio of price to earnings or to book value, and even growth rates have nothing to do with valuation except to the extent they provide clues to the amount and timing of cash flows into and from the business.”

– Warren Buffett

It’s easy to forget what owning a stock really means. It means being part-owner of a business. And owners are entitled to the future cash flow a business generates.

To bring it down to an even simpler level, think back to the board game Monopoly. In the game, players compete to acquire and develop properties. The player who collects the most rent ultimately wins.

The premier asset in the game is Boardwalk. What makes Boardwalk so valuable?

It’s not the $400 price tag. Rather, it’s the $50 rent owners are entitled to in proportion to the $400 price.

Boardwalk is the best value in the game, because it sports a superior cash flow yield of 12.5% ($50/$400). That beats the heck out of Mediterranean Ave. ($2 rent/$60 price = 3.3% yield).

If you can understand this basic concept from Monopoly, you can see why free cash flow yield is an intuitive measure of value.

If value investing makes sense to you, don’t abandon ship

In the late-1990s, rumors of value investing’s demise were widespread. Then value rebounded big-time from 2000 – 2007.

The bottom-line is there are many ways to invest. Whether you’re a growth investor, value, or something in-between, what matters most is finding a style well-suited to your personality so you can stick with it.

Morgan Housel put it well in a recent post:

My theory is that most investment models maximize for risk-adjusted returns, but in the real world every investor wants to maximize for sleeping well at night and being proud of themselves in a complicated world.”

Traditional value investing is psychologically difficult. It involves adopting lonely opinions. It can also mean having to grit your teeth during long periods where value is out of favor.

However, a hundred years worth of data says value investing works. One cycle doesn’t change that.

You can read the original article at Forbes here.

Peter Lynch: 27 Timeless Investing Lessons

Johnny HopkinsInvesting Strategy, Peter Lynch2 Comments

We’ve just been re-reading Peter Lynch’s classic book – One Up On Wall Street. In it, Lynch provides 27 timeless investing lessons. Here’s an excerpt from the book:

  1. Sometime in the next month, year, or three years, the market will decline sharply
  2. Market declines are great opportunities to buy stocks in companies you like. Corrections—Wall Street’s definition of going down a lot—push outstanding companies to bargain prices
  3. Trying to predict the direction of the market over one year, or even two years, is impossible
  4. To come out ahead you don’t have to be right all the time, or even a majority of the time
  5. The biggest winners are surprises to me, and takeovers are even more surprising. It takes years, not months, to produce big results
  6. Different categories of stocks have different risks and rewards
  7. You can make serious money by compounding a series of 20–30 percent gains in stalwarts
  8. Stock prices often move in opposite directions from the fundamentals but long term, the direction and sustainability of profits will prevail
  9. Just because a company is doing poorly doesn’t mean it can’t do worse
  10. Just because the price goes up doesn’t mean you’re right
  11. Just because the price goes down doesn’t mean you’re wrong
  12. Stalwarts with heavy institutional ownership and lots of Wall Street coverage that have outperformed the market and are overpriced are due for a rest or a decline
  13. Buying a company with mediocre prospects just because the stock is cheap is a losing technique
  14. Selling an outstanding fast grower because its stock seems slightly overpriced is a losing technique
  15. Companies don’t grow for no reason, nor do fast growers stay that way forever
  16. You don’t lose anything by not owning a successful stock, even if it’s a tenbagger
  17. A stock does not know that you own it
  18. Don’t become so attached to a winner that complacency sets in and you stop monitoring the story
  19. If a stock goes to zero, you lose just as much money whether you bought it at $50, $25, $5, or $2—everything you invested
  20. By careful pruning and rotation based on fundamentals, you can improve your results
  21. When stocks are out of line with reality and better alternatives exist, sell them and switch into something else
  22. When favorable cards turn up, add to your bet, and vice versa
  23. You won’t improve results by pulling out the flowers and watering the weeds
  24. If you don’t think you can beat the market, then buy a mutual fund and save yourself a lot of extra work and money
  25. There is always something to worry about
  26. Keep an open mind to new ideas
  27. You don’t have to “kiss all the girls.” I’ve missed my share of tenbaggers and it hasn’t kept me from beating the market

Jeremy Grantham: 4 Books That Every Investor Should Read

Johnny HopkinsInvesting Books, Jeremy GranthamLeave 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 Jeremy Grahtham. Taken from his writings, interviews, lectures, and shareholder letters over the years. Here’s his list:

1. The Wizard and the Prophet: Two Remarkable Scientists and Their Dueling Visions to Shape Tomorrow’s World (Charles Mann)

2. Dirt: The Erosion of Civilizations (David Montgomery)

3. Immoderate Greatness: Why Civilizations Fail (William Ophuls)

4. The End of Normal: The Great Crisis and the Future of Growth (James Galbraith)

$500 Off Boyar’s Forgotten Forty Report: Special Offer for Acquirers Multiple Readers

Johnny HopkinsBoyar's Forgotten Forty ReportLeave a Comment

Each year, Boyar Research publishes their Forgotten Forty Report featuring the forty stocks that they believe have the greatest potential for capital appreciation in the year ahead due to a catalyst they see on the horizon.

To give you an example, Boyar have provided our readers with sample reports from last year’s Forgotten Forty:

Click here to get last year’s free sample reports 

What Is The Forgotten Forty

Every stock profiled in The Forgotten Forty has a one page write-up highlighting Boyar’s investment thesis (including the company’s valuation and potential catalysts for value realization). While the Forgotten Forty contains one page reports on each stock, readers should be comforted to know that Boyar Research has previously published a full-blown research report on every company featured.

The Forgotten Forty has outperformed the S&P 500 by approximately 214 bps over the past 15 years, 216 bps over the past 10 years and 185 bps over the past 5 years.*

Every December, for over two decades, Boyar Research publishes The Forgotten Forty, which features one page reports on the forty companies that we believe have the greatest potential to outperform the leading indices in the year ahead due to a catalyst that we see on the horizon. All companies featured in The Forgotten Forty have been previously analyzed in full length research reports in our flagship subscription research publication Asset Analysis Focus.


(*Past performance is no guarantee of future results. These figures are not audited.)

Potential Catalysts Could Include:

  • The potential initiation of either a dividend or meaningful stock repurchase program reflecting a company’s strong balance sheet with excess cash or meaningful financial capacity (e.g. low leverage levels).
  • The potential for a company to announce/pursue a separation or spin off, which we believe makes economic sense and would help surface shareholder value.
  • Management changes, acquisitions, macro themes (e.g. demographics, housing recovery, etc.) and prospects for improved operating performance due to business investments or changing industry/competitive dynamics.

40 One-Page Snapshots:

  • 40 one-page snapshots detailing our investment theses and valuation for each company profiled.
  •  All companies featured in The Forgotten Forty have been previously analyzed in full length research reports in our flagship subscription research publication Asset Analysis Focus.

$500 Off Boyar’s Forgotten Forty Report: Special Offer for Acquirers Multiple Readers

Boyar is offering Acquirer’s Multiple readers a $500 discount off this year’s Forgotten Forty Report:

Click on this link for the $500 discount.

More about The Forgetten Forty from Mark Boyar:

(Source: YouTube)

The Forgotten Forty on CNBC:

(Source: CNBC)

The Forgotten Forty Features in Barron’s 2018:

Five Value Stocks Set To Beat The Market

Click on this link for the $500 discount.

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

Johnny HopkinsStock Screener1 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:

Westlake Chemical Corporation (NYSE: WLK)

Westlake Chemical Corp is a vertically integrated manufacturer and marketer of basic chemicals, vinyls, polymers and building products. Its products are used for flexible and rigid packaging, automotive products, coatings, water treatment, refrigerants, residential and commercial construction and others. The company operates in the business segments of Olefins and Vinyls. The Olefins segment manufactures and markets polyethylene, styrene monomer and various ethylene co-products. The Vinyl segment manufactures and markets polyvinyl chloride, vinyl chloride monomer, ethylene dichloride, chlor-alkali, chlorinated derivative products, and ethylene. It sells the products across the United States and around the world, of which a majority of the revenue is derived from the United States.

A quick look at the price chart below for Westlake Chemical Corp shows us that the stock is down 30% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 7.03 which means that it remains undervalued.

(Source: Google Finance)

Superinvestors who currently hold positions in Westlake Chemical Corp include:

Cliff Asness – 1,853,189 total shares

Jim Simons – 576,300 total shares

Chuck Royce – 264,727 total shares

Michael Price – 91,800 total shares

Ken Griffin – 76,357 total shares

Steve Cohen – 51,182 total shares

Joel Greenblatt – 46,320 total shares

John Hussman – 25,900 total shares

Jim O’Shaughnessy – 17,443 total shares

Murray Stahl – 4,718 total shares

This Week’s Best Investing Reads 12/14/2018

Johnny HopkinsValue Investing NewsLeave a Comment

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

Why Small Habits Make a Big Difference (Farnam Street)

Normal Accidents in the Stock Market (A Wealth of Common Sense)

Mind the Gap (Humble Dollar)

CNBC’s full interview with Paul Tudor Jones (CNBC)

Asset Owners Are Falling Out of Love With Index Funds (Institutional Investor)

Rational vs. Reasonable (Collaborative Fund)

3 Things To Learn From Market Speculator Victor Niederhoffer (Forbes)

A Mostly Random Walk Down Wall Street (The Irrelevant Investor)

Buffett and Cooperman Agree Luck is Key to Investing Success (Validea)

The Best White Papers 2018 (savvyinvestor)

Lecture Presentation and Notes: Surviving the Investing Game (Safal Niveshak)

Why A Defensive Rotation May Not Work So Well This Time (The Felder Report)

The perils of trying to time the market (The Economist)

5 hot posts I’m reading today (The Reformed Broker)

Slow Down (MIcroCapClub)

What You Can Learn From How Warren Buffett’s Investment Process Evolved (Behavioral Value Investor)

The Greatest Barrier to Entry (Intelligent Fanatics)

Humans vs. Machines: The Stress Management Edge (CFA Institute)

2019 S&P 500 Price Targets By Wall Street Strategists Are Mostly Bullish (Financial Samurai)

My Favorite Investment Writing of 2018 (Of Dollars & Data)

Is There A Behavioural Premium for Illiquid Investments? (Behavioural Investment)

This week’s best investing research:

ETFs Have NOT Screwed Up Correlations, Liquidity, and Alpha Opportunities (Alpha Architect)

Arctic Trails, Winter Gales, And Gold’s Secret Tales (Palisade Research)

Don’t Ignore The Yield Curve (The Macro Tourist)

Yield Curve Inversion Can Cause A Crisis Through Reflexivity (UPFINA)

The Counterproductive Nature of Annual Forecasts (Pragmatic Capatilsm)

Imminent Death Cross in S&P 500 (Price Action Lab)

Synching Lower (Advisor Perspectives)

The Risk in the Risk-Free Rate (Flirting with Models)

Yield Curve Impact on Asset Prices – Evidence Does Not Provide Simple Answers (DSGMV)

The ETF liquidity question: Can the passive universe hold up in the event of a market crisis? (13D Research)

This week’s best investing podcasts:

Top Investment Podcasts – 2018 (Meb Faber)

Animal Spirits Episode 59: Late Cycle (Ben Carlson & Michael Batnick)

[i3] Podcast – MarketFox Interview with James O’Shaughnessy (Daniel Grioli)

Winning at the Great Game: My Interview with Adam Robinson (Part 1) (Shane Parrish)

TIP220: Lessons from Billionaire Oprah Winfrey (Stig Brodersen & Preston Pysh)

Bryan Krug – High Yield Credit Investing (Patrick O’Shaughnessy)

Brent Beshore – Micro Buyout (EP.79) (Ted Seides)

Charlie Munger: I Made Four Or Five Hundred Million Dollars From Two Decisions, With Almost No Risk

Johnny HopkinsCharles Munger, Investing StrategyLeave a Comment

In this short interview Charles Munger explains how he made four or five hundred million dollars from just two decisions:

“I talked about patience. I read Barron’s for fifty years. In fifty years I found one investment opportunity in Barron’s. I made about $80 Million, with almost no risk. I took the $80 Million and gave it to Li Lu who turned it into four or five hundred million dollars. So I have made four or five hundred million dollars from reading Barron’s for fifty years and following one idea. Now that doesn’t help you very much. I’m sorry, but that’s the way it really happened.”

(Source: YouTube)

Shareholder Activism Is On The Rise: Caution Required

Johnny HopkinsActivist InvestingLeave a Comment

Here’s a great article at Forbes about a new generation of activist shareholders:

Historically, large institutional investors pursued purely financial strategies and kept a low profile in governance. This may no longer be the case. In a manner vaguely reminiscent of the corporate raiders of the 1980s, a new generation of activist shareholders is on the rise.

And these players are big fish. Some of the biggest institutional activists include BlackRock, with more than $6 billion in assets under management, followed by the Vanguard Group, with $5 billion. Institutional funds – such as pension funds, insurance companies, endowments, banks, and hedge funds – have initiated public campaigns to leverage their influence on firms and pressure management for change.

Activists vocalize their concerns by engaging in conversations with management and meeting the board directly. If consensus is not reached, they may make their demands public through open letters, white paper reports, shareholder proposals and proxy contests.

Their agenda typically involves issues related to corporate governance, such as replacing management, dividend payouts, new director appointments and executive compensation. However, increasing numbers of activist campaigns seek influence within the strategy domain, which was traditionally the prerogative of executives.

According to a 2018 report by Activist Insight, the number of companies around the globe receiving governance-related proposals from activists has steadily increased, with growth averaging about 11% for the last four years and campaigns targeting 805 companies worldwide in 2017. The pool of funds deployed in these campaigns is expanding, reaching over $200 billion in 2016, up from just $47 billion in 2010. The movement is also expanding geographically: approximately twenty percent of total activist shareholder funds are now deployed outside the English-speaking world – and national campaigns have been launched in various European countries, including France, Germany, Switzerland, Italy and Spain.

Large institutional funds, whose participation in shareholder activism was previously considered atypical, are now getting into the game. The California Public Employees’ Retirement System (CalPERS) pioneered this strategy by pressuring companies it invests in to adhere to norms of corporate governance. Through its list of governance and sustainability principles, CalPERS actively endorses the appointment of independent directors, the formation of board committees, CEO succession initiatives and the appointment of non-executive chairs.

These changes received considerable exposure in the media and many companies changed their governance approach after CalPERS acquired part of their stock. The CalPERS strategy has been accompanied by positive financial returns (about seven percent for the past twenty years), prompting other institutional funds to follow suit. Favorable regulatory changes aimed at empowering minority shareholders have put the movement in the mainstream among medium-sized investors, including hedge funds.

Whether large or small, underperforming or a market leader, no firm can immunize itself from becoming a target of activist investors. Large hedge funds, such as those managed by Carl Icahn, Nelson Peltz, Dan Loeb and Bill Ackman, are publicly agitating and generating media buzz by confronting the boards of iconic global companies such as Apple, PepsiCo, Rolls-Royce, Nestlé and Danone.

The recent appointment of Peltz, the founding partner and CEO of Trian Fund Management, L.P., to the board of P&G exemplifies a turning point in what is said to be the biggest proxy fight in history. Ever since his fund’s decision to acquire a $3.5 billion stake in P&G in 2016, Trian has been lobbying to include a representative on the company’s board – a move that the management and directors have actively resisted.

While the P&G board initially managed to block Peltz’s bid for directorship, he challenged the decision. After both sides spent millions of dollars on proxy battles, including Trian publishing an extensive 94-page white paper detailing proposed strategic changes for the company,

Peltz declared victory by a slim margin. Yet only time will show the magnitude of the anticipated shake-out. During its earlier campaign at PepsiCo, Trian managed to win board appointment through a proxy fight, lobbying for the need to split Frito-Lay from the Pepsi beverage division.

Only a year after gaining the board seat, the fund divested its stake in the company without waiting for the implementation of the key goal of their campaign, making a fifty percent return on its investment.

Following the example of US-originated activist campaigns, European activist hedge funds have mushroomed. The Swedish firm Cevian Capital has driven public battles in flagship Nordic companies such as Erickson, Volvo and Danske Bank. Despite market volatility, the fund has become one of the best performers in Europe with 19.4% returns in 2016.

Previously dormant pension funds are now looking zealously at the large profits that activist hedge funds have generated in the bull market. Similar to CalPERS, the Norwegian sovereign wealth fund Government Pension Fund Global recently approved a list of governance guidelines that emphasized “good” governance principles for companies receiving its funding.

Although the activist agenda may sound appealing to shareholders, existing research has not managed to confirm a positive effect of shareholder activism on long-term firm value. While the view of shareholder activists as corporate visionaries is becoming increasingly dominant, those who have studied this subject carefully do not necessarily agree.

For instance, research on companies targeted by shareholder activists shows that activist investors can both increase and destroy firm value. Factors such as the state of the target firm and the objectives and influence of the investors can play an important role in explaining the effects of activist campaigns on corporate outcomes.

While markets generally react positively to activist involvement, critics of the movement raise concerns about the skewed interest of activist initiatives. This is because activists may not wait to see through the promised changes, instead capturing the momentum of media exposure followed by positive reactions from the stock market and choosing to divest their shares before their proposed strategy is implemented, as Trian did with PepsiCo.

Should minority shareholders be on the alert when an institutional investor enters the firm? Shareholders should strive to maximize the positive impact of entry – better control of managerial discretion – while being ready to prevent any value-destructive strategies.

Corporate shake-outs can make firms leaner and are powerful tools for increasing managerial efficiency. However, they should not be a tool for squeezing out short-term financial gains at the expense of long-term development and profit. Thus, shareholders must carefully examine the value enhancement potential of a firm targeted by activists. As with any mechanism of corporate governance, shareholder activism is not without its flaws, but when used appropriately, it can have a significant positive impact.

You can read the original article here – Forbes – Shareholder Activism Is On The Rise: Caution Required.

Aswath Damodaran: The Inverted Yield Curve: Is There A Signal In The Noise?

Johnny HopkinsAswath Damodaran, Investing StrategyLeave a Comment

Here’s a short presentation by Aswath Damodaran on the recent inverted yield curve and whether there is a signal in the noise. He writes:

On December 4, 2018, the yield on a 5-year US treasury dropped below the yields on the 2-year and 3-year treasuries, causing a portion of the US treasury yield curve to invert.

Since inverted yield curves have predicted recessions almost perfectly for the last six decades in the US, it was viewed as a big reason for the market’s drop that day. In this session, I start with the impressive track record that inverted yield curves have had as recession predictors, posit that this may be because they are stand-ins for the “Fed” effect (on the economy) and then look at the data over the last 56 years.

I find that it is the short end (2 yr vs 1 yr), not the more common used long end (10 yr vs 2 yer), of the yield curve that offers predictive power, and even that power is limited. I also find that the post-2008 data yields very different results than the pre-2008 data, suggesting that the crisis may have reduced investor faith in the powers of the Fed and consequently altered any predictive power that the yield curve may have had prior to the crisis.

You can watch the short presentation here:

(Source: YouTube)

Jeremy Grantham: Investing Was So Much Easier 40 Years Ago

Johnny HopkinsInvesting Strategy, Jeremy GranthamLeave a Comment

Here’s a great podcast with Jeremy Grantham chatting to Barry Ritzholt at Boomberg. When asked about the difference between investing forty years ago compared with today he said:

“The world was so straight forward forty years ago. There was such a limit on the talent in the business. If you showed up and used your brains, you were likely to do pretty well. You didn’t need any help. Now, when I’ve learned all my lessons, the market is so difficult, so full of talent. You need lots of help.”

You can listen to the podcast by clicking on the play button below:

(Source: Bloomberg)