Dan Loeb: We Continue To Invest In The Integration Of Our Fundamental Process And The “Rise of the Machines”

Johnny HopkinsDan Loeb, Shareholder LettersLeave a Comment

Dan Loeb recently released his Q32018 shareholder letter in which he discusses the difficulty of investing in the market this year, the current market environment, and how he plans to invest in the future.

Here’s an excerpt from that letter:

In the hit NBC television show The Good Place, (spoiler alert!) the audience is led to believe that a group of people who led righteous lives arrive in a utopian village where they are given the homes of their dreams to live in, are matched with their soul mates, and can eat endless amounts of frozen yogurt and never get fat. Eventually, the characters learn that their “soul mates” were chosen in error and that the angel played by Ted Danson was actually an evil demon who concocted the scenario as a way to torture them. Turns out, the “Good Place” was actually the “Bad Place.”

Looking back, it has become clear that we and many investors thought earlier this year that we had arrived at the “Good Place” in terms of market conditions. In January, fueled by tax cuts and synchronized global expansion, PMIs rose, economic growth estimates were revised upwards along with corporate earnings, and stocks surged across the board, especially growth stocks. Then, in February, volatility spiked to record levels and stocks dropped precipitously after a series of technical dominoes fell into place. After October’s market rout, it seems that the environment this year ought to have been dubbed the “Bad Place Market.”

As a firm, we continue to invest in the integration of our fundamental process and the “Rise of the Machines” across our single name, sector, and portfolio positions. We remain excited about the application of alternative data insights into long and short investments.

Over the next few months, we will focus on further evolving our “quantamental” process to aid in portfolio selection, construction, and hedging. We see opportunities to shape our portfolio borne out of a more thoughtful understanding of the derivative markets, passive and quant flow impact, cross asset signaling, and how investor behavior sometimes creates extremes in positioning.

We have seen again over the last month what the new era in quant and ETF‐driven markets looks like and we are determined to evolve in order to thrive as fundamental stock pickers in this environment. Led by our new Managing Director, Bob Boroujerdi, we will focus more on these areas to ensure we avoid errors of commission and omission, seek out mispriced assets, and optimize sizing. Finally, we are focused on layering in additional systematic capabilities to identify capital structure opportunities and leverage our  experience in ESG more robustly.

You can read the entire Q32018 shareholder letter here – Dan Loeb Q32018 Shareholder Letter.

Nassim Taleb: In Investing The People You Understand Most Easily Are Necessarily The Bull***tters.

Johnny HopkinsInvesting Strategy, Nassim TalebLeave a Comment

Here’s a great passage from Skin In The Game by Nassim Taleb in which he discusses how easily investors can be hoodwinked by smooth talking salepeople promising outsized returns and, how often the best investing advice comes from those least able to explain it best.

Here’s an excerpt from the book:

The idea of this chapter is Lindy[1]-compatible. Don’t think that beautiful apples taste better, goes the Latin saying. This is a subtler version of the common phrase “all that glitters is not gold”—something it has taken consumers half a century to figure out; even then, as they have been continuously fooled by the aesthetics of produce.

An expert rule in my business is to never hire a well-dressed trader. But it goes beyond:

Hire the successful trader, conditional on a solid track record, whose details you can understand the least.

Not the most: the least. Why so?

I’ve introduced this point in Antifragile, where I called it the green lumber fallacy. A fellow made a fortune in green lumber without knowing what appears to be essential details about the product he traded—he wasn’t aware that green lumber stood for freshly cut wood, not lumber that was painted green.

Meanwhile, by contrast, the person who related the story went bankrupt while knowing every intimate detail about the green lumber. The fallacy is that what one may need to know in the real world does not necessarily match what one can perceive through intellect: it doesn’t mean that details are not relevant, only that those we tend (IYI-style) to believe are important can distract us from more central attributes of the price mechanism.

In any activity, hidden details are only revealed via Lindy.

Another aspect:

What can be phrased and expressed in a clear narrative that convinces suckers will be a sucker trap.

My friend Terry B., who taught an investment class, invited two speakers. One looked the part of the investment manager, down to a tee: tailored clothes, expensive watch, shiny shoes, and clarity of exposition. He also talked big, projecting the type of confidence you would desire in an executive. The second looked closer to our butcher-surgeon and was totally incomprehensible; he even gave the impression that he was confused. Now, when Terry asked the students which of the two they believed was more successful, they didn’t even get close.

The first, not unexpectedly, was in the equivalent of the soup kitchen of that business; the second was at least a centimillionaire.

The late Jimmy Powers, a die-hard New York Irishman with whom I worked in an investment bank early in my trading career, was successful in spite of being a college dropout, with the background of a minor Brooklyn street gangster.

He would discuss our trading activities in meetings with such sentences as: “We did this and then did that, badaboom, badabing, and then it was all groovy,” to an audience of extremely befuddled executives who didn’t mind not understanding what he was talking about, so long as our department was profitable. Remarkably, after a while, I learned to effortlessly understand what Jimmy meant. I also learned, in my early twenties, that the people you understand most easily were necessarily the bull***tters.

1. The Lindy effect is a concept that the future life expectancy of some non-perishable things like a technology or an idea is proportional to their current age, so that every additional period of survival implies a longer remaining life expectancy.

Example: If a book has been in print for forty years, I can expect it to be in print for another forty years. But, and that is the main difference, if it survives another decade, then it will be expected to be in print another fifty years. This, simply, as a rule, tells you why things that have been around for a long time are not “aging” like persons, but “aging” in reverse. Every year that passes without extinction doubles the additional life expectancy. This is an indicator of some robustness. The robustness of an item is proportional to its life!

Michael Mauboussin: 12 Books That Every Investor Should Read

Johnny HopkinsInvesting Books, Michael MauboussinLeave 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 Michael Mauboussin. Taken from his writings, interviews, lectures, and twitter feed over the years. Here’s his list:

1. Security Analysis (Ben Graham & David Dodd)

2. The Snowball: Warren Buffett and the Business of Life (Alice Schroeder)

3. Thinking, Fast and Slow (Daniel Kahneman)

4. Capital Ideas: The Improbable Origins of Modern Wall Street (Peter Bernstein)

5. Dear Chairman: Boardroom Battles and the Rise of Shareholder Activism (Jeff Gramm)

6. The Theory of Investment Value (John Burr Williams)

7. Nudge: Improving Decisions About Health, Wealth, and Happiness (Richard Thaler, Cass Sunstein)

8. Damodaran on Valuation: Security Analysis for Investment and Corporate Finance (Aswath Damodaran)

9. Antifragile: Things That Gain from Disorder (Nassim Taleb)

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

11. A Random Walk Down Wall Street: The Time-Tested Strategy for Successful Investing (Burton Malkiel)

12. Competition Demystified: A Radically Simplified Approach to Business Strategy (Bruce Greenwald, Judd Kahn)

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

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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:

Kulicke and Soffa Industries Inc. (NASDAQ: KLIC)

Kulicke & Soffa Industries Inc is an United States-based company that is principally engaged in designing, manufacturing, and selling capital equipment and expendable tools that are used for assembling semiconductor devices. The company operates through two core segments: equipment, which produces and sells a series of ball bonders, wafer-level bonders, wedge bonders, advanced packaging and electronic assembly solutions; and expendable tools, which produces and offers various expendable tools designed for multiple semiconductor packaging applications. The equipment segment contributes the majority of total revenue. The company generates the majority of its total revenue from the overseas market, mainly in the Asia-Pacific region.

A quick look at the price chart below for Kulicke & Soffa shows us that the stock is down 8% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 4.66 which means that it remains undervalued.

(SOURCE: GOOGLE FINANCE)

Superinvestors who currently hold positions in Kulicke & Soffa include:

Chuck Royce – 4,210,078 total shares

Jim Simons – 1,567,900 total shares

D E Shaw – 1,310,559 total shares

Steven Cohen – 882,108 total shares

Robert Olstein – 402,550 total shares

Prem Watsa – 120,000 total shares

Jeremy Grantham – 99,154 total shares

Joel Greenblatt – 91,394 total shares

Ken Griffin – 74,502 total shares

John Paulson: How Investors Can Benefit From Risk Arbitrage Done Correctly

Johnny HopkinsJohn Paulson, Risk ArbitrageLeave a Comment

We’ve just finished re-reading The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds, written by Maneet Ahuja. There’s a great passage in the book in which legendary risk arbitrageur John Paulson explains how investors can benefit by doing risk arbitrage correctly. Here’s an excerpt from the book:

Paulson: “Say you get a $50 offer from a company that was trading at $35 and it immediately jumps to $49,” he offers. “Now most investors don’t want to stick around for the last dollar and risk losing $14 if the deal breaks. They made a good profit and want to take the property and go home. On the other hand, the arbitrageur steps in, and for that extra dollar, takes the $14 risk of deal completion. Now a dollar may not sound like a lot. But a dollar over 50 is roughly a two percent return. And let’s say it’s a tender offer and will close in 60 days. That means you can do that deal six times a year so six times two is a 12 percent rate of return. That can be an attractive rate of return for a relatively short-term investment.”

But a 12 percent return isn’t outsized by any means, let alone by hedge fund standards of excess. There are other reasons to invest, namely the fact that risk arbitrage is not correlated with the market. “Let’s use that same example,” he says. “If you bought the stock at $49, and the market fell 10 percent over the next two months—you would still earn that 12 percent annualized return, just as long as the transaction closed.”

“The beauty of arbitrage is you can earn good returns that are non-correlated with the market. A deal like this could get exciting if another bidder came in and offered $60. That would be a 20 percent bump, or $10. That would boost the return from 12 percent annualized to 120 percent annualized. It doesn’t happen all the time but it happens often enough that we spend a lot of time trying to determine which of the announced deals could get a competitive bid to capture that potential excess return.”

This Week’s Best Investing Reads 11/09/2018

Johnny HopkinsValue Investing NewsLeave a Comment

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

What’s Staying the Same (Farnam Street)

The McRib Effect (Of Dollars & Data)

Tiny Improvements, Big Results (A Wealth of Common Sense)

I Remember When (The Irrelevant Investor)

When Things Get Wild (Collaborative Fund)

Will the stock market celebrate gridlock? (The Reformed Broker)

The Quant Frontier (Jamie Catherwood)

In Praise of Mediocrity, Being Happy, And Learning How to Learn (Safal Niveshak)

Has Buffett Lost It?! (The Brooklyn Investor)

Stansberry Investor Hour Interview (Vitaliy Katsenelson)

Quant Investor Cliff Asness Defends Factor-Based Strategies (Validea)

Transcendental Meditation: Another Cult or Blissful Nirvana? Greenwald Lectures (csinvesting)

Warren Buffett sends ‘strong signal’ to market with Berkshire Hathaway’s $1 billion buyback (CNBC)

Buffett’s Underrated Investment Attribute (Base Hit Investing)

Michael Mauboussin – Making Sense Of Multiples: Mauboussin On EV/EBITDA (Forbes)

All it Takes is One (MicroCapClub)

Berkshire’s Repurchase Policy: Too Little, Too Late? (The Rational Walk)

Just Asking (Humble Dollar)

Sometimes, It’s Bonds For the Long Run (Jason Zweig)

Smart Beta: How to Avoid Fixed Income’s “Crocodile Jaws” (CFA Institute)

Measuring the Benefit of Diversification (Flirting With Models)

The New Three-Legged Retirement Stool: You, You, And You (Financial Samurai)

Where do we stand after the October repricing? (mrzepczynski)

World After Capital (Barel Karsan)

Three Things I Think I Think – What In the Hell is Going On Out There? (Pragmatic Capitalism)


This week’s best investing research:

Alpha within Factors (OSAM)

Fund Capacity Analysis: How Much Capital Will a Strategy Handle? (Alpha Architect)

Time to Hit the Panic Button? (Insecurity Analysis)

3rd Greatest PE Decline & How S&P 500 Free Cash Flows Are Spent… (UPFINA)

Please, No More Correlations (Price Action Lab)

Smoke and Mirrors: Earnings Flatter US Stock Valuations (Advisor Perspectives)

Mid-Term Election Cycle (Macro Tourist)

Central Banks Buy Their Most Gold In Years As They Look To Reduce Risk (Palisade Research)


This week’s best investing podcasts:

Jonathan Tepper On The Single Most Important Question Investors Should Be Asking Right Now (Jesse Felder)

Ryan  Caldbeck – Quant in Private Markets (Patrick O’Shaughnessy)

TIP215: Billionaire Mark Zuckerberg Lessons – Facebook (Business Podcast) (Stig Brodersen & Preston Pysh)

Animal Spirits: Spirit Animal (Ben Carlson & Michael Batnick)

Bill Ackman: Top 10 Holdings, New Buys, Sold Out Positions

Johnny HopkinsBill Ackman, 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, 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 Bill Ackman (6-30-2018):

The current market value of his portfolio is $ 5,804,747,000.

Top 10 Positions (Only 8 Positions held)

Security Current
Shares
Current Value ($)
QSR / Restaurant Brands International Inc. 20,843,919 1,256,888,000
CMG / Chipotle Mexican Grill, Inc. 2,882,463 1,243,408,000
LOW / Lowe’s Companies, Inc. 7,715,501 737,370,000
MDLZ / Mondelez International, Inc. 16,371,713 671,240,000
UTX / United Technologies Corp. 4,540,615 567,713,000
ADP / Automatic Data Processing, Inc. 4,225,365 566,790,000
PAH / Platform Specialty Products Corp. 40,451,506 469,237,000
HHC / Howard Hughes Corp. (The) 2,204,534 292,101,000

New Positions

Security Current
Shares
Current Value ($)
LOW / Lowe’s Companies, Inc. 7,715,501 737,370,000

Closed Out Positions (0)

Jim Chanos: “Being Short With A Good Short Seller Who’s Producing Nominally Minor Positive Returns In A Bull Market Enables You To Be More Long”

Johnny HopkinsInvesting Strategy, James ChanosLeave a Comment

One of our favorite Jim Chanos interviews is one he did with FT Alphachatterbox in which he explained how short selling provides ‘long-side’ investors with an insurance policy saying:

“Being short with a good short seller who’s producing nominally minor positive returns in a bull market enables you to be more long.”

Here’s an excerpt from the interview:

[Matt Klein] Congratulations. One of the things that seems particularly challenging about short selling, and you mentioned this just now, is that there are a lot of institutional biases against short-selling. The entire sell side industry, much of the financial media, a lot of politicians, they think if things are going up that it’s good. Your 401K is richer.

There’s a lot of psychological pressure. You don’t want to be against the crowd. How do you, as an investor, deal with that and be able to on the one hand stick with the position when you think it’s correct, and also not be so bull headed about it that you ignore the conventional wisdom when it’s actually right?

[Jim Chanos] Well first of all, to get to the preface of your question – “up is good and down is bad” – of course while on the surface that seems right we always forget that having Grandma Klein pay too much for stocks can be bad.

Short-selling is an important check on the marketplace. In fact Bill Sharpe in his Nobel Prize acceptance speech pointed out that frictionless short-selling is essential for the efficient market hypothesis and the capitalised pricing model. And so it is an essential part of the marketplace, but the trickier part of course is doing it right and doing it well, and that is much, much tougher.

Generally speaking we assume that securities prices over time, in the United States anyway, will generally drift up. That’s the safe bet. But that’s not what you get paid for in my business. So what I’ve always said in terms of the business proposition of a fundamental short seller, and it’s paradoxical, but here we go:

“Being short with a good short seller who’s producing nominally minor positive returns in a bull market enables you to be more long.”

That’s really the essence of what we’re doing. So for example, if I make you a few percent a year being short, in effect I’m an insurance policy. I’m protecting your downside and I’m paying you a small amount in dividends. But think about it. You could then go twice long the market, be short my portfolio, and have 2X the market plus a few percent, minus your cost of the additional carry.

That’s the proposition, and that’s why short selling alpha is so prized in the marketplace when you can find it, because it enables you to be more long. When I tell people that they scratch their head. Here you have a noted bear saying that: My proposition to you is that I’m going to let you be more long.

You can find the entire interview here – Jim Chanos – FT Alphachatterbox.

Howard Marks: Going To Cash Under Almost All Circumstances Is Stupid!

Johnny HopkinsHoward Marks, Investing StrategyLeave a Comment

Here’s a great interview with Howard Marks at Goldman Sachs in which Marks discusses why going to cash under almost all circumstances is stupid, and why market timing is impossible.

Here’s an excerpt from the interview:

Interviewer: Now that Oaktree is now $120 billion, and I understand not all pools of money are the same, realistically given the size of that tanker how much time would you really need to meaningfully adjust the portfolio?

Howard Marks: Well first of all I appreciate your use of the word ‘adjust’ because a lot of people who are less astute than you would say how long would it take to go to cash. And the answer is we don’t go to cash. Going to cash under almost all circumstances is stupid because among other things when you go to cash you have to be right – right away.

Because if you go to cash and prices keep going up for a while, as they invariably will, and returns continue to be positive, you fall so bar behind by being in cash that you may even jeopardize your business, stay in business. You’ll certainly jeopardize a lot of your client accounts.

You used the term ‘adjust’ portfolios. If you read the book, as I hope you will, you’ll see that we don’t think about when is the turn going to come, or when is the bottom going to come. In fact, ‘when’ is one of the words I reject in our business because we sometimes have an idea what’s going to happen and we never know when.

The turns that matter… you see the market is a little bit volatile. I mean the economy is a little bit volatile. Sometimes it’s up three and sometimes it’s up one. Sometimes it’s down one. Company profits are more volatile because companies are leveraged, operating and financial. But market prices do this because they’re driven by people. By people’s emotions. By what we call human nature.

So to figure out when things are going to happen you would have to be able to predict emotion, which is impossible. So we don’t ever think about ‘when’ at Oaktree, we think… and one of my mottos is we never know where we’re going but we sure as hell oughta know where we are.

What’s going on around us. What does that imply about the future. If we conclude that the present developments justify a more defensive position then there’s no time like the present, so we start. We do what we can and hopefully we do enough before the stuff hits the fan.

You can watch the entire interview here:


(Source: YouTube)

Charlie Munger: Moral Investing – We Could See It Was Like Putting $100 Million In A Bushel Basket And Setting It On Fire As We Walked Away

Johnny HopkinsCharles Munger, Investing Strategy, Warren BuffettLeave a Comment

Here’s a great video with Charles Munger and Warren Buffett at the 2005 Berkshire Hathaway shareholder meeting in which they discuss the moral distinction between buying a stock and a company.

Here’s an excerpt from the video:

CHARLIE MUNGER: Yeah. I think he’s asking in part, are there some businesses we won’t have as subsidiaries in Berkshire even though they’re wonderful businesses? So, are we rejecting some business opportunities on moral grounds?

WARREN BUFFETT: Yeah, well we’ve referred in past meetings to one we did on that basis. We will own stocks of companies where we wouldn’t want to own the whole business. I mean, you know, you can —  I’m not sure that the logic is perfect on that, but we would not have trouble owning stock in a cigarette company. We wouldn’t want to manufacture cigarettes, you know. We might own a retail company that sells cigarettes. I mean, there’s all kinds of gradations.

But we do not — there are things we don’t want to own and be responsible for their businesses, where we have no problem owning their stocks or bonds. And some years back, Charlie and I went down to, where, Memphis?

CHARLIE MUNGER: Yeah.

WARREN BUFFETT: Yeah, we looked at a — and we were invited down, and we looked at a company that made a product that — perfectly legal — probably one of the best businesses I’ve ever seen, in terms of the economics of it.

CHARLIE MUNGER: Absolutely.

WARREN BUFFETT: Still doing very well. And we met in the room with — we went to a hotel. We met in the room with the people that had the business. And people were perfectly decent people. And they described the business to us. And we went down in the lobby.

And as I remember, we sat down in the lobby and just decided that we didn’t want to be in that business. And, you know, the lines are not perfect on this sort of thing.

I mean, it — I’m sure that there may be ads in the Buffalo News that are selling some investment service or something that I would cringe at if I knew the people involved or what they were selling.

And it — if you own a big retail establishment, a retailer, general merchandise, you know, you’re probably going to be selling cigarettes when you don’t think that you should smoke yourself or that your children should smoke. And it’s — they’re not perfect.

But we have turned down some — the most dramatic being that one because we went — took us a trip of 1,000 miles or so to finally face up to the fact that we didn’t want to own it.

Charlie, you have anything to add on it?

CHARLIE MUNGER: No, but that was interesting because we were young and poor then by modern standards. And, you know, we’re very human. And we could see it was just, like, putting $100 million in a bushel basket and setting it on fire as we walked away. And — (Laughter)

WARREN BUFFETT: You’re making me feel bad. (Laughter)

CHARLIE MUNGER: We made the decision all right and with no difficulty. But there was a certain twinge. (Laughter)

You can watch the entire afternoon session of the 2005 Berkshire Hathaway shareholder meeting here – Berkshire Hathaway 2005 shareholder meeting.

John (Jack) Bogle: 6 Books That Every Investor Should Read

Johnny HopkinsInvesting Books, John BogleLeave 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 John (Jack) Bogle. Taken from his writings, interviews, lectures, and amazon reviews over the years. Here’s his list:

The Intelligent Investor (Benjamin Graham)
A Random Walk Down Wall Street (10th edition) (Burton Malkiel)
Unconventional Success (David Swensen)
The Four Pillars of Investing (William Bernstein)
Extraordinary Popular Delusions and the Madness of Crowds (Charles MacKay)
The Bogleheads’ Guide to Investing (Taylor Larimore, Mel Lindauer)

John (Jack) Bogle has also authored a number of books which you can find here – John (Jack) Bogle Books.

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

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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:

Pilgrim’s Pride Corporation (NASDAQ: PPC)

Pilgrim’s Pride raises, processes, and distributes fresh, frozen, and value-added chicken to grocers, foodservice operators, and distributors. After its 2017 acquisition of Moy Park, about 69% of sales come from the United States, 19% from Europe, and 12% from Mexico. In addition to commodity sales and products under its namesake brand, Pilgrim’s Pride sells items under the Gold Kist, Country Post, Just BARE, Moy Park, Gold’n Plump, and Pierce labels. As of 2017, JBS S.A. owns 79% of Pilgrim’s outstanding stock.

A quick look at the price chart below for Pilgrim’s Pride shows us that the stock is down 44% in the past twelve months. We currently have the stock trading on an Acquirer’s Multiple of 6.58 which means that it remains undervalued.

(SOURCE: GOOGLE FINANCE)

Superinvestors who currently hold positions in Pilgrim’s Pride include:

Cliff Asness – 2,368,213 total shares

Ken Griffin – 385,018 total shares

Steve Cohen – 228,000 total shares

Jim Simons – 208,213 total shares

Scott Black – 93,520 total shares

Mario Gabelli – 15,000 total shares

This Week’s Best Investing Reads 11/02/2018

Johnny HopkinsValue Investing NewsLeave a Comment

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

The Surprising Power of The Long Game (Farnam Street)

The Relative Anchor in Rates (A Wealth of Common Sense)

A Top or The Top? (The Irrelevant Investor)

Shiller: Stocks Could Rise Higher Before They Fall (Validea)

Tax-Loss Selling: A Silver Lining in Volatile Markets (Morningstar)

An October Surprise? Making Sense of the Market Mayhem! (Aswath Damodaran)

Personal Musings, November 2018 Edition (Vitaliy Katsenelson)

Five Reasons Why Stocks Have Fallen (Bloomberg)

Thinking in Bets, Lessons from Howard Marks, and Few Insights on D-Mart (Safal Niveshak)

Jean-Marie Eveillard: The Best Book Ever Written About Value Investing (ValueWalk)

You Have No Competition (Of Dollars & Data)

Taleb Says World Is More Fragile Today Than in 2007 (Bloomberg)

No One is Crazy (Collaborative Fund)

Whitney Tilson – Bull and bear debate the FANG trade (YouTube)

Earnings Learnings (The Reformed Broker)

Here’s what you get when you stick a bunch of investing wonks on an island (MarketWatch)

What Investors Can Learn From Gamblers (Jason Zweig)

Mohnish Pabrai – Interview with CNBC – TV18 on Investing Opportunities in India (Mohnish Pabrai)

When Simplicity Met Fragility (Flirting With Models)

Why Wait? (Humble Dollar)

REAL News not FAKE News; Podcasts (csinvesting)

America Is Not An Economic Island (The Macro Tourist)

Not Learning From Investing History Can Be Hazardous To Your Wealth (Behavioral Value Investor)

The Billionaire Raj (Barel Karsen)

Investing vs. Speculating: Why Knowing the Difference Is Key (Advisor Perspectives)

How A Big Expensive House Can Ruin Your Life And Path To Financial Freedom (Financial Samurai)

Execution is Everything (25iq)


This week’s best investing research:

The Dark Side of Low-Volatility Stocks (CFA Institute)

Self Discipline (Krueger & Catalano)

The Reason Housing Market Is Falling (UPFINA)

Emerging Markets Face a New Problem as Trillions in Bonds Mature – and Soon (Palisade Research)

Funding in an Endogenous Money System (Nerdy) (Pragmatic Capitalism)

S&P 500 Now 27 Days Without Back-to-Back Gains (Price Action Lab)

Bad October performance, but we are already hearing that this was expected – The hindsight bias (mrzepczynski)

Missing the best or worst market days (Alvarez Quant Trading)

Asset Diversification in a Flat World (Alpha Architect)


This week’s best investing podcasts:

The Kids Are Worth It (Shane Parrish)

TIP214: Billionaire Richard Branson Lessons (Business Podcast) (Stig Brodersen & Preston Pysh)

Episode #128: Claude Lamoureux, When You Have to Make A Decision, Always Make the One That Will Let You Sleep Better, Not Eat Better (Meb Faber)

Animal Spirits Episode 53: Panic a Little (Ben Carlson & Michael Batnick)

Stephen Mandel: Top 10 Holdings, New Buys, Sold Out Positions

Johnny HopkinsStock ScreenerLeave 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 Stephen Mandel (6-30-2018):

The current market value of his portfolio is $18,908,615,000.

Top 10 Positions

Security Current
Shares
Current Value
($)
MSFT / Microsoft Corp. 12,504,471 1,233,066,000
BABA / Alibaba Group Holding Limited 6,394,697 1,186,408,000
ATVI / Activision Blizzard, Inc. 14,257,637 1,088,143,000
ADBE / Adobe Systems, Inc. 4,456,362 1,086,506,000
BKNG / Booking Holdings Inc. 531,060 1,076,506,000
UNH / UnitedHealth Group Inc. 4,121,415 1,011,148,000
IQV / IQVIA Holdings Inc. 10,120,122 1,010,191,000
EA / Electronic Arts Inc. 6,317,420 890,883,000
STZ / Constellation Brands, Inc. 3,877,836 848,742,000
CSX / CSX Corp. 13,192,235 841,401,000

Top New Positions

Security Current
Shares
Current Value
($)
CP / Canadian Pacific Railway Ltd. 2,861,578 523,726,000
NVDA / NVIDIA Corp. 2,134,768 505,727,000
MHK / Mohawk Industries, Inc. 477,072 102,222,000

Sold Out Positions

Security Prev
Shares
Prev Value
($)
AVGO / Broadcom Limited 2,737,741 645,149,000
TSM / Taiwan Semiconductor Manufacturing Co. Ltd. 12,349,027 540,393,000
BLK / BlackRock, Inc. 918,870 497,770,000
TMUS / T-Mobile US, Inc. 3,486,629 212,824,000
EXAS / EXACT Sciences Corp. 1,298,001 52,348,000

Jim Simons: Investing Is a Very ‘Gut Wrenching’ Business But You Can Find Things That Are Predictive

Johnny HopkinsInvesting Strategy, Jim SimonsLeave a Comment

Here’s a great video interview with Jim Simons in which he discusses how his early success came more from luck than strategy. He also discusses how gut wrenching investing can be, how the efficient market theory is wrong, and how machine learning is only as good as the humans operating it. Here’s some excerpts from the video:

Jim Simons (JS): So I went into the money management business, so to speak.

Interviewer: So you started with some of your dad’s money and that got you a taste of it and interest in it.

JS: Some family money and then some other people put up some money. I did that. No models, no models, for the first two years.

Interviewer: So what were you doing then. You were just using cunning. Just like normal people.

Like normal people do. I brought in a couple of people to work with me. We were extremely successful. I think it was just plain good luck, but nonetheless we were very successful. I could see this was a very gut wrenching business. You come in one morning, you think you’re a genius, the markets are for you. We were trading currencies and commodities and financial instruments and so on, not stocks, those kinds of things.

The next morning you come in and you feel like a jerk the market’s against you – was very gut wrenching. In looking at the patterns of prices I could see that there was something we could study here that there may be some ways to predict prices mathematically or statistically. I started working on that and then brought in some other people and gradually built models, and the models got better and better. Finally the models replaced the fundamental stuff. So it took a while.

Efficient Market Theory

There’s something called the efficient market theory which says that there’s nothing in the data, let’s say price data, which will indicate anything about the future because the price is sort of always right, the price is always right in some sense. But that’s just not true.

There are anomalies in the data, even in the price history data. For one thing commodities especially used to trend, not dramatically trend, but trend. So if you could get the trend right you’d bet on the trend and you’d make money more often than you wouldn’t. Whether it was going down or going up that was an anomaly in the data. But gradually we found more and more and more and more anomalies. None of them is so overwhelming that you’re going to clean up on a particular anomaly. Because if they were other people would have seen them. So they have to be subtle things. You put together a collection of these subtle anomalies and you begin to get something that will predict pretty well.

It’s what’s called machine learning. You find things that are predictive. You might guess such and such should be predictive, might be predictive, and you test it out in the computer and maybe it is, maybe it isn’t.

Successful Machine Learning Still Comes Down To The Human Factor

The computer is just a tool that we use. A good cabinet maker doesn’t say it’s all because of my wonderful chisel you know. You may have great film equipment but that’s not why you’re a success at doing what you’re doing, working with good equipment. But another guy would make a mess of it, with the same equipment. We don’t feel, “Oh the computer is doing everything”. The computer does what you tell it to do.


(Source: YouTube)

Joel Greenblatt: Redefining ‘Traditional’ Value Investing So That It Never Goes Out Of Favor

Johnny HopkinsInvesting Strategy, Joel GreenblattLeave a Comment

Here’s a great interview with Joel Greenblatt at Bloomberg in which he discusses the types of businesses he’s currently looking for and how he’s redefined the ‘traditional’ value investing strategy so that it never goes out of favor’

Here’s an excerpt from the interview:

We try to stick to companies gushing free cashflow. Huge returns on capital, meaning they deploy their capital well.

That avoids some of the value traps from ‘traditional’ value. I think that brings up the point – we don’t really think of value as low price-to-book, low price-to-sales investing. We’re actually valuing businesses based on cashflow, like a private equity investor would.

So if you’re trying to figure out what a company’s worth and buy it for less, at a bigger discount, that will never go out of favor even if value as defined by companies like Morningstar, which is low price-to-book or low price-to-sales investing. That may or may not stay in vogue. It may be out of favor sometimes, in favor, it may not even outperform the market going forward.

That doesn’t mean that much to me because those have been correlations that have worked with more than your fair share of companies that are out of favor. I imagine they’ll come back a some point. We’re actually valuing businesses based on cashflows. That’s what stocks are, ownership shares in businesses.

You can watch the entire interview here. (If the video doesn’t start you can watch it on YouTube here.)

Charlie Munger: That Decision Has Cost Me Now About $5 Billion

Johnny HopkinsCharles Munger, Investing StrategyLeave a Comment

Here’s a great recent interview with Charlie Munger & Li Lui in which Munger recalls one of his greatest investment mistakes that cost him $5 Billion. Here’s his recollection:

Munger: Let’s take a simple question.

As I said in that book. They offered me three hundred shares in Belridge Oil, which I bought because I had the money on hand. They offered fifteen hundred more at the same price. Now I had to sell something or borrow the money. So I bought the three hundred and not the fifteen hundred.

That decision has cost me now about $5 Billion. I would be $5 Billion richer if I bought the other fifteen hundred. It’s the contrast. It didn’t inconvenience me in any way to buy the three hundred, it inconvenienced me to buy the other fifteen hundred.

Just the extra contrast made my judgement go sour. It was the dumbest goddam decision. One of the dumbest investment decisions I have ever made in my whole life.

The stock was not overpriced cause it was just a little more inconvenient for me to buy it. But the inconvenience was enough to trigger my mind.

Another problem on that was even worse…

The man who dominated the corporation was eccentric and heavy drinking. But the oilfield wasn’t over-drinking.

I had two different psychological reasons so I made the wrong decision.

I thought too much about how much the man was drinking and too little about how good the oilfield was. I thought too much about my inconvenience and too little about the basic situation.

So I screwed up fairly well!.

That should encourage you people. You can blow the major opportunities of your life, but still get through all right.

You can watch the full interview here:

A Value Investor’s Reading List: 26 Books

Johnny HopkinsInvesting 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 the recommended reading list from Columbia Business School. Here’s the list:

1. Security Analysis: Sixth Edition, Foreword by Warren Buffett (Benjamin Graham)

2. The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Benjamin Graham)

3. The Little Book That Beats the Market (Joel Greenblatt)

4. You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits (Joel Greenblatt)

5. Value Investing: From Graham to Buffett and Beyond (Bruce Greenwald)

6. Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor (Seth Klarman)

7. The Most Important Thing: Uncommon Sense for the Thoughtful Investor (Howard Marks)

8. The Little Book of Behavioral Investing: How not to be your own worst enemy (James Montier)

9. Distress Investing: Principles and Technique (Marty Whitman)

10. Value Investing: A Balanced Approach (Marty Whitman)

11. The Essays of Warren Buffett: Lessons for Corporate America (Warren Buffett, Lawrence Cunningham)

12. The Warren Buffett Way (Robert Hagstrom)

13. The Warren Buffett Portfolio: Mastering the Power of the Focus Investment Strategy (Robert Hagstrom)

14. Buffett: The Making Of An American Capitalist (Roger Lowenstein)

15. The Memoirs of the Dean of Wall Street (Benjamin Graham)

16. The Rediscovered Benjamin Graham: Selected Writings of the Wall Street Legend (Benjamin Graham, Janet Lowe)

17. Benjamin Graham on Value Investing: Lessons from the Dean of Wall Street (Janet Lowe)

18. Investment Gurus: A Road Map to Wealth from the World’s Best Money Managers (Peter Tanous)

19. The Money Masters (John Train)

20. What Has Worked In Investing (Tweedy Browne)

21. What Works on Wall Street (James O’Shaughnessy)

22. How to Beat the Market With High-Performance Generic Stocks (Your Broker Won’t Tell You) (Avner Arbel)

23. Competition Demystified: A Radically Simplified Approach to Business Strategy (Bruce Greenwald)

24. The New Finance: The Case Against Efficient Markets (Robert Haugen)

25. In the Shadows of Wall Street: A Guide to Investing in Neglected Stocks (Paul Strebel, Steven Carvell)

26. Wall Street On Sale (Timothy Vick)

Dan Loeb: Top 10 Holdings, New Buys, Sold Out Positions

Johnny HopkinsDan Loeb, 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, 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 Dan Loeb (6-30-2018):

The current market value of his portfolio is $14,351,508,000.

Top Ten Positions

Security Current
Shares
Current Value
($)
BAX / Baxter International, Inc. 36,000,000 2,658,240,000
NXPI / NXP Semiconductors N.V. 10,750,000 117,465,000
UTX / United Technologies Corp. 7,600,000 950,228,000
DOW / Dow Chemical Co. (The) 14,300,000 942,656,000
PYPL / PayPal Holdings, Inc. 10,000,000 832,700,000
NFLX / Netflix, Inc. 2,000,000 782,860,000
BABA / Alibaba Group Holding Limited 4,000,000 742,120,000
FB / Facebook, Inc. 3,000,000 582,960,000
STZ / Constellation Brands, Inc. 2,000,000 437,740,000
BID / Sotheby’s 6,661,604 361,992,000

Top 5 New Positions

Security Current
Shares
Current Value
($)
NXPI / NXP Semiconductors N.V. 10,750,000 1,174,652,000
PYPL / PayPal Holdings, Inc. 10,000,000 832,700,000
V / Visa, Inc. 1,700,000 225,165,000
DVMT / Dell Technologies Inc. 2,000,000 169,160,000
DE / Deere & Co. 1,100,000 153,780,000

Top 5 Closed Out Positions

Security Prev
Shares
Prev Value
($)
GOOGL / Alphabet Inc. 575,000 596,356,000
ICE / Intercontinental Exchange, Inc. 5,000,000 362,600,000
MHK / Mohawk Industries, Inc. 835,000 193,904,000
PAGS / PagSeguro Digital Ltd. 4,550,000 174,356,000
ANTM / Anthem, Inc. 785,000 172,464,000

This Week’s Best Investing Reads 10/26/2018

Johnny HopkinsValue Investing NewsLeave a Comment

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

And now…a reality check (The Reformed Broker)

Hemingway, a Lost Suitcase, and the Recipe for Stupidity (Farnam Street)

DotCom Deja Vu (The Felder Report)

Can the Stock Market Predict The Next Recession? (A Wealth of Common Sense)

Value Investing Claims Another Casualty as $5 Billion SPO Shuts (Bloomberg)

Rube Goldberg (Collaborative Fund)

All You Need to Do to Finish Rich (The Irrelevant Investor)

Stepping Up (Humble Dollar)

What We (Don’t) Know (Safal Niveshak)

You’re a Bad Investor? That Can Be Good (Jason Zweig)

Pessimism on global growth reaches November 2008 levels; is it justified?  (The LT3000 Blog)

ValueAct’s Ubben says electricity is the next ‘Amazon-like’ growth area (CNBC)

Are Millennials About to Get Slaughtered? (Macro Tourist)

The Average Stock Is Overvalued Somewhere Between Tremendously And Enormously (Vitaliy Katsenelson)

Summary of Great Investors’ Best Ideas Conference (GIBI) Dallas 2018 (Market Folly)

Why Kodak Died and Fujifilm Thrived: A Tale of Two Film Companies (PetaPixel)

Improving Factor-Based Quantitative Investing by Forecasting Company Fundamentals (Cornell)

The agony of the value investor (The Economist)

Investing is Hard (MicroCapClub)

Action Speaks Louder Than Words (Intelligent Fanatics)

Older tech companies among the more reasonable stocks right now (Aswath Damodaran)

Howard Marks, may the odds be ever in your favor (The Waiter’s Pad)

The George Costanza Portfolio (Cliff Asness)

Alignment of Investing Styles Not Necessarily Bad Omen (Validea)

Circle of Competence (Behavioral Value Investor)

Small Is Better and So Is Passive in Money Management (Bloomberg)

A Change in Perspective (Of Dollars & Data)

Peter Bernstein: Embracing Surprise (Novel Investor)

Attack of the Clone: Lessons from Replicating Long/Short Equity (Flirting With Models)

Why Does the Stock Market Rise and Fall? (Pragmatic Capitalism)

Why $5 Million Is Barely Enough To Retire Early With A Family (Financial Samurai)

Don’t Avoid the Simple Questions (Behavioural Investment)


This week’s best investing research reads:

Constructing Long-Only Multifactor Strategies: Portfolio Blending vs. Signal Blending (Alpha Architect)

Stocks Above Their 50-DMA (Crossing Wall Street)

Wall Street ‘Pros’ Finally Seeing the Upcoming Global Earnings Recession (Palisade Research)

Reviewing The Catalysts Of Stock Market Volatility (UPFINA)

Another Ominous Sign For the Market (Price Action Lab)

The big waves for stocks, bonds and commodities – You have to exploit these trends (mrzepczynski)

Scoring the Market Negatives (Advisor Perspectives)

Andrew W. Lo: To Survive Adaptive Markets, Look to Biology (CFA Institute)


This week’s best investing podcasts:

Value Investing That Is Socially Responsible With Jerome Dodson (GuruFocus)

Karen Finerman, ‘Out-of-Favorness’ Is Appealing. The Difficult Part is Timing (Meb Faber)

Precious Metal Investing: Gold, Silver, & Platinum w/ David McAlvany (Stig Brodersen & Preston Pysh)

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