I had to do something to end of the year without making ridiculous predictions about next year (I also plan to post something about ValueWalk’s growth thanks to our loyal readers). However I did make some good predictions in 09,10, 11 which came true this year. Not to sound haughty, and readers can correct me if I am wrong, but I dont recall any wrong predictions (part of the reason is that I nearly never make predictions), although I did make some bad investments!
One had to do with the stock market, one on John Paulson and Bruce Berkowitz, and many on the Middle East.
Ill link them below:
Questioning Berkowitz’s investments (August 2010) Bruce Berkowitz: Where is the free Cash Flow?
Question John Paulson on BAC (September 2009) https://www.valuewalk.com/2009/11/fair-value-of-bank-of-america-a-flaw-in-paulsons-calculation-2/
Yemen, Egypt, Iran and Iraq http://seekingalpha.com/article/180672-will-middle-east-tensions-drive-oil-to-300-part-i (January 2010) The headline was just to get traffic! as can be seen in part II.
(Feb. 2011) My predictions about the ‘democracy emerging in Egypt’ https://www.valuewalk.com/2011/02/egypt-repercussions/
Due to the rapid change in Egypt I am more skeptical of an Israeli strike on Iran. Additionally since Iran now controls the Iranian Government, a war is highly unlikely.
Stock market euphoria (June 2011) quote Stock Market Valuation June 2, 2011:
I find the current valuations astonishing. No I am not refering to linkedin or Groupon or the high fliers. The overall market is so overvalued considering the macro picture. I am not a macro investor, but Wall Street is. It makes no sense for the Shiller PE to be at 23 (an earnings yield of 4.3%), when the deficit is out of control, there is inflation accross the board except Real estate (the one asset class QE2 was really supposed to help!), housing is in a double dip, unemployment cannot come down for years unless there is job growth of 500k a month (close to impossible). Additionally, the Euro zone is experiencing a big crisis, Japan suffered a catastrohpic humanitarian and economic disaster, and countries like China are starting to get nervous about over heating in their economies.
What further demonstrates the inefficiencies in the market, is the valuation of small caps to large caps. The perma-bulls are looking for companies that have large exposure overseas, especially in emerging markets. However, the large cap companies produce far more of their revenue from overseas than small caps. Yet, large caps are far cheaper than small caps. This really defies logic.
So here were the most popular articles in descending order (pages are excluded):
Anything which is removed I do not send out, so please do not email requesting a copy.
https://www.valuewalk.com/2011/12/luxor-capital-q3-shareholder-letter-short-danske-bank/ This post probably got me banned for life from Denmark. It was about Denmark’s largest bank, which has assets 2x GDP. The article was mostly a letter from Luxor Capital. After being swamped with media requests, Luxor’s CEO asked me to remove the letter. We ended up getting lunch, and is a super nice guy with a sick track record who tries to keep below the radar. The post was published on the front pages of major Danish papers, and other European publications.
https://www.valuewalk.com/2011/09/walk-exclusive-seth-klarman-q211-shareholder-letter/ I removed this at the request of Baupost, lots of great stuff including some announcements of Klarman investing in debt, which he made a nice return on.
https://www.valuewalk.com/2011/10/jim-chanos-situation-china-deteriorating-rapidly/ Jim Chanos with further brilliant analysis of China.
https://www.valuewalk.com/2011/12/kyle-bass-latest-letter-sovereign-defaults-imminent/ kyle Bass talking about Doomsday, excellent letter, even if one believes he is too pessimistic as I do. H/T http://www.zerohedge.com/
https://www.valuewalk.com/2011/10/investing-congress-2011-david-einhorns-full-presentation/ Another famous short of David Einhorn, this one involving GMCR. Turns out a lot of value investors were short the company before the presentation, including Whitney Tilson.
https://www.valuewalk.com/2011/11/bill-ackmans-pershing-square-q3-shareholder-letter/ Bill Ackman q3 S/L, H/T http://dealbreaker.com/. Anyone notice a theme how the most popular articles are ones written by great investors and I merely obtain and post them?
https://www.valuewalk.com/2011/03/nassim-taleb-black-swans/ Great article by Taleb on the earthquake in Japan. This article got picked up by a huge Japanese news-site and went viral.
https://www.valuewalk.com/2011/11/full-john-paulson-q311-shareholder-letter/. John Paulson’s “Were Sorry Letter”. I was the first in the media to obtain the letter. I got requests from major media outlets for it.
Well stop the list here, now for some books (I personally have read all of these):
You Can Be a Stock Market Genius: Uncover the Secret Hiding Places of Stock Market Profits by Joel Greenblatt. Best book on special situation investing. I wish Greenblatt discussed these topics more, instead of the magic formula
Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New Epilogue by David Einhorn. David Einhorn’s personal story of his SIX year short of Allied Capital. Great story, good reading on how to identify fraud, and good lesson about true long term investing.
Value Investing: From Graham to Buffett and Beyond (Wiley Finance) by Bruce Greenwald. Great book on different ways of valuing securities including calculation the value of items like intangibles.
The Intelligent Investor: The Definitive Book on Value Investing. A Book of Practical Counsel (Revised Edition) by Benjamin Graham. What can I say? This is the ‘Bible of Value Investing.’ I personally read this book at least four times. This was my introduction into value investing, many others share the same story.
Quality of Earnings by Thomas A. Glove. One of the best books on accounting shenanigans. A must read for anyone who really wants to understand financial statements.
There’s Always Something to Do: The Peter Cundill Investment Approach by Christopher Risso-Gill. One of the best books I ever read on Peter Cundill. Cundill was one of the greatest Canadian value investors ever. He invested across every asset class, anywhere where he could find value.
Contrarian Investment Strategies – The Next Generation by David Dreman. Probably the first book on behavioral finance ever written. Dreman gets a lot less credit than he deserves.
The Essays of Warren Buffett: Lessons for Corporate America, Second Edition by L. A. Cunningham. Great compilation of Warren Buffett’s shareholder letters by topic.
The Little Book That Still Beats the Market (Little Books. Big Profits) by Joel Greenblatt. Joel Greenblatt’s book on the merits of valuation equal weighted investing. Very short and quick read. Has some good important data.
Here are some of the most popular best-sellers of the year:
Steve Jobs by Walter Isaacson.
Thinking, Fast and Slow by Daniel Kahneman. Kahneman is one of the best behavioral finance economists today.
Boomerang: Travels in the New Third World by Michael Lewis. Lewis’ books are always best sellers, I really want to read this one just for the story about Kyle Bass.
The Big Short: Inside the Doomsday Machine by Michael Lewis. Another best seller by Lewis. This book tells the fascinating tale of previously unknown investors such as Michael Burry, Steve Eisman and others, who shorted subprime.
And the best seller of 2012 will be (this is my only prediction for 2012):
The Alpha Masters: Unlocking the Genius of the World’s Top Hedge Funds by Maneet Ahuja (Foreword by Carl Icahn), (Afterword), Mohamed El-Erian. The book features interviews and insights from David Einhorn, Bill Ackman, John Paulson, Kyle Bass, Dan Loeb, Ray Dalio, David Shaw, Marc Lasry, Jim Chanos, Sonia Gardner, Pierre Lagrange, and many other great hedge fund CEOs.
