Hottest links for Saturday and Sunday October 26th-27th, 2013 the weekend edition on time (see Friday’s edition of hottest links). Get our free daily newsletter (which is being updated currently to make it even better) and never miss a single linkfest.

Top stories for today can be found below. There are a lot of great value investing/behavioral articles out, including some great valuation pieces; Check out some good articles on hedge funds, including an article about a new massive purchase by Howard Marks’ Oaktree Capital; Some notes from a recent investment conference, stay tuned as we are covering four different investment conferences this week; The debate over small caps, Royce Funds explains why there could still be some room for growth in the sector; How much is a Warren Buffett tweet worth? What about one from Carl Icahn? Not even close to one from Justin Bieber; A Man’s house went on fire but he ran back in to heroically save….

Value Investing

Colfax Corporation (CFX) Valuation

OK, so this is another extension of the footnote to the book post.  Someone mentioned in the comment section that Colfax Corp (NYSE:CFX) is the younger analog to Danaher Corporation (NYSE:DHR) and it is owned by some Tiger cubs and BDT Capital, a firm run by Byron Trott. (Buffett’s investment banker). [KK, The Brooklyn Investor]

Investing Words of Wisdom (Part 1)

Wise words from great investors… “I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.” – Warren Buffett. [Kanwal Sarai, Simply Investing]

7 Key Tips to Value Investing

My early days of investing involved some speculative purchases of Priceline and Kmart.  The first one turned out great and inspired a passion for investing. Here’s a look at why that’s important, and some other key tips I’ve mastered over the years. [Benjamin Clark, ModernGraham]

My Investing Mistakes And Lessons That I’ve Learned

This is a list of the most important things that I’ve discovered.  Sometimes I have learned these things the hard way. [Glenn Chan]

Notes From Excellence in Investing San Francisco 2013

The 4th annual Excellence in Investing: San Francisco conference took place this week and MarketFolly was there to cover the event. Notes included are of John Burbank III –  Passport Capital, Kurt Billick –  Bocage Capital, Mick McGuire –  Marcato Capital Management, Mason Morfit –  ValueAct Capital and more. [Market Folly] Related; More coverage of Excellence in Investing include notes of Michael Moe – Buy Twitter, Malcolm Fairbairn – Buy CF Industries Holdings, Inc. (NYSE:CF), Christopher Lord – Buy tower companies – Crown Castle International Corp. (NYSE:CCI), American Tower Corp (NYSE:AMT), SBA Communications Corporation (NASDAQ:SBAC) and more. [ValueWalk]


Probabilistic Investing

While I don’t think the US is in a bubble it is in the top 10% of valuations, which works as a massive headwind to returns in the 3-10 year period. [Mebane Faber]



Small cap valuations

What to Do with Small Caps?

First is a chart on the historic run of small caps from WisdomTree, then a chart from the amazing Green Book from Leuthold that lays out the valuation argument against small caps relative to the overall market. [Mebane Faber]

Hottest Links

Related; The table below shows all calendar years from 1979 to 2012 where GDP Growth was less than 3%, the corresponding performance of the Russell 2000 (INDEXRUSSELL:RUT), the Russell 1000 (INDEXRUSSELL:RUI), and the index performance spread. [TheRoyceFunds]

Calendar Year GDP Growth Russell 2000
Russell 1000
Russell 2000 Outperformance
or Underperformance
vs. Russell 1000
1980 -0.29% 38.60% 31.87% 6.73%
1981 2.54 2.03 -5.10 7.13
1982 -1.98 24.95 20.31 4.64
1990 1.86 -19.48 -4.21 -15.27
1991 -0.26 46.04 33.04 13.00
1993 2.87 18.88 10.18 8.70
1995 2.55 28.45 37.77 -9.32
2001 1.09 2.49 -12.45 14.94
2002 1.83 -20.48 -21.65 1.17
2003 2.55 47.25 29.89 17.36
2006 2.66 18.37 15.46 2.91
2007 1.91 -1.57 5.77 -7.34
2008 -0.36 -33.79 -37.60 3.81
2009 -3.11 27.17 28.43 -1.26
2010 2.38 26.86 16.10 10.76
2011 1.80 -4.18 1.50 -5.68
2012 2.21 16.35 16.42 -0.07

 Hedge Funds

Lone Pine To Combine Long-Only Funds

Stephen Mandel Jr.’s Lone Pine Capital is merging its two main long-only equity funds. Lone Cascade and Lone Dragon Pine, according to the Greenwich, Connecticut headge fund firm’s third quarter letter to investors. [Stephen Taub, Institutional Investor’s Alpha]

Some Excerpts from Conatus Capital’s Q3 letter

Conatus Capital Partners rose 3.2 percent net of fees in the third quarter, bringing the fund to a 12.7 percent gain for the year through September. Recent winning stocks include Gulfport Energy Corporation (NASDAQ:GPOR), Pioneer Natural Resources (NYSE:PXD), Facebook Inc (NASDAQ:FB), LinkedIn Corp (NYSE:LNKD) and, Inc. (NASDAQ:AMZN), according to the Oct. 16 letter. Asia stocks Tencent Holdings Ltd (HKG:0700) (OTCMKTS:TCEHY), International, Ltd. (ADR) (NASDAQ:CTRP), Limited (HKG:1688) (OTCMKTS:ALBIY) and European equities EADS NV (EPA:EAD) and Volkswagen AG (ETR:VOW) (FRA: VOQ) (OTCMKTS:VLKAY) also performed well. [Lawrence Delevingne, CNBC]

Battle Of The Billionaires Erupts Over Keystone

The brawl is over an upcoming decision by the Obama administration about whether energy company TransCanada Corporation (NYSE:TRP) (TSE:TRP) should be allowed to build a massive oil pipeline, called Keystone XL, that will ship oil sands in Northern Canada to refineries in the Gulf of Mexico. [Lawrence Delevingne, CNBC]

Oaktree Capital Discloses NewPage Stake

Howard Marks’ hedge fund firm Oaktree Capital Group LLC (NYSE:OAK) has filed a 13G with the SEC and disclosed a 15.8% ownership stake in NewPage Holdings with 1,117,192 shares. [Market Folly]



These Funds Suggest the Muni Bond Fire Sale is Over

iShares S&P Natnl AMT – Free Munpl Bd Fd (NYSEARCA:MUB), the biggest ETF for the $3.7 trillion market, is selling at the smallest discount to fair value since July. Now here’s a year-to-date chart of how SPDR Series Trust (NYSEARCA:HYMB) trades versus fair value. [Brendan Conway, Focus on Funds] Hottest links

Why Closet Index Trackers Need To Be Regulated

The point of most actively managed investment funds is to beat the market, but in order to beat the market they must in some way be different from the market. [John Kingham, UK Value Investor]

The Great Rotation Has Already Happened in ETF’s

Vanguard Dividend Appreciation ETF (NYSEARCA:VIG), the category leader, has enjoyed $3.2 billion inflows this year, while SPDR S&P Dividend (ETF) (NYSEARCA:SDY) has taken in $1.2 billion. The figure for Vanguard High Dividend Yield ETF (NYSEARCA:VYM) is $1.6 billion. [Climateer Investing]

Could An ETF Price War Get Ugly?

Fidelity launched 10 new passive sector exchange-traded funds — they started trading at 9:30 a.m. — each with a total expense ratio of 0.12% and available commission-free through the company’s brokerage platforms. [Chuck Jaffe, MarketWatch]

Tweet values

Carl Icahn Tweets Aren’t Worth What They Used To Be

After billionaire activist investor Carl Icahn appeared on CNBC for almost an hour to discuss his proposal that Apple Inc. (NASDAQ:AAPL) CEO Tim Cook should initiate a $150 billion share buyback, Miller Tabak chief economic strategist Andrew Wilkinson pointed out in his “chart of the day” that Icahn is not even a top-2o shareholder of Apple. [Matthew Boesler, Business Insider]

Hottest links

Related; Mr. Buffett, valued at more than $58 billion and the second-richest man in the world, according to Forbes, would be worth a mere 13 cents to Twitter, Inc. (TWTR) with his paltry four messages. Meanwhile, Mr. Bieber, No. 9 on Forbes’ Celebrity 100 and the most-followed person on Twitter, could be worth $762.89 thanks to his 24,000 plus tweets. [David Benoit, MoneyBeat]


What Happens When Wall Street Builds A Rental Empire

Most rental houses in the U.S. are owned by individuals, or small, local businesses. Culpepper’s landlord is part of a new breed: a Wall Street-backed investment company with billions of dollars at its disposal. [Ben Hallman and Jillian Berman, Huffington Post]

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