Hottest links for Saturday and Sunday, 14th-15th December, the weekend edition (see Friday’s edition of hottest links). Get our free daily newsletter (which HAS BEEN RECENTLY UPDATED) and never miss a single linkfest. Also, now if you sign up you will get our new e-book on value investing.
Top stories for today are included below. Lots of great value stories for today; A great article on the Shiller PE and possible improvements; Tronox was a hot value name, now a look at the latest from a distressed debt perspective; Why one hedge fund manager thinks we should ignore Munger and rely on the robots; A look at value in the mining sector; Bridgewater Associates explains the problems with QE; Lots more.
Hottest Links: Stories
Fixing the Shiller CAPE
Abacab Fund Sees Mispricing In Options As Black-Scholes Has Become “Inadequate”
Abacab Asset Management's flagship investment fund, the Abacab Fund, had a "very strong" 2020, returning 25.9% net, that's according to a copy of the firm's year-end letter to investors, which ValueWalk has been able to review. Commenting on the investment environment last year, the fund manager noted that, due to the accelerated adoption of many Read More
For most of history, the Shiller Cyclically-Adjusted Price-Earnings ratio (CAPE) oscillated in a pseudo sine wave around a long-term (130 year) average of 15.3. It spent 55% percent of the time above the average, and 45% of the time below–a reasonable result for a metric that allegedly mean reverts. [Philosophical Economics]
Versailles Financial, almost too good to be true
The investment case for Versailles Financial Corp (OTCBB:VERF) is fairly simple, the company’s current market cap is $5.9m against a tangible book value of $9.8m. In other words they’re selling for 57% of TBV. [Nate Tobik, Oddball Stocks]
Noble Roman’s: The Power of Operating Leverage
Noble Roman’s, Inc. (OTCBB:NROM)’s sells and services franchises and licenses for non-traditional food service operations under the trade names “Noble Roman’s Pizza”, “Noble Roman’s Take-N-Bake” and “Tuscano’s Italian Style Subs.” The company has built a stable franchising business that is characterized by predictable revenues, low capital requirements, and 40%+ operating margins. [Mackie, Moatology]
Urbana Corp: one year later
Urbana Corporation (TSE:URB) (OTCMKTS:URNAF) has been one of the first stocks I wrote about on this blog, and it’s also one of the few investments I have realized a loss on. But after selling my position at the end of last year the fund has gained more than 100%. [Alpha Vulture]
Make a List, Check It Twice
By building a checklist — a standardized set of questions you must answer before you commit to any investment decision — you can reduce the risk of making costly errors. The best way to do that is by looking at your past mistakes. That’s true no matter how you invest, even if you don’t buy individual stocks at all. [Jason Zweig, MoneyBeat]
Amateur hour short-selling from the once respectable Geoinvesting
Amtrust Financial Services, Inc. (NASDAQ:AFSI) is clearly a worthy candidate for examination by a short-seller. Several of the executives have colourful backgrounds and it is in a bunch of difficult, even problematic businesses. The first problem is identified by Geoinvesting. [John Hempton, Bronte Capital]
Human? Then You Might Have These Issues With Trading
When asked at a dinner party what accounted for his success, renowned investor Charlie Munger – Warren Buffett’s business partner – replied that he was rational. To classical economists, that market participants were rational was taken for granted. But the notion has been criticized in the field of behavioral finance, which studies the effects of social, cognitive and emotional factors on economic decisions. [Harriet Agnew, MoneyBeat]
My current thinking on mining stocks (Dec 2013)
The mining sector is not a good place to look for longs. On this blog I have written about the few opportunities out there such as Altius Minerals Corporation (TSE:ALS) (OTCMKTS:ATUSF) and companies trading below the market value of their stocks and cash. [Glenn Chan]
AEO–It is Cheap, But is there a Justifiable Value in the Stock?
American Eagle Outfitters (NYSE:AEO) has tried to gain and hold on to their market share by competing on price. While the rest of the competition is also suffering through the current reduced discretionary spending in this demographic, a few companies like The Gap Inc. (NYSE:GPS) have gained market share. [Shailesh Kumar, Value Stock Guide]
CEF Prices Getting Their Holiday Discount, and Then Some
For closed-end fund investors, it’s the most wonderful time of the year — or the most painful one if you don’t get this market’s quirks. Tax-loss selling is a perennial feature of CEFs. But this year the trend looks especially pronounced thanks to an unusual confluence of events which are driving the market’s discounts to the widest in more than two years. [Brendan Conway, Focus on Funds]
How Are Active Fund Managers Finding Alpha?
In a poll conducted earlier this week in the CFA Institute Financial NewsBrief, we asked readers, “If your firm manages investments actively and any of your funds generated alpha in CY2013, to what will you primarily attribute the alpha?” [Jason Voss, CFA Institute]
Sprott Down Over 50%, Will Step Down In ’14
John Paulson’s belief in gold has cost him a very great deal of money—but it may have cost Eric Sprott his job. [FINalternatives]
How Selective Is Too Selective?
We reminisced about the good ol’ days (2008-2010) when fairly good businesses would trade at 5x FCF, or banks with clean balance sheets and decent ROEs were trading at 50% of book value. Whereas today, the cheap names usually come with patches of ingrown hairs. [PM Jar]
Why QE Isn’t Working: Bridgewater Explains
Since we always enjoy simplification of complex concepts, we were happy to read the following 104-word blurb from Bridgewater’s Co-CEO and Co-CIO Greg Jensen, on how QE should work… and why it doesn’t. [Tyler Durden, ZeroHedge]
Anadarko’s Kerr-McGee Owes Billions in Damages for Tronox Spinoff
In a 166-page decision, Judge Allan Gropper ruled that the Anadarko Petroleum Corporation (NYSE:APC) owned Kerr-McGee E&P business is liable for its actions during the Tronox Ltd (NYSE:TROX) spinoff of the chemical business later named Tronox Worldwide. The amount of the damages is uncertain but could swing widely between $5.15 billion and $14.46 billion depending on certain factors. [Hunter, Distressed Debt Investing]
Found this as I was cleaning up some backups from almost 15 years ago. THought it would be interesting to let people see what my goals were for our merger with Yahoo back then. [Mark Cuban]
After Newtown, a bonanza for gun stocks
Those who bought Smith & Wesson Holding Corp (NASDAQ:SWHC) in the immediate aftermath of the massacre 12 months ago have made profits of more than 60%. Those who bought rival gun maker Sturm, Ruger & Company (NYSE:RGR) are sitting on profits of nearly 80%. Those returns have left almost any other financial speculation in the shade. They’ve beaten the overall stock market by more than two-to-one. [Brett Arends, Market Watch]
Hottest Links: Not The Onion
During a training exercise, firefighters mistakenly pumped jet fuel instead of water onto a flaming mock-up of an airplane crash. [Chris Ingalls, King 5 News]