Bronte Capital Management Amalthea Fund
There are plenty of good companies – ones that you would want to own for decades and which have superior economics – but they are 25-40 percent overpriced – and 50 percent higher than where we are excited to buy them.
There is more nonsense in this market than we have seen since dot-com. The two centers of market nonsense are China and Biotech, but the nonsense is widespread.
Was Ben Graham's big purchase of GEICO shares actually a value investment? Perhaps it was contrary to what many believe. "In 1948, we made our GEICO investment and from then on, we seemed to be very brilliant people." -- Benjamin Graham, 1976 Both Benjamin Graham and Warren Buffett can attribute a large part of their Read More
The dot-com boom was strange – during 1999 value stocks were not expensive – and continued to get cheaper. Buying breweries in New Zealand at 9 times earnings was not a way to make money in 1999 – as they bottomed at below 7 times earnings. [No we are not kidding – John bought a huge number of New Zealand value shares during 1999.
But if you retreated to buying value stocks you did really well over the next four to five years. The trick in 1999 was simply to avoid the heat – avoid it by miles. It didn’t matter whether you bought Wells Fargo or DB Breweries (though the NZ brewery was better). All that mattered was you avoided tech or anything with a website (such as a newspaper or a dot-com). The insane bits of the market were truly insane – but much of the rest was cheap.
Full Bronte Capital letter below