Value Investing: Qualitative Versus Quantitative Aspects


In general, over the years, I have had respect for John Buckingham, who writes The Prudent Speculator.  I caught this because we own the  same stock Ensco plc.  As he said:

For instance, Ensco PLC (ESV) is the world’s second largest offshore driller, operating in six continents with one of the newest jackup and deepwater fleets in the industry. The company has shown a relatively impressive ability to keep operating expenses in check and generate solid free cash flow, while the P/E is less than 10, the dividend payout is more than 5% and profits per share are expected to increase from $6.14 last year to $6.67 this year and $7.79 in 2015. In short, we find Ensco to be a high-yielding, value-priced, financially-strong growth stock, operating in an industry with high barriers to entry and favorable long-term demand characteristics!

Great minds think alike, and fools seldom differ.  You shouldn’t buy Ensco after reading this unless you have studied it out.  Just because I agree with a comrade does not mean you should take action.  We could both be wrong.

Khrom Capital killed it during the first quarter, continuing its strong track record; here are their favorite stocks

Khrom Capital was up 32.5% gross and 24.5% net for the first quarter, outperforming the Russell 2000's 21.2% gain and the S&P 500's 6.2% increase. The fund has an annualized return of 21.6% gross and 16.5% net since inception. The total gross return since inception is 1,194%. Q1 2021 hedge fund letters, conferences and more Read More

At the end of his piece he listed many summary statistics of his portfolio.  I want to compare his with mine:

Dividend yield: His: 2.3%, mine 2.2%

P/E: His 15.9x, mine 12.0x

P/B: His 1.65x, mine 1.48x

P/S His 0.86x, mine 0.68x

I don’t look for dividend yields, and many European stocks that I own pay dividends, just not regular dividends — the philosophy is different there.

One thing that is different for me versus Buckingham is that I have more foreign stocks in my portfolio.  I am willing to consider companies in countries that follow the rule of law.

I have done better, and you are free to ask me how.  My main idea is to search for the best ideas regardless of where they are domiciled, or what size they are.  I analyze stocks regardless of how they are categorized by most.

Full disclosure: long Ensco plc [ESV]

By David Merkel, CFA of alephblog

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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.

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