Author Archives: memyselfandi007

12 Ways how the “Ideal Company” should be run

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Introduction:

Some years ago I introduced a 27 point  “beta version” of an investment check list. This check list contained a lot of quantitative aspects, such as P/E, P/B or other multiples as well as some qualitative aspects. I used this as a rough guideline for analyzing potential long-term holdings but I found out that the quantitative aspects in a check list are not very helpful, because it leads to discarding really well run companies at a very early stage.

On the qualitative side however some things were missing, especially how a company is run for me became more and more important over the past years.

I think this aspect is not well covered by many other investors as most concentrate (only) on the “what”:

  • What moat does a company have ?
  • What industry  are they in ?
  • What ROE/ROIC/EBIT Margin does the company generate ?
  • At what EPS/EBIT/Book multiples does the stock trade ?
  • What is the “Magic Formula” that generates Alpha without actually looking into the companies I invest

For me the “what” in many cases is actually only a secondary result of the “how”. Moats for instance are not created out of thin air.

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Provident Financial (PFG): A very profitable subprime lending company run by a “Crook” ?

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Provident Financial is a UK-based “financial service provider”. What makes Provident “special” is that the company is extremely profitable:

Market Cap 4,2 bn GBP
P/E 16,1
P/B 5,7
ROE 47%

Among its shareholders there are many “famous” investors for instance Marathon AM, Neil Woodford and  Tweedy Brown.Stock analysts are quite bullish, according to Bloomberg 9 out of 12 have the company as “buy”, although the target price at 31,00 is only a few percent higher than the current price.

The stock has done pretty well over the last years, “the great financial crisis” had almost no impact on the share price:

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Some links

The Pixar / Steve Jobs story

Bloomberg story about the “uber quant” hedge fund Renaissance Technologies

Hilton Hotel is going to split into 3 companies

Stock Buybacks in Europe seem to have lost their magic 

Wexboy celebrates 5 years of blogging as well as Alpha Vulture. Keep it up guys !

“How I built this” podcast – Herb Kelleher & Southwest Airlines (via Valueinvestingworld)

A very interesting piece on Mark Zuckerberg and how he runs Facebook

Italgas SpA (ISIN IT0005211237) – Spin-off special situation meets contrarian opportunity

Management Summary

As this turned into a pretty long post again, quickly the highlights. I do think that Italgas SpA, the recent Spin-off from SNAM SpA represents a potentially interesting special situation investment because:

  • overall sentiment towards Italy is really bad (“Renzi referendum”)
  • the Spin-off was not timed well just a day before the US election
  • the current uncertainties within Italian regulation changes further deters potential investors
  • all this is reflected in asset multiples at the very low-end for comparable regulated assets

For those reasons I initiated a 2,7% position for my portfolio for my “Special Situation” bucket.

DISCLAIMER: This is not investment advice. Please do your own research !!!!

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Some links

Taleb has written a foreword to the upcoming biography of Ed Thorpe. (This is the book I am really looking forward to….)

Jason Zweig on the stamina required for longterm investing success

Damodaran on the perils of family owned (Indian) companies (Tata)

Morgan Housel on (non traditional) sources of competitive advantages

Steve “the big short” Eisman is short European Banks

And yes, finally a few Trump related links worth reading:

Howard Marks
 – Ray Delio
 – Bill Gross
– and of course the full interview with Warren BUffett

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