I am looking high and low for good value investment ideas, but the 25+% run-up in the market over the last year has left me high and dry.
The best I can do is the pair of toy-makers (MAT and HAS) that had ben left for dead a year ago, presumably because kids play video games now, real physical toys are not a growth industry anymore. Like railroads or newspapers, you know, the stuff Buffett likes to buy. But both of them have climbed and are still climbing up, getting closer to fair value. I do believe they have a ways to go up. Still, not as attractive / safe based on margin of safety as they were a year ago.
Same with industrials, I like EMR, UTX and colleagues, but also not cheap. They were being given away last September.
Maybe I will try my luck with K, GIS, CPB (maybe ADM) etc. No growth and the draught will kill their earnings by raising the supply prices. Temporary earnings dip = panicked Wall Street guys dumping good companies = opportunity to buy.
Let me know if you see Value lurking out there somewhere else.
Value is contained in the places people don’t care to look or have no interest in. Social media, commodities and financials seem to take up most of the spotlight now, leaving other industries largely ignored. However, there are only a limited amount of industries to invest in. I’m particularly a huge fan of buying stocks that get beat up because of bad earnings for a quarter or who have received negative publicity.
Damn AF ate my reply! I clicked on DBS’s name and that was that! A well-composed 20 line reply vanished for the lack of a control-C. Ah well.
@Palantir: L is interesting. Like BRK but more junky operational businesses. Impossible to value so I only feel comfortable with a small stake.
@bromion - value can lurk in widely followed large caps, you cannot overestimate Wall Street stupidity and the need to follow the herd. After the 2008/2009 crisis, these geniuses were offering T and HNZ at a discount, both are up 50%-ish now. Forget cyclicals like HD (almost 100% gain) or F (1100%). Look at what Buffett buys - IBM, BNSF (before he bought all of it), WFC.
@DBS: OCC is too small-cap but SCOR looks interesting despite the negative EPS. Thanks for the tips!
Palantir, didn’ tknow you were long on GOOG as well…good to be partners…
L is not impossible to value its actually quite easy if you understand hotels, offshore, insurance and holding company versus underlying…its actually much easier than BRK.B…
Yes you can find value anywhere…ppl that say you can’t find value in big market cap stocks are just plain wrong…the biggest holdings of some top managers is AAPL…not value? perhaps but it sure as hell did good for them and beat out 90% of “value” cigar butts out there…
When you don’t see opportunities, sometimes the most important thing is not to deploy in unfavorable conditions. It’s amazingly challenging on the psyche. It seems to me that this may be another one of those times.
Of course, if you aren’t finding stuff because you’re not looking, that’s another story.
FrankArabia, I don’t really understand insurance and off-shore investing so please explain how you value “L.” I’m curious to learn.
Also, going forward, it would be a lot more informative if people on this thread (and others) explain the rationale for their investment ideas rather than just throwing a bunch of tickers out there.
bpdulog – just a couple names to throw out there that may fit your investment philosophy – HPQ and DELL. Curious to hear where you stand on these, if you have an opinion. Specifically, with your investment preferences, I wonder how you systematically separate value traps from stocks that are unfairly beat up due to bad publicity and are generating below-normalized earnings, but are ultimately primed for an uptick in performance.
Keep in mind DJCO has a 100M portfolio and they’re earning about 8M/yr in FCF, so you’re paying 25M for 8M FCF…(I bought it at MCap of 115 though). I think it is still a good value…but being a micro it can fluctuate so you should look for a better price.
This stock piled up cash for years, and starting in 2009ish they really started investing it. If you look at BVPS growth, it really took off after 2009, which reflects that.
numi, you’re undermining the “confidence culture” by demanding an investment rationale. We’re supposed to be practicing saying things “I’m confident that FB is going to exceed expectations in the short term; it’s a substantially undervalued: strong buy. Anyone who says otherwise just isn’t informed.”
Because, in the end, confidence is all that matters.
Yeah…the way I see it is that Google really does have a substantial economic moat in search, that has been very difficult to crack. It’s not to say that they will always have that moat, but it does look pretty strong to me.
You can’t quote the 2008 / 2009 period and suggest that large cap stocks offer good value in even semi-normalized conditions. I also saw someone buy HTZ below $2.00 and watched it go to the high teens, that hardly makes it a regular occurence though. I can name multiple stocks that were up between 10x and 20x during that period, but I haven’t seen much of anything move that much since, nor do I expect to.
Buffett has a longer-term time horizon than most people here. Again, it’s not a value for the average stock market participant if you have to hold it forever to see realization of that value, or if you buy the whole thing and plan to never divest it.
Btw, 100% gain is the minimum target outside of large caps. Most professional value investors I know are looking for 3 baggers on a 2-3 year basis.
numi…you can buy based on 1) historical discount to nav 2) underlying growth in value of assets 3) capital allcoation efficiency…i won’t get into valuing insurance and offshore drilling (not entirely confident in offshore here either)…
one easy way to buy on L is to basically buy on discount to nav…its disclosed in the annual report (the discount and the calc)…essentially the sum of the parts is greater than the whole but this is a phenomenon has gone on indefinitely so ppl would buy when the discount is wider than its historical average…
yeah palantir…goog my holding and fave stock now…moat in search is the fundamental and you not paying too much for it even if other endeavors fail (glass,android, etc)…
who are these professional value guys you’re referring to? you might aim for that but you won’ get that on a consistent basis…anything above the index is good and from an absolute standpoint 15%+ consistently is amazing (over a 10 year period)… aiming for 2-3 baggers is unrealistic for me at least…to get one of those you will get a lot of losers…value guys have outperformed generally but not by the margins you’re suggesting big or small caps…
You target a 3x return, obviously many do not work out. You will have some losers in that group, but hopefully you pre-emptively dump the ones that are struggling once the outlook changes. I have seen many stocks go up 3x over a 2-3 year period and there is a kind of science to finding them. There are others where you can say pretty confidently that the stock will likely be up 5x over a 3-7 year period and you have an opportunity to buy in to a name that is pretty illiquid (event driven selling). A lot of funds can’t do that because they have a quarterly mandate from their institutional LPs, so they have to accept lower returns. I wouldn’t call 15% amazing though unless you’re talking large dollar sums north of a billion in assets. If it’s a small nimble firm, I would say 25%+ is solid, 35%+ is amazing. Some have done 40-50% returns over a decade or longer but that can’t be done with a large capital base focusing on small caps internationally. Maybe I’m biased and 15% is amazing, but I’ve been lucky enough to work at a firm that has returned way more than that annually over the last 15 years with only one down year (2008 – down 5% in absolute terms).
About flat with the S&P. I’m not sure if you’re implying this, but having great annualized returns doesn’t require consistently linear performance each year. The fund was up 150% in 2009, for example, had a big 2010, and was about flat last year. It has been difficult to make money on a short-term basis over the last 18 months in the US. But that doesn’t mean there won’t be more triple digit years to come (the firm has had 3 over the last 15 years). Right now it’s mostly about wait and see and not losing money, but that said, there are some pretty good long-term value picks in the market right now IMO in small caps for buy and hold investors.
It is a HUGE advantage to be able to hold things indefinitely because you have a permanent capital base and don’t have to worry about quarterly numbers. That alone should offer the opportunity to beat the market over long time periods assuming a reasonable amount of investment analysis skill. The market is a discounting mechanism for the next 6-12 months. In probably 80% of public names, the market is blind or close to blind beyond that point.