Jurgis

I'm currently trying out this third strategy in the Drybulk and Oil Services industries. I guess we will see where they go! Hahaha. I do wish Mohnish would go more in detail about how he analyzes companies. I found his Dhando Investor DCF modelling to be in-congruent with how he describes how he thinks about valuation. Yeah, strategy 3 is where I got one or two ten baggers. Also one or two zeros. Probably no more for me. It can work great. Picasso did some of that with deep DD. Some other oil people here perhaps.

I promised Sanjeev never to criticize Pabrai, since it raises Sanjeev's blood pressure and we really don't want that. 8) I thought the talk was interesting. Here are ways to get 10-100 baggers: 1. Buy soso (or even fraudulent) company that goes 100x in a bubble. Notice that it went 100x up near the top of the bubble. Sell. ... Profit. Don't look at it before then, since you gonna sell it at 2x or something. 2. Buy a future KO/V/GS/GOOGL/FB before it is KO/V/GS/GOOGL/FB. Maybe buy a future Indian KO/V/GS/GOOGL/FB. Don't look at stock price for 10 years, or you gonna sell it for 2x or something. ... Profit. 3. Buy a cyclical, preferably levered at some kind of "maximum" negativity. Wait until it doesn't blow up. ... Profit Here are ways not to get 10-100 baggers: 1. Buy soso (or even fraudulent) company that goes 100x in a bubble. Continue holding. 2. Buy KO/V/GS/GOOGL/FB when everyone and their friend know they are KO/V/GS/GOOGL/FB. 3. Buy a cyclical, preferably levered. Wait until it blows up.

I think you raise a valid issue. There is a risk in having levered balance sheet + possibly safety critical components + drive for numbers. If something leads to failure(s) with losses of lives, this could be in trouble. OTOH, they might have enough of safety culture for this not to happen. I don't know. I doubt this can be easily evaluated except for backward looking "it hasn't happened yet".

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We agree on that. :)

Agreed. Tell that to MSFT, AAPL, FB, GOOGL multimillionaires. ;) Practically everyone who diversified out ended up multiples less rich than the ones who did not. ;) Yeah, I know, tell it to MOT, RIMM, etc. employees who lost most if not everything... ;) Edit: I guess the most ironic one is AAPL. I know a bunch of people who got fired from AAPL in the dark days ... obviously did not keep their "worthless" stock ...

Hmmm. That might be a bit of a confirmation bias. How about the following obvious, excellent opportunities for which professional expertise would have triggered a massive buy signal: Research in Motion in 2007 Countrywide Home Loans in 2004 AIG in 2004 Motorola in 2003 Not saying that professional expertise is worthless, only that I know lots of very smart engineers who lost scads of money by investing in their area of expertise. I explicitly said that this is from Monday morning quarterbacking standpoint. So yeah, it's obviously biased by post-factum analysis. However, I can say without any bias that Motorola in 2003 or RIMM in 2007 would not have been no-brainers to me. I knew about them and I did not invest in them. In fact, for me both of them were pretty clearly uninvestable at that time. I have no opinion about AIG or Countrywide Home Loans. I have no clue why you would even consider them to be "in-profession" for engineers. ::)

I've made this argument about small caps in the past. In nanocap you might not be trading against a mutual fund with 10 analysts, but you might be trading against oddballstocks, otc adventures, Travis Wiedower, Schwab711, Picasso, etc. (forgive me if I did not mention someone else personally). Are you better than them? I'm not. ;) Will you get more info and faster than them? Not me.

Anyway, here are couple "in-profession" "informational advantage" gimmes (from Monday morning quarterbacking standpoint) that I missed in the last 20 years or so: GOOGL at IPO FB at IPO Mobile providers in 2000s Apple at iPhone Nvidia last couple of years ARM(H)(Y) in 2000s INTU in 2000s For pretty much all of these, it was clear that the company has a huge technological/market advantage. For most the issue that tripped me was valuation. For couple it was thumb sucking - I knew, but I did not do anything. For couple, it was not enough confidence to buy and hold (sometimes coupled with valuation, but in case of ARM I just sold for some stupid reason).

OK. You have a point there. Although sometimes people in-profession can have a counter-edge exactly because they are close to the area/products which gives raise to a number of negative biases because they know what's in the sausage. In general I agree that more knowledge is better than less. I still question how much of this is an actual edge.

This is somewhat commonly held belief, but in reality very few people have knowledge deep and wide enough to have an edge even in their profession. Even if you're a doctor, you don't necessarily have knowledge and mindset to analyze the drugs and competitive advantage of pharma company X. And likely if they have competitive advantage, the stock is already expensive, so you have to have a level 2 or 3 insight to do better than that. There are some situations where you can have level 2 insights by being in profession related to what company does. But these opportunities are usually few and far between.

That's been true for a while. The really important question is how exactly is it going to die. http://www.imdb.com/title/tt0808151/ or http://www.imdb.com/title/tt3062096/

If you assume huge inflation (3x loss of purchasing power) and huge PE contraction (30x to 12x) then yeah, most of options are not very attractive.

You have to be careful though. The "Outsiders" "We Don't Need No Stinking Guidance" CEO could be a real deal or could be a scammer who just wants to blow off the investors. Distinguishing the two is not as easy as the 20-years-after Monday morning quarterbacks make it appear.

scorpion, in your scenario, you should be careful to either express everything in constant-time-moment-A dollars or specify which things are time-moment-A dollars and which ones are time-moment-B dollars. I get impression that you are mixing the two which might be confusing you and other people reading your example. E.g. $30 in cash at A becomes $10 in constant-time-moment-A dollars at B. It still remains $30 in time-moment-B dollars. Then when you say $30 in KO at A becomes $45 at B, is $45 in time-moment-B dollars or time-moment-A dollars?

Thanks

I guess that is an interesting piece of information to use as a thought experiment, but unfortunately he didn't purchase those stocks without hedging. Yes, this is good observation. It's easy to assume that results without hedging would be as in graph. That's not necessarily true. They could have been quite different for a number of reasons (cash flows in/out of fund, mental inability of manager to buy/hold unhedged securities that he holds hedged, etc.).

He should have offered unhedged version of the fund and raked in money. 8) am I good or what

Can you remind how you would hedge the tail for couple 100bps? ( I assume perma hedge, not something for 2-3 months ). Edit: I assume "couple 100bps" per year. And "couple" is less than 3. ;) So <3% per year. ;) But feel free to suggest something more (or less) costly. Serious question, though mostly out of intellectual curiosity. Thanks

Not a bad platform 8)

Interesting topic. Out of the stocks mentioned, FB probably can grow 15-20%+ for 3 years. Not sure about 5. Asking about EPS growth makes little sense when you mention companies with almost zero earnings like AMZN and TSLA. Some other metric should be used there. TSLA probably can grow sales at 15-20%+. I would not bet against GOOGL growing 15%+ though it's possibly getting tough. Some other CoBF favorites to ponder: TDG? IBKR? PRDGF? ;)

I think there are a lot of us. We are lacking a party to represent us. I vote for https://en.wikipedia.org/wiki/Liberal_Movement_(Lithuania) Which might come as a surprise for some people who consider me red incarnate. 8) Not that it's ideal match and yeah, I don't think there's equivalent in US.

I used to think that I was too, but then I realized that they are not as orthogonal as it seems from the first glance. Usually the first thing "fiscal conservatives" aim their knife at is social programs. I agree however that the waste and graft in government and its contractors should be cut and controlled. It's not as trivial as the Orange T suggests. Some pressure is probably good though.

I suspect that those nifty features like air refueling, ability to withstand the EMP from a nuclear blast, ability to defend against missiles and ability to conduct a global war from 30,000 ft add a little to the price tag. In addition I suspect that a good chunk of the budget goes to the Air Force for planning, design of features, etc. That would be brown dollars not real cost since they'd still probably pay those people anyway even if they weren't working on this project. So new stealth bombers were supposed to cost $55B or 550M per plane: http://www.thefiscaltimes.com/2015/03/04/55-75-Billion-Guess-How-Much-New-Stealth-Bomber-Will-Cost $2.9B for two planes still seems a bit steep. On one hand it's only 2 planes so there's no cost spread over multiple planes build. On the other hand, even with all the fancy defensive and comm stuff, the Air Force One is likely less complicated to design and build compared to new stealth bomber...

This already has been posted upthread (2 pages up).