Waiting for "2009 Style" Values to Appear vs. "Great Companies at Good Prices"

[Uccmal]

If there is a market swoon as it is implied, it is likely to sink all boats together. Including the "great companies" you already own. If your names fall 10%, 20%, 30%, not buying those again is kind of silly. This is the bird that was in the bush that flew into your hands. In a market swoon, I highly suspect that many people somehow favor other birds in the bush! Many of Munger's classic human misjudgments are at work here.

 

How many times since 2009 have the Omaha boys bought more of WFC, DVA, IBM etc.? Some of these were the result of market swoons, other times it was one-time events. It doesn't matter, it should be far more easier to make those decisions. Most of the money (virtually all of it) I've made have been by buying more of what I already owned. This has lead to more concentration as well; #10/#15 positions made more room for #1, #2... I'm grateful that the last 10-15 years presented plenty of such opportunities. Heck, last week did!!

 

 

 

This so much. The best remedy to having a fear of buying (or buying too early) is owning something already and averaging down when the stock drops on nothing but general stock market sentiments. Just make sure you don't buy more just to get a lower average price but because the opportunity got much better.

 

Instead of holding cash, hold the cheapest things you can find. Plenty of outperformance possible both when markets continue to go up as when they go down. It's the only sensible thing to do. I believe it's extremely unlikely that your entire possible investment universe is overpriced. If it is, look further away from home.

 

I was going to flag the same comment.  Of my holdings listed above:

 

Rus: I held 2-3 yrs in the early 2000s.  Never sold a couple of hundred shares in one account.

MTL: I held 2-3 yrs mid 2000s. 

SSW: Continuously since Sept. 2008

Jpm, WFc: for years

RY: In one account for 10 years

FN - new as a stock but have watched it for 11 years

 

BAC Leaps - back into opportunistically last two weeks.

 

I find it very easy to deploy into these when they hit new 52 week lows. 

Virtually all of my biggest hits have been due to getting to know something really well and loading up opportunistically.  I have never had a net cash position in 20 years. 

 

Conversely, my worst blunders have been new stocks to my holdings.  Rimm comes to the forefront of my mind. 

[Palantir]

I'm a soccer player, but I'm only going to take shots when there's an open goal. There never seems to be an open goal....what should I do? Pls advise!

[BargainValueHunter]

I'm a soccer player, but I'm only going to take shots when there's an open goal. There never seems to be an open goal....what should I do? Pls advise!

As a soccer player, you HAVE to take shots...its your job. As an investor you don't HAVE to do anything. You can buy CDs forever if you wish.

[tombgrt]

I'm a soccer player, but I'm only going to take shots when there's an open goal. There never seems to be an open goal....what should I do? Pls advise!

As a soccer player, you HAVE to take shots...its your job. As an investor you don't HAVE to do anything. You can buy CDs forever if you wish.

 

Most of the time a soccer player has to pass, think of his strategy, anticipate the other team, think about positioning on the field, keep the rules in mind, ... He doesn't have to shoot at any point, but just like the investor, he better shoots at some point or he's not going to get far. I'd say it's a good analogy. :)

 

 

[Guest longinvestor]

I'm a soccer player, but I'm only going to take shots when there's an open goal. There never seems to be an open goal....what should I do? Pls advise!

As a soccer player, you HAVE to take shots...its your job. As an investor you don't HAVE to do anything. You can buy CDs forever if you wish.

 

Most of the time a soccer player has to pass, think of his strategy, anticipate the other team, think about positioning on the field, keep the rules in mind, ... He doesn't have to shoot at any point, but just like the investor, he better shoots at some point or he's not going to get far. I'd say it's a good analogy. :)

 

Of course the goal keeper is the world renowned one, you just can't get past him. EMT is his first name.

[merkhet]

...what would be his last name?

[Palantir]

Real soccer players only go by one name.

[BargainValueHunter]

I'm a soccer player, but I'm only going to take shots when there's an open goal. There never seems to be an open goal....what should I do? Pls advise!

As a soccer player, you HAVE to take shots...its your job. As an investor you don't HAVE to do anything. You can buy CDs forever if you wish.

Most of the time a soccer player has to pass, think of his strategy, anticipate the other team, think about positioning on the field, keep the rules in mind, ... He doesn't have to shoot at any point, but just like the investor, he better shoots at some point or he's not going to get far. I'd say it's a good analogy. :)

All of the time an investor doesn't have to do anything. Look at Loews.

[TwoCitiesCapital]

If you're having trouble finding value relative to TBV, cash flow, profits, etc. then I don't think you're looking in the right places.

 

Russia and South Korea have companies trading at great multiples of book value and cash flows. A few of these companies have ADRs/GDRs that trade on major exchanges.

Resource stocks, iron and coal specifically, trade at large discounts to accounting book value (you'll probably want to adjust).

Energy companies are similarly depressed, but will require similar adjustments to their stated book value.

 

Full Disclosure: Almost everything that I've bought in the past year has been resource related, energy related, or in South Korea and Russia.

[KinAlberta]

Best Fund Over Quarter Century Stumbles as FPA Shuns Hot Stocks

by Charles Stein

June 3, 2015

Excerpts:

 

"FPA Capital is not the only value fund that has struggled during the bull market. Donald Yacktman’s $12.3 billion AMG Yacktman Fund and the $6.6 billion Longleaf Partners Fund, run by O. Mason Hawkins and G. Staley Cates, both have strong 15-year records and have trailed a majority of peers over the past five years. Both funds hold above-average amounts of cash and generally avoid the high-flying segments of the market."...

 

" "The mountaintop keeps getting steeper,” said Bryan. “When the avalanche hits, things will have that much further to slide down.”

 

Ahitov pointed out the fund has trailed peers in rising markets in the past only to outperform when markets stumbled.

 

“We need to be judged over a whole cycle,” he said. “What we have had the last six years is just the up part.”

 

 

http://www.bloomberg.com/news/articles/2015-06-04/best-fund-over-quarter-century-stumbles-as-fpa-shuns-hot-stocks

[Pelagic]

I think Buffett has something to say about this, Jimmy Buffett that is. "It's five O'clock somewhere" similarly, it's 2009 somewhere.  That somewhere today is Russia, Greece, resource companies etc. tomorrow, who knows where it will be 2009 or 1929. There's no one forcing you to step up to the plate and swing at a pitch, but if you pay attention, there are usually enough pitches worth considering coming across the plate.

[Palantir]

I'm a soccer player, but I'm only going to take shots when there's an open goal. There never seems to be an open goal....what should I do? Pls advise!

As a soccer player, you HAVE to take shots...its your job. As an investor you don't HAVE to do anything. You can buy CDs forever if you wish.

Most of the time a soccer player has to pass, think of his strategy, anticipate the other team, think about positioning on the field, keep the rules in mind, ... He doesn't have to shoot at any point, but just like the investor, he better shoots at some point or he's not going to get far. I'd say it's a good analogy. :)

All of the time an investor doesn't have to do anything. Look at Loews.

 

This is a joke right?

[MG2014]

Do you guys consider options when looking at how much cash to hold? For example, being 100% invested at all times, then when large correction happens, lever up by switching your equity positions out with LEAPs? If you decide you are more comfortable holding cash, do you regularly write cash-secured puts on names you want to own at a cheaper price?

[BargainValueHunter]

I'm a soccer player, but I'm only going to take shots when there's an open goal. There never seems to be an open goal....what should I do? Pls advise!

As a soccer player, you HAVE to take shots...its your job. As an investor you don't HAVE to do anything. You can buy CDs forever if you wish.

Most of the time a soccer player has to pass, think of his strategy, anticipate the other team, think about positioning on the field, keep the rules in mind, ... He doesn't have to shoot at any point, but just like the investor, he better shoots at some point or he's not going to get far. I'd say it's a good analogy. :)

All of the time an investor doesn't have to do anything. Look at Loews.

 

This is a joke right?

???

[Guest Schwab711]

I'm at ~22% cash right now because nothing jumps out at me as a terrific value and I reconsidered my investment in SELF (looks like an amazing value but mgmt is terrible). I'm very concentrated as I'm now down to just 4 positions (I finally sold SELF after they announced NAV). I also take fairly large positions at times, so my opinions may not be relevant to others. Finally, I have experienced a lot of head fakes this year (at least 3 "great" businesses that turned out to be too hairy to be a great company) where I didn't buy because I wasn't comfortable with management or I was worried about dilution. I have not seen a non-brainer investment opportunity with a quality company in ~2 years. Further, my investment in CLB also helped me noticed that I have been introducing "creep" in to my buying criteria compared to when I first started keeping notes in 2011 (it had to be an obvious double - crazy to consider I had enough ideas to make this criteria meaningful). Some of the creep was for warranted (2008-2009 was a ridiculous time to start investing) and some of it seems due to the prolonged bull market. I've never experienced a down market year in almost 7 years of investing! I have noticed some larger companies finally falling below 20x forward earnings, but nothing interesting is even close to 10x operating earnings, unless you want to sacrifice nearly all of your liquidity (ask Harvard/Yale how that worked).

 

I second TwoCities in that cyclical/resource-related companies have been on my radar more than at any other time. I purposely have avoided them so it was some what disappointing when the best buying opportunities was resource-related. I did buy CLB this year (1 of 2 different companies I've purchased and the only new one), but I really didn't see much value in the US even with the drop. I think if we see more bankruptcies in the oil sector than we could see a better buying opportunity. Even the large drop in oil prices didn't create that great of a buying opportunity. I think it is safe to say that the equity market is assuming low interest rates indefinitely (I don't think I would have said that any time before 2015, which was part of the reason I was buying throughout the bull market). I see headwinds everywhere now.

 

I'm excited for rising rates and I hope it will create new events similar to the dive in oil prices that will open up new opportunities. If a "great" company with liquidity trades at 10x operating earnings, I'll be there. If a "great" low-liquidity company trades at 8x or less, I'll be there. Lately, I've been selling, not buying.