"Superinvestor Arnold Van Den Berg Delivers His Annual Client Review"

[Guest hellsten]

If you have 1 hour 15 minutes to spare, I recommend watching Arnold Van Den Berg:

 

Via http://www.grahamanddoddsville.net/?p=1463

 

You can also read my messy notes:

- China has one of the biggest real estate bubbles that probably existed on the planet

    - China only represents 6% of our exports

- How low do stocks go during a war?

- The price at which sophisticated buyers and sellers can agree on a price (average = 22x earnings)

- Good price at which to buy:

    - Large companies -50% of private market value

    - Mid-sized companies -60% of private market value

    - Small companies -75% of private market value

- 25 bear markets since 1899

    - Average duration is 17 months

    - Average decline is 35%

    - Worst decline other than Great Depression -54%

- "Stocks bottom out because they become so irresistible to somebody who has to struggle for that dollar of sales that it is cheaper to buy it"

- Cisco

    - Dominant company

    - Net cash of $30 billion

    - Challenges (priced in)

          - Slow growth economy

          - High unemployment

          - High national debt

          - Obamacare

          - Slowdown in Europe

          - Slowdown in China

    - Challenges (not priced in)

          - Looming fiscal cliff - tax increases

          - European break-up

          - China's real estate bubble

          - Potential military action in IRAN, middle east, other

          - Potential recession

          - Inflation

    - Current Century Management Price Points

          - Worst case as of Mar 2012 $14

          - Current price $19

          - Risk to CM worst case $19-$14 = $4 (21%)

          - Upside to CM sell point $33-$19 = $14 or 74%

          - Risk is 21%

          - Upside is 74%

          - Reward to risk 3.5 to 1

    - Private market value is $36 = ~50% discount

- Value Line 1700 Median PE

    - Value zone is between ~12.2-14.2

    - Will tell you the value of the market

          - better than S&P 500 etc.

          - 1700 companies

          - uses earnings 2 quarters forward and back

          - includes mid-sized companies

          - uses the median, not the average

          - market has been between 10 and 20 times earnings the last 20 years

          - we're at about 15 times earnings, not cheap, not expensive

    - As long as interest rates are below 12% this fluctuation is going to be between 10 and 20 times earnings.

    - If interest rates go higher than 12% like in the 1970s it will go lower.

    - Median PE at 10 only 4 times during the last 20 years (1984, 1987, 1990, 2009)

    - When you're at 10 times earnings you know you're "there"

    - Percentage of time market spends in 10 x PE = 1.2%

    - If you buy a major company at 10 times recession earnings it will not stay there long

    - If you buy at 12 times earnings you will be right 87% of the time

    - If you buy at 11 times earnings you will be right 96% of the time

    - If you buy at 10 times earnings you will be right 99% of the time

- Weighted Portfolio Values

    - April 29, 2011: Reward to risk = 1.38 to 1

    - October 3, 2011: Reward to risk = 8.95 to 1

          - We knew it wouldn't stay there very long. One week?

    - August 31, 2012: Reward to risk = 2.25 to 1

- Big-cap stocks are way ahead of the market and so that's why they have a little bit more risk than the smaller companies

- When the stocks hit those levels where the risk and reward is not very favorable and our stocks are hitting our sell point we're going to sell them out. There are plenty of problems that are going to unnerve the market.

- This is the largest increase in money that we have had since the FED started in a 100 years

    - We have no precedent other than Japan to see what would happen when a nation does this.

    - This is my biggest single fear.

    - If the FED doesn't handle this properly we're going back to 7.5-8 times multiples

    - Fortunately we're going to have a few years to be able to warn us of that

    - What would Franz Pick, an international currency analyst, say about this

    - This money is not going into the economy, if it was we would already have huge inflation. It's going into the banks. As long as it stays there it's not going to cause inflation.

    - There is a precedent in what Bernanke is doing (Japan). Hopes FED will pull the money back out as in Japan. No inflation in Japan.

- This is what has made America a standout among nations:

    - "The Wealth Creation Formula"

    - Create businesses -> Jobs -> Consumer Spending -> Sales and Profits Rise -> Capital Expenditures -> Productivity Gains -> Wealth

    - Immigrants is the most productive thing you can do for a nation.

    - 40% of top 500 companies were started by immigrants or their sons

- America will eventually become the lowest cost producer in energy

    - Low energy costs is attracting a lot of companies here

    - Japan, Korea and Germany are shutting down nuclear power and switching to natural gas

    - Who would you buy from Russia or the US?

- The housing market has bottomed out

- Manufacturing

    - China, Europe, and Japan have major problems

    - Winds are blowing America's way

    - 3D printing will allow companies to cut costs and bring back manufacturing to the US.

    - Nike cut manufacturing steps from 37 to just 2 by 3D printing a shoe.

    - 3D technologies mentioned: LayerWise and ThingLab.

    - One day they will be able to print organs, e.g. a kidney.

 

- Benefits of 3D printing

    - Cheap manufacturing. Up to 70% cost savings.

    - Quick production. Product products in hours versus days and weeks.

    - Less waste. Allows some products to be up to 60% lighter.

    - Better quality. Full control, layer by layer, as the product is built.

    - Accessibility. Able to create products we need, when we need them.

    - Sustainability. More eco-friendly.

    - New shapes & structures. Infinite number of complex figures.

    - New combinations of materials. Removes many traditional boundaries.

    - New business models. Entrepreneurs can personalize endless products.

[nwoodman]

Great notes, thanks for posting

 

Cheers

 

nwoodman

[stahleyp]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

[biaggio]

says that average private market value=22 x earnings according to history. I was surprised it was this high. What do others think?

 

 

[Guest deepValue]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

[MrB]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

 

Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population.

 

Great notes!!

[Yours Truly]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

I would certainly include him..  He's only had four years of negative returns out of 35+ years in operation

[stahleyp]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

I would certainly include him..  He's only had four years of negative returns out of 35+ years in operation

 

That's a good point. I didn't really look much at the yearly.

 

I don't like labeling people as "super investors" unless it's unquestionable. Perhaps I'm being a bit nit-picky here. We can say "good" or "great" but super belongs to the real legends of things - not to a guy who barely beats the index.

 

If we look at a more comparable index, the russell 2500 (not even value biased), his returns are good but not super. Not the exact dates, but not too far.

 

Russell 2500 (a more appropriate index based on what I can see) annualized is 13.07 (since 1978). This is higher than his net to investors. Maybe his standard deviation is lower or something to justify his fees.

 

http://www.roycefunds.com/News/Spotlight/2011/Q2/default.asp?gclid=CPGfz-rKs7MCFeiPPAodCWIAWg

 

 

[Kiltacular]

I'll add my thanks for the notes.

 

[stahleyp]

I'll add my thanks for the notes.

 

I second the appreciation.

 

Kiltacular, this is showing my nerdiness a bit, but do you play Halo? haha

[Guest deepValue]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

 

Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population.

 

Great notes!!

 

There are plenty of under-the-radar hedge funds/family offices that have done better; there's a guy out in California that has done 40% annualized since the early 80s. I can't confirm all of the records I hear about, but I hear enough scuttlebutt to make me believe that W.E.B. isn't entirely in a class of his own.

 

With that said, Arnold Van Den Berg is a great investor. He was one of my recommendations to my parents when they were looking for a new asset manager. There are many good managers out there, but few go through the pains that CentMan takes to put clients' minds at ease. Customer service is usually the most neglected aspect of "value-focused" funds management.

[Yours Truly]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

 

Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population.

 

Great notes!!

 

There are plenty of under-the-radar hedge funds/family offices that have done better; there's a guy out in California that has done 40% annualized since the early 80s. I can't confirm all of the records I hear about, but I hear enough scuttlebutt to make me believe that W.E.B. isn't entirely in a class of his own.

 

With that said, Arnold Van Den Berg is a great investor. He was one of my recommendations to my parents when they were looking for a new asset manager. There are many good managers out there, but few go through the pains that CentMan takes to put clients' minds at ease. Customer service is usually the most neglected aspect of "value-focused" funds management.

 

40% annualized over 25+ years? surely this individual must be on one of those Forbes' list

[ERICOPOLY]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

 

Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population.

 

Great notes!!

 

There are plenty of under-the-radar hedge funds/family offices that have done better; there's a guy out in California that has done 40% annualized since the early 80s. I can't confirm all of the records I hear about, but I hear enough scuttlebutt to make me believe that W.E.B. isn't entirely in a class of his own.

 

With that said, Arnold Van Den Berg is a great investor. He was one of my recommendations to my parents when they were looking for a new asset manager. There are many good managers out there, but few go through the pains that CentMan takes to put clients' minds at ease. Customer service is usually the most neglected aspect of "value-focused" funds management.

 

40% annualized over 25+ years? surely this individual must be on one of those Forbes' list

 

How do you get on the Forbes' list?

 

Like if I just keep compounding my money as I've been doing the past 9 years, I'll surely qualify for the Forbes list at some point here.

 

But do I call them up and tell them I'm rich so put me on your list?  What's the etiquette there? 

 

Maybe some people are worth $5b but don't want everyone to know, so they don't tell Forbes.

[Guest deepValue]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

 

Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population.

 

Great notes!!

 

There are plenty of under-the-radar hedge funds/family offices that have done better; there's a guy out in California that has done 40% annualized since the early 80s. I can't confirm all of the records I hear about, but I hear enough scuttlebutt to make me believe that W.E.B. isn't entirely in a class of his own.

 

With that said, Arnold Van Den Berg is a great investor. He was one of my recommendations to my parents when they were looking for a new asset manager. There are many good managers out there, but few go through the pains that CentMan takes to put clients' minds at ease. Customer service is usually the most neglected aspect of "value-focused" funds management.

 

40% annualized over 25+ years? surely this individual must be on one of those Forbes' list

 

How do you get on the Forbes' list?

 

Like if I just keep compounding my money as I've been doing the past 9 years, I'll surely qualify for the Forbes list at some point here.

 

But do I call them up and tell them I'm rich so put me on your list?  What's the etiquette there? 

 

Maybe some people are worth $5b but don't want everyone to know, so they don't tell Forbes.

 

Yeah, it's definitely not too hard to stay under the radar when you don't make big splashes with asset sales, etc.

 

Forbes is also not fantastic at estimating wealth. My parents have a friend who was briefly on the list; the thing is, he didn't know how much he was worth but he was pretty sure it wasn't what Forbes had estimated. I wouldn't treat the Forbes 400 as anything more than a list of really rich Americans.

[meiroy]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

 

Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population.

 

Great notes!!

 

There are plenty of under-the-radar hedge funds/family offices that have done better; there's a guy out in California that has done 40% annualized since the early 80s. I can't confirm all of the records I hear about, but I hear enough scuttlebutt to make me believe that W.E.B. isn't entirely in a class of his own.

 

With that said, Arnold Van Den Berg is a great investor. He was one of my recommendations to my parents when they were looking for a new asset manager. There are many good managers out there, but few go through the pains that CentMan takes to put clients' minds at ease. Customer service is usually the most neglected aspect of "value-focused" funds management.

 

40% annualized over 25+ years? surely this individual must be on one of those Forbes' list

 

How do you get on the Forbes' list?

 

Like if I just keep compounding my money as I've been doing the past 9 years, I'll surely qualify for the Forbes list at some point here.

 

But do I call them up and tell them I'm rich so put me on your list?  What's the etiquette there? 

 

Maybe some people are worth $5b but don't want everyone to know, so they don't tell Forbes.

 

I've been struggling with this dilemma for a long time now.  My friends are all pushing me to do it, but still not sure... To appear on Forbes front page only to be found out later that I don't really have the cash, that's a tough ethical question.

[Kiltacular]

Kiltacular, this is showing my nerdiness a bit, but do you play Halo? haha

 

 

 

Classic...I didn't think anyone would ever get that.  Haven't played it for a long, long time. 

 

4 rapid kills -- for the poor non-nerds out there.  Great game ;D

 

 

[woltac]

Thank you for the link.  I listened to the whole presentation.  It was excellent!  I hope he is correct about the US becoming a manufacturing powerhouse again.

[Parsad]

I wouldn't call this guy a "super investor". He's beaten the S&P 500 but he's also investing in smaller stocks. Maybe this is all current and the S&P 500 was a more accurate representation back then.

 

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/characteristics

 

14.45% annualized since 1974 is pretty solid, though many have done much better.

 

http://www.centman.com/investment-strategies/cm-value-i-all-cap-value/performance

 

Many? You will struggle to come up with more than 5, maybe 10. Even if you would come up with 50 it will still make them a Superinvestor. They will certainly rank in the top 0.1% of the fund population.

 

Great notes!!

 

+1!  Cheers!

[ERICOPOLY]

Man, how long can someone take to explain why stocks bottom?  Spit it out, short and concise, move on.

[claphands22]

Arnold's sermons are great.  He presents his analysis in a digestible form for his congregation.  If I ever manage money with a similar client base I hope I could be equally as skilled.

[gndsville]

I just found this video of a lecture Arnold Van Den Berg recently gave to students at Texas Lutheran University.  In this lecture, Mr. Van Den Berg tells his amazing story of how a child who survived the Holocaust grew up to become an American success story.

 

I think Mr. Van Den Berg is not only a Superinvestor, but also a SuperHumanBeing!

 

[stahleyp]

If I invest in an index, let's say small value, and average about 15% after fees over a 80 year period, am I also a super investor? 

 

 

http://investment-fiduciary.com/2011/03/29/small-cap-value-risk-and-returns/

[Yours Truly]

If I invest in an index, let's say small value, and average about 15% after fees over a 80 year period, am I also a super investor? 

 

 

http://investment-fiduciary.com/2011/03/29/small-cap-value-risk-and-returns/

 

YES I would.. irregardless of what class of asset it is.. 15% after that many years is tremendous

 

I guess you wouldn't include Walter Schloss as a 'superinvestor' then even though Buffett calls him one

[ERICOPOLY]

If I invest in an index, let's say small value, and average about 15% after fees over a 80 year period, am I also a super investor? 

 

 

http://investment-fiduciary.com/2011/03/29/small-cap-value-risk-and-returns/

 

YES I would.. irregardless of what class of asset it is.. 15% after that many years is tremendous

 

I guess you wouldn't include Walter Schloss as a 'superinvestor' then even though Buffett calls him one

 

That gets a bit strange because if a fundholder puts all of his money into Schloss' fund and mirrors Schloss performance, isn't the fundholder also a superinvestor?

 

 

 

 

[stahleyp]

If I invest in an index, let's say small value, and average about 15% after fees over a 80 year period, am I also a super investor? 

 

 

http://investment-fiduciary.com/2011/03/29/small-cap-value-risk-and-returns/

 

YES I would.. irregardless of what class of asset it is.. 15% after that many years is tremendous

 

I guess you wouldn't include Walter Schloss as a 'superinvestor' then even though Buffett calls him one

 

In order to be a "superinvestor" shouldn't you be able to beat the index you're playing in by a decent amount?

 

What defines good, great and average?