What are you buying today?

[Lance]

MMM

 

Thanks

Lance

 

Why?

 

 

Curious, myself.

 

BTFD  ;D

 

 

LOL!  I suppose BTFD is as good an answer as any.  I don't think it's necessarily cheap here, but it's cheaper than it was and a quality stock I've followed forever but never purchased - added to my wife's IRA, which consists of high quality, somewhat boring blue chips.   

 

Thanks

Lance

[vince]

Since it went on sale today,  decided to purchase a first lot of CHTR and LRBDA. I agree it’s thr narrative here - communication toll road at 9x EBITDA that will likely benefit from secular tailwinds including 5G. I also added a bit more CMCSA as well - same idea really.

 

Spek,  I like that move. 

[Luke 532]

I've been adding in the past week to FMCCL at roughly 18% of par.  Roughly $9 on $50 par.

[Broeb22]

SPB

 

Company guided down and replaced its CEO with its Chairman David Maura who is well-respected as a capital allocator. He stated that much of the guide down in FCF is due to transitory factors, which have been ongoing for about a year at this point.

 

Announced $1BN share repurchase over 3 years would wipe out ~30% of market cap.

 

Company will be largely unleveraged after selling its battery and appliance businesses.

 

Transaction with HRG will allow index funds to own the stock once its no longer controlled.

 

~10% FCFF yield pro forma for divestitures of battery and appliance business.

 

[gfp]

thanks for the heads up, I hadn't noticed this.  got filled on a small amount of HRG at 9.555

 

Off to buy some more kwikset products..

 

SPB

 

Company guided down and replaced its CEO with its Chairman David Maura who is well-respected as a capital allocator. He stated that much of the guide down in FCF is due to transitory factors, which have been ongoing for about a year at this point.

 

Announced $1BN share repurchase over 3 years would wipe out ~30% of market cap.

 

Company will be largely unleveraged after selling its battery and appliance businesses.

 

Transaction with HRG will allow index funds to own the stock once its no longer controlled.

 

~10% FCFF yield pro forma for divestitures of battery and appliance business.

[motown]

This is great, so much information embedded in your post.  I have been looking for a good set of shorts so I will do some dd on your put names.  Curious what you mean with your japanese netnet, do you have a fixed period of time you will wait before selling?

 

I sell netnets at NCAV, but after 1 year i reassess the situation and when i find something a lot cheaper i make the switch.

 

I sell net-nets often below NAV (80% of NAV is typical for me). But I buy them even cheaper...typically at least <60% of NAV. And I rebalance often...almost continuously actually. I'm thinking of lowering to once a quarter. My backtests indicate quarterly rebalancing is significantly better than annual rebalancing. The following appear to really work well in a "net-net" like strategy:

 

1) Large cash balances....lots of cash is far far better than lots of inventory or receivables

2) Few financial but not necessarily operating liabilities

3) Lots of extra, not necessarily current assets

 

What you are basically looking for is a company in an excellent liquidity situation because they have a tonne of cash a few financial liabilities (operating liabilities are far less important). And simultaneously a low price to book ratio...lets say around 60%. Examples of such companies are:

 

1) KDM Shipping

2) Namura Shipbuilding

3) Kikukawa Enterprise Inc

4) STR Holdings

5) Walker Innovation

 

Interestingly 2) and 3) often don't show up on net net screens.

 

In other words net nets are really a combination of two things:

1) cheapness

2) great liquidity => immunity from bankruptcy

 

Traditional nets-nets which may include companies with a tonne of inventory and often lots of financial liabilities...can be terrible.

 

Rukawa,

 

Thanks for your post!  Is Namura trading below NCAV?  If so, please help me with the math if you have time.

 

Many thanks!

[Liberty]

CHTR

[gokou3]

CHTR

[DooDiligence]

And Jeff makes 3 (people buying Charter, that is...)

[John Hjorth]

I like your new signature, Jeff.

[Voodooking]

CHTR & LBRDA  :)

[DooDiligence]

I like your new signature, Jeff.

 

Thanks, I kind of do too.

Charter just seems to fit alongside Disney (edit: and SoftBank.)

Thanks to Cable Cowboys,

and of course thanks to Liberty.

[Spekulatius]

CHTR and CMCSA. Not today but a  era recent purchases were AKBTY (Turkish bank, small position) and AVX (electronics distributor)

[frommi]

DAX bear put spread dec 2018, 10000/9400, maxmimum payoff is ~16:1, target is 8:1. For it to reach the payoff the DAX has to fall roughly 20-22% from here and that happens every 4-5 years. This is my "summer" hedge system and has an expected return of 5-7% over time, but the big gain comes from having money to invest after a huge correction. I backtested this for ~100 years and trade it since 2014. In 2015 i did it with normal puts, so the payoff was not that large.

 

I also bought a very small position of NFLX Jan2019 put spread 200/180, because i think that the market forgot that Disney will pull all Marvel content next year and open its own streaming business which will surely be a dent into NFLX growth rates. The payoff is 10:1, target is 5:1. I think these are very good odds and all that is needed is probably the anouncement of Disney that will show that they are on track with their streaming service. Its unbelievable but just 4 months ago NFLX traded at the level required for such a payoff!

[Spekulatius]

DAX bear put spread dec 2018, 10000/9400, maxmimum payoff is ~16:1, target is 8:1. For it to reach the payoff the DAX has to fall roughly 20-22% from here and that happens every 4-5 years. This is my "summer" hedge system and has an expected return of 5-7% over time, but the big gain comes from having money to invest after a huge correction. I backtested this for ~100 years and trade it since 2014. In 2015 i did it with normal puts, so the payoff was not that large.

 

I also bought a very small position of NFLX Jan2019 put spread 200/180, because i think that the market forgot that Disney will pull all Marvel content next year and open its own streaming business which will surely be a dent into NFLX growth rates. The payoff is 10:1, target is 5:1. I think these are very good odds and all that is needed is probably the anouncement of Disney that will show that they are on track with their streaming service. Its unbelievable but just 4 months ago NFLX traded at the level required for such a payoff!

 

Still gambling on the ourcome of certain scenarios ? Do these trades generally work out for you. I am curious, if this is truly better time and money spent than being an armchair investor?

[Spekulatius]

I like your new signature, Jeff.

 

Thanks, I kind of do to.

Charter just seems to fit alongside Disney (edit: and SoftBank.)

Thanks to Cable Cowboys,

and of course thanks to Liberty.

 

I actually think that CMCSA is becoming more like DIS. At one point, they wanted to buy DIS a couple of years ago, no they run into each other with SKY.

[frommi]

Still gambling on the ourcome of certain scenarios ? Do these trades generally work out for you. I am curious, if this is truly better time and money spent than being an armchair investor?

 

My NFLX trade is a gamble, i won`t argue about that and my history with these type of bets is not favorable for me (even though this year i am at +-0 with these type of bets). I still do it from time to time, because i sometimes simply can`t control my gambling habits. But these bets are always very small. I tried to get rid of them by simply having no access to free capital in my brokerage accounts which worked very well in 2016, but since i trade other systems than my NCAV system now (OTC stocks eat all the available margin.) i have to give my gambling habits a little room from time to time. (So i try to control my bad habits by doing them at least half way intelligently.)

 

Other than that i am trying a lot of different stuff and keep doing what works for me personally, the DAX hedge is something i tested and that worked in the past. But of course you can`t get payoffs of 5:1 or 8:1 and win on every single trade. I try to collect a number of quantitative systems over time that suit me and that simply work. My options system for shorting stocks that i tested from Sep 2017 to last month has not worked for me because trading and implementation costs where a lot higher than simulated and expected. So i stopped doing that, even though it was profitable.

 

I am just not the guy who can buy an index fund or AMZN/GOOG/NFLX/AAPL/BRK.B and leave it alone. Its not in my DNA. But my performance over the past 5 years was in line with the market and i expect to do a lot better in the future, especially if we finally get a larger market correction. How do you value the knowledge that compounded over this time?

[MrB]

CHTR and CMCSA. Not today but a  era recent purchases were AKBTY (Turkish bank, small position) and AVX (electronics distributor)

Outstanding bank. Actually most of the Turkish banks are pretty good. Also Sabanci family has an excellent reputation. Pity about Erdogan though.

[writser]

I am just not the guy who can buy an index fund or AMZN/GOOG/NFLX/AAPL/BRK.B and leave it alone. Its not in my DNA. But my performance over the past 5 years was in line with the market and i expect to do a lot better in the future, especially if we finally get a larger market correction. How do you value the knowledge that compounded over this time?

 

I get where you are coming from, I almost failed a job interview because a psychologist determined I had an 'extreme appetite for risk' and I was 'unsuitable for work in a low-pressure environment'. Fortunately I applied for a trading job and the head trader overruled her, more or less saying: "that's exactly what we need". I'm not sure the assessment was entirely correct (basically when I told her I used to play a lot of poker she had made up her mind) but rest assured that I have made, and will make, stupid trades every now and then.

 

I think the key to dealing with this problem is to be super honest with yourself: these trades (including your DAX 'hedges') almost certainly have negative expected value, you make them because you are bored and/or tired and you are prone to justfy them after the fact. Design your investing routine in such a way that that you avoid these situations and make sure you document everything you do (especially your mistakes) to keep yourself accountable. I think Walter Schloss once said something along the lines of 'I like owning 50 different stocks - I always have something to do'. That always resonated with me.

 

Calling playing around with options 'compounding knowledge' doesn't really sound introspective, to say the least. In fact, it sounds more like a way to fool yourself into justifying your gambling habit. So, to answer your question: I'd value it at -2% p.a.

 

[frommi]

I get where you are coming from, I almost failed a job interview because a psychologist determined I had an 'extreme appetite for risk' and I was 'unsuitable for work in a low-pressure environment'. Fortunately I applied for a trading job and the head trader overruled her, more or less saying: "that's exactly what we need". I'm not sure the assessment was entirely correct (basically when I told her I used to play a lot of poker she had made up her mind) but rest assured that I have made, and will make, stupid trades every now and then.

 

I think the key to dealing with this problem is to be super honest with yourself: these trades (including your DAX 'hedges') almost certainly have negative expected value, you make them because you are bored and/or tired and you are prone to justfy them after the fact. Design your investing routine in such a way that that you avoid these situations and make sure you document everything you do (especially your mistakes) to keep yourself accountable. I think Walter Schloss once said something along the lines of 'I like owning 50 different stocks - I always have something to do'. That always resonated with me.

 

Calling playing around with options 'compounding knowledge' doesn't really sound introspective, to say the least. In fact, it sounds more like a way to fool yourself into justifying your gambling habit. So, to answer your question: I'd value it at -2% p.a.

 

Thanks, i really appreciate your view. Compounding knowledge was also attributed to reading a lot of annual reports, conference call transcripts, quant papers etc. something i probably wouldn`t do as an armchair investor. The DAX hedge has a positive expected value (at least it had one in the past), you can look at my backtest if you like. Of course its just a backtest, but i would even do it with an expected value of zero because it lowers the maximum portfolio drawdown (who wouldn`t buy an insurance that has no cost?).

This was not created with publication in mind, so its probably not that easy to understand: https://docs.google.com/spreadsheets/d/1NeuzDBHovCGqOz0VH0DKVBgUOJRJpB-24c_rgWsTr6U/edit?usp=sharing

Expected value for doing it on the Dow Jones is lower (could maybe even improved using a putspread instead of a 5%OTM put), but even there the expected value was slightly positive. And instead of losing 75-80% in the great depression you would have come out of it without losing a lot of money.

[Spekulatius]

CHTR and CMCSA. Not today but a  era recent purchases were AKBTY (Turkish bank, small position) and AVX (electronics distributor)

Outstanding bank. Actually most of the Turkish banks are pretty good. Also Sabanci family has an excellent reputation. Pity about Erdogan though.

 

I got aware of AK Bank when I was in a Turkey on a business trip. it’s is the best Turkish bank by virtually all metrics, with an owner operator family controlling them. Trades at around book and a 6x PE. I agree that thr political situation is a mess and a lot of the educated folks don’t like Erdogan. The country itself has a chasm between western and Muslim and hopefully can resolve this.

 

The country itself has a lot for potential and the Turkish people are hardworking and some of the business work hard to be competitive world wide and making visible strides too. Very nice folks although the security situation is concerning; there are bomb searches in every car driving in a hotel and guards with metal detectors.

 

That said, I am keeping this a very small bet and probably would be trading out of this to take advantage of the volatility. I own a bit of AVAL the columbian Bank,  - same idea, but more expensive and safer.

[Spekulatius]

Still gambling on the ourcome of certain scenarios ? Do these trades generally work out for you. I am curious, if this is truly better time and money spent than being an armchair investor?

 

My NFLX trade is a gamble, i won`t argue about that and my history with these type of bets is not favorable for me (even though this year i am at +-0 with these type of bets). I still do it from time to time, because i sometimes simply can`t control my gambling habits. But these bets are always very small. I tried to get rid of them by simply having no access to free capital in my brokerage accounts which worked very well in 2016, but since i trade other systems than my NCAV system now (OTC stocks eat all the available margin.) i have to give my gambling habits a little room from time to time. (So i try to control my bad habits by doing them at least half way intelligently.)

 

Other than that i am trying a lot of different stuff and keep doing what works for me personally, the DAX hedge is something i tested and that worked in the past. But of course you can`t get payoffs of 5:1 or 8:1 and win on every single trade. I try to collect a number of quantitative systems over time that suit me and that simply work. My options system for shorting stocks that i tested from Sep 2017 to last month has not worked for me because trading and implementation costs where a lot higher than simulated and expected. So i stopped doing that, even though it was profitable.

 

I am just not the guy who can buy an index fund or AMZN/GOOG/NFLX/AAPL/BRK.B and leave it alone. Its not in my DNA. But my performance over the past 5 years was in line with the market and i expect to do a lot better in the future, especially if we finally get a larger market correction. How do you value the knowledge that compounded over this time?

 

This was meant as an open question, not as a critique. Option trading is tough, since time is your enemy and as writer stated expected value is negative.

 

I tried hedging as well a few years ago, as an insurance against my longs as well as shorting and found that it didn’t work for me. It required much more energy and time, distracts from long term thinking and even increased the volatility of my portfolio rather than reducing it. So shorting for me is out now and if anything, I would do an option trade, where I know exactly how much I can lose, which kind of helps with sizing. Even Munger said, don’t do shorting and I think he is spot on for 99% of the investors.

 

Viel Glück!

[CorpRaider]

I also bought a very small position of NFLX Jan2019 put spread 200/180, because i think that the market forgot that Disney will pull all Marvel content next year and open its own streaming business which will surely be a dent into NFLX growth rates. The payoff is 10:1, target is 5:1. I think these are very good odds and all that is needed is probably the anouncement of Disney that will show that they are on track with their streaming service. Its unbelievable but just 4 months ago NFLX traded at the level required for such a payoff!

 

I did a post kind of about this.  I don't know what will happen, but NFLX is trading at an "untouchable" valuation and I don't really see how its better positioned than HBO and I think DIS can probably knee-cap them at will.

[EricSchleien]

I would agree with that. Personally, I got into value investing because I realized all the best investors in the world with long track records were pretty much all value investors. At the same time, I haven't seen many people with amazing long-term track records who run a long/short fund.

 

Also, my view has been if I really did want to short something and though something was a fraud, just buy a small put position where if I'm wrong I lose the small amount and if I'm right then I make triple digits on the position.

 

I'd be MUCH more comfortable buying put options instead of selling borrowed shares which would prevent me from sleeping at night if the trade went the wrong way in a huge way and my downside if I'm wrong is losing my small amount of starting capital.

 

If anyone thinks I'm not looking at this correctly, please enlighten me. Part of me feels shorting is better for marketing and raising capital for a fund then it is in actual implementation.

 

 

 

 

Still gambling on the ourcome of certain scenarios ? Do these trades generally work out for you. I am curious, if this is truly better time and money spent than being an armchair investor?

 

My NFLX trade is a gamble, i won`t argue about that and my history with these type of bets is not favorable for me (even though this year i am at +-0 with these type of bets). I still do it from time to time, because i sometimes simply can`t control my gambling habits. But these bets are always very small. I tried to get rid of them by simply having no access to free capital in my brokerage accounts which worked very well in 2016, but since i trade other systems than my NCAV system now (OTC stocks eat all the available margin.) i have to give my gambling habits a little room from time to time. (So i try to control my bad habits by doing them at least half way intelligently.)

 

Other than that i am trying a lot of different stuff and keep doing what works for me personally, the DAX hedge is something i tested and that worked in the past. But of course you can`t get payoffs of 5:1 or 8:1 and win on every single trade. I try to collect a number of quantitative systems over time that suit me and that simply work. My options system for shorting stocks that i tested from Sep 2017 to last month has not worked for me because trading and implementation costs where a lot higher than simulated and expected. So i stopped doing that, even though it was profitable.

 

I am just not the guy who can buy an index fund or AMZN/GOOG/NFLX/AAPL/BRK.B and leave it alone. Its not in my DNA. But my performance over the past 5 years was in line with the market and i expect to do a lot better in the future, especially if we finally get a larger market correction. How do you value the knowledge that compounded over this time?

 

This was meant as an open question, not as a critique. Option trading is tough, since time is your enemy and as writer stated expected value is negative.

 

I tried hedging as well a few years ago, as an insurance against my longs as well as shorting and found that it didn’t work for me. It required much more energy and time, distracts from long term thinking and even increased the volatility of my portfolio rather than reducing it. So shorting for me is out now and if anything, I would do an option trade, where I know exactly how much I can lose, which kind of helps with sizing. Even Munger said, don’t do shorting and I think he is spot on for 99% of the investors.

 

Viel Glück!

[DooDiligence]

My Mom always told me "if you can't say anything nice about someone, short their equity."

 

Actually, she hasn't got a clue as to what a short is & I can say with 99.99% confidence that I will never short anything, ever.

(not qualified to do so.)