Asset Management, Business Articles, Investing, Investment Management, Learn About Investing, Money Manager, Value Investing

7 Lesson’s You Can Use From Investor Guy Spier

What comes to our minds when I mention the name Guy Spier?

Guy Spier is a Value Investor, Fund Manager, Investment Banker, Harvard Graduate, Talented Skier, Father, Husband and also Mr. Spier is a Community leader of VALUE X.

Here are Seven lessons I have learned from Guy Spier that I would like to pass on to you. It doesn’t matter if your a Professional Investment Fund manager or Company Executive. You will find calmness and wisdom from Guy’s wisdom.

Investing Without Emotions

Guy teach’s his followers like myself that we should always invest without emotions. First we must break down what this means. 1. Breaking down what are our personal Behavior Biases truly are? 2. Be aware of common behavioral biases we may resort to without thought. 3. Defining your goals and time horizon can help you avoid emotional biases. 4. Bucketing or Achieving Milestone’s helps your clearly see your progression. Discipline can help you keep to a plan of action.

You may feel that watching CNBC or Bloomberg as a Retail Investor is good to gather the latest information on the market. It will feel like this gives you an investing edge in the market. However your are dead wrong! It’s simply a media outlet meant to deliver news and entertainment in the business world. That’s all. It’s smart not to allow this Television content to cloud your judgment and emotions while Investing. We as Value investor’s have a checklist, and a sophisticated skill set that includes Due Diligence and valuation processes before Investing in a Opportunity. We use these skills and our personal research before deciding if this would a good investment opportunity. Having the discipline to say no to things or investments does have tremendous value. Survival is everything. Protecting Capital is your duty. These are all ways to help you as a individual keep thing in focus and Invest without Emotions.

Resist Rebalancing

Many Retail Investors are being taught by the Traders on Youtube and it’s also standard practice for many Financial Advisors to Rebalance your Portfolio of securities when it looks like the market is overvalued. This looks like this. Your standard Retail investor has twenty securities positions. And if you place Five Percent of your Capital in to twenty positions this equals a hundred percent of your capital. However if history is a teacher? And if you were to just allow your portfolio grow organically? You may have a few positions see substantial growth and you will see a mixed bag of performance of mediocrity. And then you will see a few positions perform poorly earning you no returns or possibly loosing money. However with Guy’s approach of just allowing your portfolio to grow organically without rebalancing? You will see your small set of high performers account for most of your growth in your portfolio. While at the same time limiting the loss’s of the poor performers. In other words? Investing is very forgiving if you adhere to using long term time horizons as a strategy for your portfolio.

Learning From Your Mistakes Early in Your Career

This is truly a important lesson that Mr. Spier has shared publicly that I feel has a ton of merit for other Investors and Entrepreneurs like myself. Bottom line up front? You will make mistakes. You will make many mistakes. You will embarrass yourself. Making Mistakes and learning from them is just apart of the Human Experience. And if your a Entrepreneur? You will likely find that your failing your way forward. Now let’s learn about a big Mistake most Investors encounter when they begin investing as Retail Investors. You just don’t know what you don’t know. There are three different types of Entrepreneurs. Small Business Boutique Entrepreneurs, Enterprise Operator Entrepreneurs, and the Decentralized Investment Entrepreneurs. All has their own unique world. However they all encounter one mistake after another. It’s truly important to share your mistakes so that others may learn from your mistakes in business. Let’s be honest! Sometimes they make for great stories when your successful in the end. LOL

Defining Your Circle of Competence

Defining your circle of Competence means “What are you trained to do and what are you professionally knowledgeable about?” This important question can give you direction and confidence when evaluating Investment Opportunities. And if we are being honest if you can fix your Car’s Engine when it fails on you. I wouldn’t expect to see Guy Spier turning wrench’s in his Driveway in Switzerland when his car suddenly has a failure. No He would dispatch a Automotive technician or just buy a new car. Why spend the time on something of this caliber when you have options. Expert Networks operate in the same manner. There are Business professionals who do not have backgrounds in all things related to technology, manufacturing and and so many more topics of interest.

GLG Insights is a company any Investor or Business Professional can access and speak to Experts in their respective fields about a topic and answer difficult questions you may have about their respective professions and expertise. If you don’t have a Background in Softdrink manufacturing it’s likely you would seek out Softdrink Manufacturing experts. This is what we mean by saying, “Define your circle of competence.” You know what you know. And leave the hard questions to the experts of their fields.

Risk and Downside

Investing is a activity that involves Risk. Risk is the thing that acts as barrier or is the Downside of Investments. Some investments are relatively safe like Investing in US Treasuries. Then their are Investments like for example investing in to High Risk opportunities that may not return your capital and may not give you a return like New Startups and Junk Bonds. It all comes down to What is your Risk threshold. The lesson we can take from Guy’s lesson’s on Risk directly is communicated by his friend Warren Buffett. Warren spends a lot of time thinking about the Downside of an Investment. If you are comfortable investing your money into a company with a proven track record? Then it’s highly likely the downside of risk will be lower than investing into a unproven company that has not been in business for long. Your appetite for Risk is a personal comfort level. And I must mention that your comfort with risk directly correlates with what your circle of competence is!

Interestingly Mr. Guy Spier’s father was a Sapper in the Israeli Army. And the reverence and love that he speaks about his Father and how his Father is able to calm the environment with his presence and ability to listen while bringing calmness to the situation. Sounds to me like the Man you want next to you in a Fox Hole while your being bombarded with Bombs and all out War. This touches on the Topic of Risk and Downside because you want to be able to keep your cool during stressful situations. Id love to learn more about Mr. Spier’s Father. He sounds like a real Bad Ass. I can respect that.

Did you catch my latest Article on Bill Ackman’s Investing Principles Here.

Courageous Integrity

While watching or rather Listening to Guy Spier and his fellow writer Mr. William Green it was very refreshing to hear these two community leaders speak about having the Courage to share your thoughts and feelings in real time. While filming a episode of the Podcast Surviving and Thriving recently. They were sharing a point in time when they were collaborating and writing Guy’s first Hit Book “The Education of a Value Investor”. I found it utterly Courageous that Mr. William Green had the fortitude to hone in and selectively ask hard questions and seek difficult answers to personal situations that occurred to Mr. Spier during the very stressful weekend of the Great Financial Crisis of 2008. The Video is below. Furthermore during the weekend of the Great Financial Crisis Guy’s Aquamarine Fund was hanging in the balance and held hostage during the Bankruptcy of Bear Stearns. However Jamie Dimon and JP Morgan came to his Funds rescue by making a Bid and buying Bear Stearns. It’s truly a fascinating look at how two very good friends of 30 years can open eachother up and allow mutual trust. A lesson definitely worth the watch.

Keep a Professional Journal | Annual Reports

William Green and Mr. Guy Spier touch on the very important topic of keeping and committing to writing a Professional Personal Journal or even servicing your Funds Annual Reports. Some in our space of Investing, do diligently keep Annual Reports detailing their Thoughts, Decisions, and the reasoning behind the exposures in the Market within their Portfolio’s. How many times have we as individuals forgotten why we did this or that or forgotten our split of the moment thoughts and reasoning while explaining our actions to others who were not present? Keeping track of professional actions is vital to our success as Professionals. So understandably It makes since to keep a journal. However it’s also important to keep a Personal Journal to allow the reader or you back into your Decision making process. We are all humans. We are all imperfect. So keeping a Personal and Professional Journal can make a ton of sense for Professionals like myself and Guy who do openly and admittedly have ADHD.

Mr. William Green’s advocacy of writing throughout your career stems from his professional life as a Author and writer. He is always selflessly adding value in the Investment Space. Mr. Green is a professional writer within the Value Investor community. And his speech’s and guidance and journal suggestions are always pure gold. I genuinely appreciate Mr. Green sharing thoughts publicly as it has helped me in my writing.

Annual Reports

Why keep a Journal for a Annual Report? As Professional Investment Advisors and Investment Fund Managers or Partnerships it’s not only smart to keep a Annual Report, but also it’s required by Securities Regulators. When Investors read your Annual Reports it’s wise to let them in to see how your decisions and actions led to you choosing to build a Professional Portfolio.

After all the Investment Returns or Failures need to be accounted for. An annual report is a document that public corporations must provide annually to shareholders that describes their operations and financial conditions. At the end of the year when Annual Reports are drafted and published this keeps all involved in the Profession Accountable and demonstrates Public Transparency. I hope you found something in this post useful and insightful from Mr. Spier’s content.

Godspeed
JS

Business Articles, Investing, Investment Philosophy, Value Investing

Special Situations Investing

“Sometimes Political Pressure Comes From Shareholder Value Creation”

This Week’s Post will dive into Special Situation Investing and how this investment niche can be used in the Market to sometimes force Corporate Governance, Management, and Boards of Directors to hold a Proxy contests to install a new outside Director on to a unfriendly Board Of Directors. They elect a new outside Board Of Directors member to correct the board alignment. Creating shareholder value.

According to Investopedia: A special situation is an unusual event that compels investors to buy a stock or other asset in the belief that its price will rise.

Activist Investing

Sometimes Special Situations Investing is referred to by some Investment Professionals as “Activist Investing.” Special Situation Investing by definition has little to do Security Analyses. And more to do with buying a controlling percentage of shares of at least five percent to force a vote to elect an outside member to the Board of Directors. Often this person is a Fund Manager, or elected member of the investor. With this said there is Risk involved with these actions and proxy vote contests.

“Attention:” The following content or post is a general post about “Special Situations Investing”. And is not to be construed or intended to be “How to Invest in Special Situations”.This post is meant to be a general outline of the topic related and share stories related to Special Situation investing. Entertainment only. Meant to be examples of stories. Thank you all Investment Fund Mangers who are close to me. They are always challenging me to be better. That’s respect. Thank you. Are the Markets Efficient? After realizing markets are far from Efficient like the media and some academics likes to proclaim. It’s clear Special Situations has a long history of wins by very notable prolific Investors. And some very publicly losses that have ruined some Fund Managers.

Value Investing Spectrum

Value Investing can be described as paying less for a piece of a company in the market than the actual intrinsic value of the company. You will find that most Value Investors like myself and other close followers of Warren Buffett, Charlie Munger, Li Liu, Ben Graham, Guy Spier, Bill Ackman, Mohnish Pabrai etc. choose to invest for the Long Term.

However Value Investing has a spectrum of Investment Philosophy’s. Some Value Investors like Howard Marks, Bruce Karsh choose to Invest in the Long Term specializing in asset classes like fixed income as Investment Vehicles. Other Value Investors like Mr. Bill Ackman has chosen earlier in his Hedge Fund Career to use “Event Driven – Special Situations Strategies” for his Portfolio’s advantage. A great example of a Successful Trade is when Mr. Ackman generated a 100 fold return during the Pandemic by foreseeing the Impact the Corona Virus would have on the country’s linked communities.

Bill’s Corona Virus Hedge Trade yielded $2.6 billion in profits. If we look at the position or bet Mr. Ackman bought? His traders bought as much Hedged Protection they could find in the market to Hedge Pershing Square’s Portfolio of Investments before the Corona Virus pandemic. In the end his bet on the market falling was proven right. And It is celebrated as one of the Legendary Trades on Wall Street during this time Corona Virus Time-period.

The Value investing spectrum includes all Asset Classes and can even be applied to the Commercial Real Estate space. However the spectrum of Value investing is like a umbrella of different areas of specialities. From Special Situations Investing to buying undervalued assets like securities. Investing in general can be simplified by the following thought. Buy Low, hold long term, Sell High.

Believe it or Not? Investing in general is pretty simple. Special Situations Investing is a complex topic. But for the purpose of this post I will keep it simple and not make this a long drawn out white paper for other Investors who love to nerd out on this topic.

Understanding Special Situation Investing

Typically a “Special Situation arises from a News Event happening in the Market, a Stock may have intermittently dipped below it’s intrinsic value during a short tie period. Other forms of events include; Rumors in the market that point to spinoffs, tender offers, Mergers happening soon, Acquisition speculation, Bankruptcy, litigation, capital structure dislocations, shareholder activism, stock buybacks, and other events that may affect a company’s short-term prospects.

A special situation is a special event or one-time event that has an impact on a stock or other asset.
A Series of Events could have a negative or postive affect on a stock price.
There are Special Situation Funds ready at a moments notice to act on events and profit from events.
Nearly all Special Situation Investing is executed by a Institutional Investors.

In light of impacts Special Situations events have in the Public Markets, we must stop and ask will the outcome be a Positive Impact or Negative Impact? Often times Special Situations can either be positive or negative depending on the action or intent by the Institutional Investor. Sometimes the Institutional investor profits from a misfortune or failure that is occurring to a Public Company. And sometimes the Public company can be positively impacted by the Investor creating Shareholder value.

Activist Investor Challenges The Board Of Directors Status Quo

Let’s say for an example a Board of Directors is being run by a short sighted sloppy CEO and Chairman. And this complacency is causing the Board of Directors to fall into following the herd and not making waves. They have put their own comforts and expenses before the shareholders interests. This has caused a situation where status quo is the normal operating governing procedure. Causing the Public Company to lose it’s way affecting the company’s financials. Ultimately the stock price falls and the company loses Market share. None of the Directors on the Board want to bring attention to the failures and just go along to get along type situation.

For many quarters the Public Company has falling sales, revenues and all the financial Statements are impacted. An outside Institutional investor or Portfolio Manager see’s the news and decides to take a closer look and does some due diligence. Only to find the Public Companies Board and management are acting irresponsibly with company funds and assets. Putting their own interests before the Shareholder.

The Institutional Investment Team decides to act. And begins purchasing all the Shares they can buy on the open market. Until they have bought a controlling interest in the company. This act by the Institutional Investment team can force the Boards of Directors to hold a Proxy Vote. Removing a member of the Board of Directors and Shareholders electing a new Board Member (Often from the Proxy Challenger “Who is The Institutional Investor who invested.”)

This in turn will begin to align shareholders interest and create shareholder value. And with this new Outside Board Member elected to the Board? The Companies management will have a new objectionable voice who won’t allow the CEO and Chairman to hold congruent votes. Shaking up the “Go along to Get Along” Boards procedures.

This is important because this new voice on the Board of Directors can suggest or demand new ways to fix the companies future direction. Often times by insisting the Board instal a new CEO, and or taking a close look at what is not working correctly in the Managements operations that is affecting the Companies financials. This action can and often will correct a companies future profitability and growth. Or can make matters worse. It all depends on the situation within the Board Room.

Proxy Votes and Fights

When we think about Proxy Fights between Activist Investors and Boards of Directors and Management. This really begins to get into the political area of Corporate Governance. And these disagreements are certainly a gray area of Policy and Law between Boards of Directors and Outside majority Shareholders. I wrote a little about these situations above. However if your really interested and want to read all about Proxy Votes and Proxy Fights? I would highly suggest reading Michael Levin’s “The Activist Investor Newsletter Website HERE.“

“The goals of electing a new outside Board member usually are to align shareholder interests and generate Shareholder Value.”
-Bill Ackman

A share buy back is another example of a special situation and will cause the stock of a company to trend upwards in the short term. On the other hand a negative impact could be such as a Government Antitrust inquiry may push a Public Companies stock price into falling for the short term. News sometimes of Events happening in the world of Business Litigation will and do often times do cause price speculation and investors to capitalize on opportunities happening publicly.

Merger Arbitrage “Opportunistic Investing Model” Special Situations

When a public company intends to merge with another medium to large company that is also publicly traded a special event occurs. And this event is usually extremely profitable. Company Board Members and even Executive Management have a personal and professional duty to keep confidential company information safe from the public. In other words they are charged with “Keep it Confidential” Policy or you will be shown the Door.

Sometimes outsiders in the Companies hemisphere create “Rumors”. And these rumors sometimes are false or true. Or they maybe a little of both. Your typical Sophisticated Investor knows; “When you create a list of well positioned companies that more than likely will be acquired soon.” You create an opportunity to capitalize on Public Companies who are merging. And this leads to the Public Company buying market share. Generating Dominance. This is a profitable strategy for Special Situations Investors.

Bill Gross who is a Prolific Philanthropist and Investor has said on CNBC in 2023 to look for Merger Arbitrage opportunities. This is where he was looking in 2023 for Money makers rather than focusing on the usual in Credit Markets. Here is the Video of Mr. Gross sharing his Opinion about where he is Investing in 2023.

Special Situation Example

Bill Ackman Vs. Carl Icahn + Dan Loeb = Public Market Brawl “HERBALIFE”

First I want to highlight a knockdown investment market brawl that literally had the Financial World on the Edge of their Seats when Pershing Square’s CEO and Chairman Mr. Bill Ackman took on a Public Company that was “allegedly” taking advantage of Hispanic Migrants in the communities across the United States using unfair distributorship and salesman tactics that are propelled by dubious Multi Level Marketing Practices. Mr. Ackman felt by releasing unseen information and bringing attention to the predatory Salesmanship and unfair Distributorship Multi Level Marketing happening to these poor unsophisticated Migrants the Market would correct the Market Pricing forcing the company to correct its policies while Mr. Ackman’s fund would profit off-handedly from the correction. While Mr. Ackman was dong the Market and the Migrant Community a Community Service that the Government could not.

This is not what happened. Instead of the Market taking corrective action another professional Investor named Carl Icahn and another activist named Dan Loeb worked separately to short squeeze Mr. Ackman’s Funds Herbalife Short Position. It’s likely the intent of Icahn’s involvement was for the unfair purpose to punish Mr. Ackman for a previous perceived Slights. I am not a Icahn expert. And never want to be. However Mr. Ackman previously pursued litigation against Mr. Icahn forcing Icahn to court when he refused to pay up. A Judge forced Icahn to pay a Profit margin on a previous investment agreement. This is an brief example of a Special Situation that had all the Hallmarks of being a Good Faith Action for the market and to help the American underserved Migrant Community. But just went terribly awry for a very Good man and Community Leader. If you would like to read about more details of this Special Situation? Please Read About It Here In Vanity Fair. Or Watch Bill Explain his actions below with Lex Fridman.

Elliot Investment Management L.P. Vs Proctor & Gamble

In 2003 Elliot Investment Management Partners formed the opinion Proctor & Gamble was not being fair in offering all Preferred Shareholders a fixed price while it tactically acquired German Hair products company “Wella A.G.”. A collective of Investment Funds along with Elliot opposed the Boards proposal to acquire the German Hair Products Company. Even one of Germany’s largest Fund Managers “Deka Investments” joined in the Special Situation to force a Shareholder Proxy Vote of Proctor and Gambles Board Of Directors. After many years of Litigation P&G capitulated and offered all Preferred Shareholders a raised fixed price offer. Elliot stated: “The Goal of the Investment Funds joining forces against P&G was to protect the rights of Minority Shareholders.”

Risk & Special Situation Investing

Public Companies provide the most opportunities for Special Situations. Senior to Subordinated Debt Securities are often analyzed and used for Special Situations. Did you know? “Event Driven Investing is often referred to as Special Situation Investing.” The Risk involved in special situation investing is inherently dangerous to Investors who do not stop and understand that this area of investing is unique and filled with uncertainty. Situations and life that you do not control can be seriously risky. Often change at a moments notice. So on the spectrum of Investing. Special Situations or Event Driven Investments usually are categorized as some of the most Riskiest Investments a Institution or Investor can make.

Conclusion

It’s clear Special Situation Investing and The Funds raised for this investment strategy are extremely unique and can move markets. It’s serious business. And has serious consequences for Management, Boards of Directors, Shareholders and even for Communities. Most of the Special Situation Investment Activity we see in the Market is executed by very experienced Investment managers. The truth of Special Situations Investing is generating Investor returns. I guess it can be said there is Value in taking a Company to court for the purpose of? Standing up for minority shareholders. Or more descriptively when Bill Ackman decides to Buy Hedging Positions to protect his Shareholders (like me) from a possible portfolio collapse during a Pandemic. I can see the positivity and responsibility in Mr. Ackman’s Hedging Positions.

But make no mistake there are those out there who do use Special Situations under the radar. These Opportunistic Investors who use “Special Situations Investment Strategy” can most certainly be a force of greedy negativity! I won’t name names. But frontline has made documentary’s on this topic. You can watch youtube for more on this criminal topic.

In reality it does feel like there is Political undertones in certain Special Situations Investing. However I feel as long as the Regulators at the S.E.C. and our fellow Institutional and Retail investors see the negativity Special Situations Investments for what they are. We can put the Bad Actors who use Special Situations for greedy unhealthy purposes out of business. Making our communities better in the process. Capitalism is all about making things better in our communities and in our markets. I just hope this philosophy works for Special Situations as well.

Thank you for reading. Godspeed.

Business Articles, Value Investing

Current Yield of Brown & Brown Stock?

Computation of Current Yield for $BRO

When forming the computation for the Current Yield of any Stock or Bond it’s necessary to understand what Current Yield Means and “Why we use this measurement of Yield?” “According to the Financial times: Current Yield does measure and examines the current price of a bond or stock, rather than looking at its face value. Current yield represents the return an investor would expect to earn, if the owner purchased the bond and held it for a year. However, current yield is not the actual return an investor receives if he holds a bond until maturity.”

Black Rifle Coffee Company $BRCC : NO DIVIDEND

I wanted to do an actual Current Yield computation of one of my investments to demonstrate the importance of minding your investments. While searching I came across something that truly raised my eyebrows! I am astonished that my SOF Veteran Brothers over at $BRCC Black Rifle Coffee Company has an annual Net Revenue in December 2023 175.4 Million. That is 30% higher YOY than last January. I will be watching closely as time moves on this year. If I see additional movement in the earnings later? This may be placed on my Defensive list. I am also astonished BRCC has so little Shares outstanding on it’s Balance Sheet! Only Sixty One Million Nine Hundred Sixty Four and One Hundred Fifty Seven shares outstanding. BRCC does not pay a cash or stock dividend. So this was in observation only.

The Computation of “Current Yield”

The Stock I am choosing for today Current Yield Computation is Brown and Brown Insurance. Amazingly B&B has seen 30 years of increased Dividends! That’s incredible. Making it certainly a stock that does pay a healthy Dividend. According to Brown & Browns 10K the Company’s Outstanding Shares equal Two Hundred Seventy Nine Hundred Million, Nine Hundred Thousand Shares Outstanding. (279,900,000.)The Current market price of the Stock is: Seventy Six dollars eighty eight cents. $BRO $76.88. Wikipedia say’s “Brown & Brown, Inc. is an insurance brokerage firm, specializing in risk management. Headquartered in Daytona Beach, Florida, Brown & Brown has 450+ locations worldwide”. And currently has an annual revenue of 3.051 Billion. They pay an Quarterly Cash Dividend of $13.00per 100 shares.

So let’s find the Current Yield of Brown and Brown? With all the information provided we need to get back to our basics and decipher “What exactly Current Yield measures?” Current Yield measures the Annual Dividend divided by the Current Market Price and equals the Yield of the Investment. Our computation should look like: We take the $13.00 and divide by 100 equal .13 per share. Then take Annual Dividend $0.13×4= Annually dividend of $.52c. Then we divide our .52 by Current Stock Price of $76.88 which equals after all the math is done? = .676 or a( .7% Current Yield). This is our Current Yield explained for Brown and Brown.

I do hope you learned something in todays post? It was fun to write, and breakdown all the different elements to the computation of Stock Brown and Browns Current Yield. I needed a little practice for CY for my Investment Advisor curriculum. And thought writing an article would help me in ths area. I appreciate you stopping by to read this small Fundamental Analysis of $BRO.

Godspeed

Business Articles, Investing, Value Investing

2023 Annual Letter & Investment Performance

The following post is my personal Investment Portfolio’s 2023 Performance and How I achieved a 19.9% Real Rate of Return. This in depth investment post will also include incredibly in depth personal thoughts, and thought processes from my Education as a Value Investor from this year. It’s likely to surely strike a chord with many out there who are in the Investment Management, Family Offices to the Entrepreneurial space. Thank you for spending a few minutes reading my annual Investment Notes. Let’s begin.

It’s been a good year, I learned a lot more about being a Investment Portfolio Manager and what it takes to build your skills as a Value Investor and as Howard Marks would share “What is the most important thing?”. With all the distractions in this world working against us and our Investment performance? I still managed to pull off a great victory. Achieving a stable 19.9% Real rate of return for my personal Investment Portfolio. As I posted to the Value Investors I am connected with? I shared, “I will take it!”

This post will be about my personal Investment Portfolio and I will take you trade by trade “The Good and The Bad” and show you how I ended up with a stable 19.9% Real Return at the end of the year.

Charlie Munger May G-D Rest His Soul, was right! “There are only a three ways a smart person can go broke: Liquor, Ladies, and leverage.”
-Charlie Munger (Jan 1st 1924 – Nov 28,2023)

In January 2023 I wanted to begin Earning and training a Series 65 Investment Advisor/Investment Fund Manager Course. This career move will pay massive dividends in my life. And already is beginning to as I write this. There are about two dozen Investment Professionals on Wall-Street watching me closely. Along the way I have developed attracted a little community of Commercial Real Estate Brokers as well. I am positive they will be awesome to know as well. But back to studying as a Investment Advisor Rep. It’s true there have honestly been times I have experienced complete and embarrassing failures. Like failing practice tests. And then times I have overcome obstacles and demonstrated incredible resilience. If I am being honest? Sometimes because progress is slow? I feel absolutely Retarded! LOL It feels like my brain is not absorbing the content I am reading. It’s incredibly frustrating. But you put the book down. And the next day at the same time? You begin studying again. It’s only a matter of weeks before I am able to officially say I conquered this latest stepping stone.

Militant discipline, I use? Is precise and plainly works. When you feel your unable to continue? You stop for a break. Then get back after it. And then you feel better. Because you begin to internalize the information and content your supposed to absorb. I do admit I have had to learn to forgive myself. A. Because I have had a Massive Head injury while serving in the Military. And B. Because my Metabolism Illness/Disability plays havoc on my Body and emotions at times. And this does cause my brain to have concentration issues on some days. But as one of my Veteran Brothers from the Army Ranger Special Operations community always tells me after a failed evolution? “Lets just Keep Rangering On Doc!” And thats the key to learning in life! Wether your learning as a Value Investor. Or as a Competent and Dangerous Investment Portfolio Fund Manger. This Discipline just makes you a Bad Ass in general. You just keep marching forward regardless of your repeated failures.

A Foundation of Conservative Investments

There have been many ups and downs during the 2023. Most people were afraid of full on Recession and others were very Greedy riding the never ending train of the Bull market. But when I began in January 2023 and opened a new Brokerage Account to build a new Experimental Value Portfolio, I was reading Seth Klarman’s famous book “Margin of Safety” just one more time. Because admittedly there is so much in his book that I learn something new as I go deeper into his Books Lessons. And I feel that can be said in life in general. We all start off from a place of sheer ignorance to finding which direction makes since. I must share I am not much of a Speculative Investor. I like to keep my foundation very Conservative when investing. So that is why the First Stock I bought in my portfolio was a Deep Value Real Estate Company “Howard Hughes”.

Buying Howard Hughes?

After doing a Deep Dive, and considering the Management and reading the Annual Report or 13k? This is a great company that is being discounted in the Market because of the fact it is a Real Estate Development company. All my research told me it’s going to be a great investment. Little did I know in later in February? Famous Investor Joel Greenblatt made the same call. And posted inside the Value Investors Club website, which I am a member of, that he too has taken a large position in this undervalued Company. After learning this? I knew I was on to something. I guess it does help that Bill Ackman is the Chairman of the Board. This was another deciding factor. 100%

Insight Enterprises

I have been a long time Investor in the Company Insight Enterprises. So it would seem nautural that I would add this incredible little IT company to my Portfolio’s foundation. The companies management are genuinely “Truly Fantastic!” and I revere the Brothers who started as Entrepreneurs and built this incredible Company. Fact. The continued value of this company speaks for itself. And I am pretty sure just like Berkshire Hathaway it will be foundation for many Investment Portfolios to IT Professionals Retirement Accounts. It’s just that damn good. The end.

Pershing Square Hedge Fund

Im pretty sure everyone knows by now “How much I admire Bill Ackman as a good man and community leader.” I was going through a very dark time when I watched Bill’s Father’s “Larry” Career Leadership Award Ceremony and listened to Bill and Larry talk about life as a Entrepreneur and more importantly. Larry’s entrepreneurial Journey as a Mortgage Broker in New York City. It really brought some direction to my Emotional turbulence as a Entrepreneur during that time. I was really going through just terrible things from my illness. Made me question my sanity and my direction as a Entrepreneur. But! Larry and Bill straightened me right out. And for the fact Bill has personally been very generous with me? Pershing Square was a Buy! I really did not care about the value. I just knew I had to Support Bill. I am glad I did. Bills Fund is a Value Investing Powerhouse this year. If I may leave you with one thought? Invest in the People you genuinely Adore as Mentors and Community Leaders. The good faith will always come back to do nothing but good things. Live by the Golden Rule.

Blackstone Group

Next on my list of Investments that I have been invested in for a few years is Blackstone Group. It’s abundantly clear Mr. Schwarzman and President Jon Gray and the Team are building a phenomenal Business. Even during the Interest Rates and Inflation Crisis early this year? It was clear Blackstone’s Portfolio was more than capable of handling the bumps in the road. I should add, Jon, and Mr. Joe Dowling has personally been very generous with me personally. So Blackstone? Was a no brainer. It must be in my new Portfolio. So I invested. I owe all these Guys on this Investment list Success. And I am gonna give it to them.

Palantir | Artificial Intelligence for the Future

Did you know when I was deep inside Politics I flew across the country and brought certain Community Leaders who are Running for US Congress to a small office in Washington D.C. that was Peter Theil’s Club for Growth PAC? It was a-lot of fun. And I thank the Club for Growth team for being very generous with me.I never spent much time with Mr. Peter Theil except one time at a conference about Tech and AI. And that was before I began my role as Club For Growths guy out in the field. LOL The only reason I bought Palantir for this Investment Portfolio is becuase I can see the good it it doing with AI. It’s a incredibly undervalued Company in the Tech/AI space. And Dr. Alex Karp and team are doing incredible work. I am certain the way this team is collecting contracts from Allied Governments this small investment will pay off very well during the next decade. It’s that simple. During the 3rd Fiscal Quarter Palantir earning were so good? The market rewarded the Company for it’s growth. If I can mention someone else I truly like is Joe Lonsdale. His views are no nonsense and are very close to my own. The fact that Joe, Peter, and Dr. Alex Karp teamed up for Palantir? Makes this company a winner.

Inverse ETF’s and X3 Leverage.

It’s only fair for me to share that on occasion I did experiment with certain speculative ETF’s that were x2 and x3 inverse levered on certain days. For the most part. I had mixed results. And although my results were more Positive than negative. More in depth? Meaning I did sustain 6 days of loss minimal loss during 2 months using this method of speculation. I won’t be using any of these ETF’s with inverse leverage moving forward. But I am grateful for the experience. Buffett was right. No need to use leverage.

During December we saw 15% growth in the Market

During December when the Market was off to the races and rising near Christmas, I felt it prudent to rebalance. My actions were more Defensive than speculative. The rising prices in the market just did not seem sustainable and felt a little overvalued. So I did implement some harvesting of Profits and Rebalanced this Conservative portfolio. I am glad I did. I am happy to report I did not lose anything by this action. And remained true to Gharam’s and Buffet’s rules of “Never lose money!”

Conclusion to 2023

The list of Value Investors who I feel have influenced me the most is growing yearly. But it’s a small group. All have taught me to share in a Annual Letter. So here I am. I would like to Thank, Warren Buffett, Li Liu, Tim C., Bill Ackman, Howard Marks, Guy Spier, Mohnish Pabrai, William Green, Rick Reider, Stanley Druckenmiller, Jon Templeton, Jim Rogers, Bill Gross, Lauren Templeton, and many more. Thank you for the lesson and teaching me a fantastic frame work of how to express myself and share a professional investment philosophy, to sharing the many business decisions I have made throughout the year.

Howard Marks has taught me much through his Annual Letters and Memo’s and interviews online. But there is one Quote that I feel sums up a direction for all of us while Investing during turbulent markets. And if you listen closely he is often heard sharing this quote again and again. During the 2008 financial crisis. When the world was burning. And everyone had thought that all is lost. Mr. Marks said a little qoute that is fitting for all of us during those times we feel uncertain in our investments. And that quote is?

“Keep Calm and Invest On!”.

If you are still reading. I think I know what your saying?.. “This guys writing sucks!” LoL Admittedly Yes. I am not the best writer. I apologize in advance if this is hideous and embarrassing writing. I am not the best at many things in life. I could probably use a professional writer to screen my posts and first annual letter. But since I am just a upstart? I am forced to just keep marching forward without a professional team to help me. So I do feel that does account for something.

I feel the same thing will apply to this years new Investment Portfolio. I am giving it my best! And in conclusion I would like to leave you with 2 thoughts. During 2023 there were many ups and downs. The market was hysterical at times. And was greedy at times. But I kept my focus and kept learning while doing deep dives on many companies. In the end my new personal Investment Portfolio did clear a healthy 19.9% Real Return after inflation. And if I include my other Portfolio? The Return rises for both Brokerage Accounts at just under 24.5% for the Year. That is a fact. If you would like to see the report images? I can email them to you directly.

If I can leave you with my last thought for this years Annual Letter? I would like to share a Post by Guy Spier. Guy shares. 2024: Begin. Just Begin. Put your pen to paper. Fire up that laptop. Put on the running shoes. Say that thing. Call that person. Write that note. Open that book. Just begin. The rest will be history. Thank you.

Godspeed.
JS

Business Articles, Index Investing, Investing, Value Investing

Index Investing is More Art Than Science

I am about to share some Value Investing information that will make your jaw drop. If your anything like myself and the gang of us on Twitter who are Value Investors? You are a Junkie for information so you can put your research to work for the purpose of outperforming your latest Investment Portfolio’s compounding unrealized gains. Today’s Post is special for Investment Professionals.

You know that S&P 500 Growth Index your about to invest in? It’s likely there is a better index option with higher returns. FACT! By the way THIS IS NOT A SALES PITCH. NOR INVESTMENT ADVICE.

Hear me out! Thank you. I would like to introduce a well known Investment Advisor who has focused his career on Institutional Investing in the North East, and for the last 10 years has lived and practiced in Tucson Arizona, I listen to his fantastic Podcast while I work at night driving around town listening to his Podcast, “Money for the rest of us“.

Mr. Stein has a gift explaining complex and sophisticated Financial Products, and Investing Topics that make it very easy to compute. Furthermore one of the Episodes he recorded recently was fundamentally explosive for me as a fellow Investor. He went on to explain that not all Index Investing is created equal. Now I do see this will begin to shift opinions with what I am about to share. But before I begin addressing the Questions you may have about this Morally Hazardous Claim. First I have to share why we came to this conclusion.

Data Mining Index Markets on to a Software Application

Mr. Stein and his small Investment Team and a few Software Developers and Architects of Digital Computer Programs recently released a secret project that details charts and tons of Data of Index’s across the globe in different Markets. They measured different ETF’s, Value Index’s, Growth Index’s, Growth ETF’s, ETN’s, Japan Index’s, UK Index’s, US S&P Index’s and tons more.

What did they find?

They found that not all Index Investing is the same. A very valid argument for Investment Advisers and Money Managers can be made that with this new DATA? The old practice of Value Investing is very much alive and out performing it’s counter part of Growth Funds. This post is general findings I heard on the podcast. However I suspect if you listen to the exact episode I listened to you will find it fascinating all the data and inflection points to that Index Investing is a Art not a Science. The following points of interest and listed topics will keep you on topic as you listen to Mr. J. David Stein share some incredible Data about “how to make your Index Research interesting? And how you should begin looking at data with his latest Software Application for Investing. This is what you will learn?

Index Providers divide the stock universe into large and small, growth and value.

The Difference Between the price to earnings ratio and earnings yield and which is better?

How earnings volatility can impact annual earnings growth and what to use to estimate future earnings?

How value stocks often grow earnings faster than growth stocks

How value has outperformed growth in the last three years?

Click the Photo below for Access to the Episode about Asset Camp and the Points and Topics shared above.

If your like me and would like to see these Data and Research Points? I would recommend sign up for the Data Suite Software for Investment Advisors and Sophisticated Professional Investors Asset Camp

Listen to the Episode with J. David Stein

https://moneyfortherestofus.com/443-surprising-stock-index-insights/

Thank you for reading, I am very happy to share this. You will learn a few amazing topics that make Value Investing hard to beat as a Investor.

Godspeed
JS

Business Articles, Corporate Finance, Finance Articles, Hedge Fund Articles, Value Investing

How to Calculate a Stocks Intrinsic Value

Just like with any profession there are professionally instructed leaders of industry and amateurs. That is the same for Investing. But you should know that if you are not read up on the latest value investing procedures or if you haven’t formed your own personal checklist before investing in a Company or stock? You likely are make big mistakes along the way. But with today’s post on “How to Calculate a Stock or Company’s Intrinsic Value?” This will begin giving you a foundation or basic education to thrive and become successful in Investing.

I see so many people who do let emotions control their investing strategies and future. They are bound to lose almost everything. It’s just like If your a player in the Stock Market using only your gut and other people’s money? Your a borderline Criminal, Moron and most likely a gambling Day Trader at best. And should be taken behind the Building strung up by your ankles smothered with cheap grape jelly packets from the cafeteria and left for the Bears. These day’s Quants run the show. But there is good news! This post is for the bonafide new up and coming Investors wanting to reach that next elite level in Investing. If you have ever wondered where the like’s of Warren Buffet, Seth Klarman, Howard Marks, and other Value Investing Legends get there super secret knowledge from? This post is definitely going to provide you with a foundation of how to Calculate Intrinsic Value of a Stock or Discounted Cash Flow (DCF) of a Business.

So stay tuned…This is a post you do not want to miss. Even if it is Mathematics and heavy Calculations.

Hedge Fund Managers

If you plan on opening your own Hedge Fund Shop in the future or if your a Everyday Sophisticated Investor that plans on using Calculations and Mathematics instead of Gambling and Speculating? Your going to want to lay a foundation around Value Investing using Benjamin Graham’s teachings and procedures. So it’s absolutely vital you read Benjamin Grahams “Intelligent Investor” Book. Question. What makes a Hedge Fund unique to calculating a Stock or Companies Intrinsic value or Discounted Cash Flow? Well for starters Hedge Funds typically focus on trading on the stock market. But before I begin explaining Hedge Funds in depth like so many Financial personalities around me “I have extreme ADD sometimes.” LOL So maybe I should keep on track.

What is Intrinsic Value?

The intrinsic value of something is said to be the value that that thing has “in itself,” or “for its own sake,” or “as such,” or “in its own right.” Extrinsic value is value that is not intrinsic. Many philosophers take intrinsic value to be crucial to a variety of moral judgments. STANFORD BUSINESS ENCYCLOPEDIA

If your going to understand Intrinsic Value of a Business or Stock you need to understand that the Market is just voting for the day what they price is of a Stock. It doesn’t actually value the company. We use Intrinsic Value to evaluate and make a opinion to analyse if the Company or Stock we are looking at is undervalued and a bargain. If it is not a bargain and not undervalued? Then we keep looking. What is the formula to calculate Intrinsic Value? Before I answer this basic question you must know I highly recommend you read Benjamin Graham’s “Intelligent Investor” Book. It’s Warren Buffett’s bible of sorts. But first we need to lay out to terms.

Intrinsic Value Formula and Margin of Safety. These Topics are incredibly important for making a educated and professional judgement on a company’s future. And knowing if it is worth investing in.

By the way did you miss Berkshire Hathaway’s 2022 Annual Meeting? WATCH & READ HERE!

How to Calculate Intrinsic Value of a Business?

#1 – Intrinsic Value Formula of a Business

Mathematically, the intrinsic value formula of a business can be represented as,

where FCFE_i = Free cash flow to equity in the i^th year
FCFE_i= Net income _i + Depreciation & Amortisation _i – Increase in Working Capital _i – Increase in Capital Expenditure _i – Debt Repayment on existing debt _i+ Fresh Debt raised _i
r = Discount rate
n = Last projected year

Since this formula is mathematically difficult for ADD individuals like myself who struggle with on the page formulas. I would like to make this as easy as I am able for you. Here are a few videos that go in depth. Watch the Videos below to explain the calculation and models in action. This will begin giving you a foundation to grow.

BENJAMIN GRAHAM’S INTRINSIC VALUE CALCULATION MODEL EXPLAINED

Watch this Video below for a in depth explanation by this legendary Value Investor who is Charlie Mungers Bridge Playing Side Kick Mr. Mohnish Pabrai. Mr. Mohnish Pabrai is sincerely a fantastic guy. Mr. Pabrai has been very generous with the lessons and information he gives to up and coming Value Investors/Academics. And for this reason I need to list him in my blog. The way he lay’s out all his information and lessons makes it digestible and simple to newer people like us. His resources for all Value Investors is a must see, and you should watch his Youtube Channel and Videos. 100%

Discounted Cash Flow Model

When evaluating a Company’s (FCF) Free Cash Flow currently and for the next 10 years you need to include a Average Growth Rate and also consider what your “IDEAL” return rate is that you want to include within the DCF Model. For a more easier way of explaining this I need you to watch this video below. It will give you a better understanding of “How to calculate the DCF of a Company”.

Margin of Safety

In conclusion of today’s post it seems like it would be worth it to include what I had touched on earlier, “Margin of Safety”. If you are a Hedge Fund Manager or Value Investor, or everyday Accredited Investor knowing and calculating a Company’s Intrinsic Value is incredibly useful when analysing if it is a Investment you want to make. However even though you do find the Value of a Stock or Company you need to add an extra layer of Safety to the strategy before deciding to invest. The way you do this is by adding a Margin of Safety. Benjamin Graham’s Book will give you more info on this. But if your really a Pro? You will likely want more of a tactical explanation, strategy and guidance. So I highly suggest you read Mr. Seth Klarman’s “Margin of Safety”.

To end this chapter of todays very long post, it’s ideal if I say this in conclusion. Even though you may calculate the Value of a Company or Stock? You must make a educated professional judgement if the company warrants a long term investment. Many everyday investors don’t have the temperament nor experience within Value Investing to make these correct calls. But with time and learning to be Risk Averse by, with and through failures? You will learn. I wish you all happy hunting and I do hope you learned a bunch from today’s post. It’s long over due. And let’s make something clear up front.

This post is just a short taste of what Calculating Intrinsic Value is all about. The topic and subject is so deep and wide this post is nothing compared to the expertise out there in the market. If you are a Beginner or moderate investor? Please find a mentor and study the greats/legends like Warren Buffett, Charlie Munger, Bill Ackman, Mohnish Pabrai, Howard Marks, Seth Klarman and others. Then you will begin to see “How to use this post as a spark of which direction you should go to invest in your education, experience and financial gain.”

Godspeed
JS