Value Ideas Blog
Presentation about Value Investing at TU Darmstadt

After the success of our last presentations we are happy to announce one new presentation about Value & Activist Investing. It will be held by us at the 09.11.2016 19 on the TU Campus in Darmstadt in room 123 of the old main building S103. The presentation will be presented in german and will deal with an introduction to Value Investing and two case studies. The Case studies will be interactive and contain a long pitch which we have not yet presented on the blog. You are kindly invited to the presentations but as place is scarce you have to quickly fill out the form below with you name and the number of guest first so that we can plan. We would be glad to host many visitors.

 

2016-11-06-tu-darmstadt

 

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Dear followers, the time has come again for our weekly link collection. This time featuring an enlightening article on management compensation, how Charlie Munger picks stocks, seven patterns of inefficiency when pricing a business, some thoughts from the Brooklyn Investor and an ‘Economist’ comment on John Nash’s nobel price 1994, in remembrance of his great life that ended three days ago. nash We will be back shortly with our latest investment story. Stay tuned and enjoy your week!

After the success of our last presentation one year ago we are happy to announce two upcoming presentations about value Investing. The first will be held by us at the 23.02.2015 19.30 on the EBS Campus in Oestrich-Winkel in room N3 the presentation will be presented in german and will deal with an introduction to Value Investing and two case studies. The Case studies will be interactive and contain a long pitch which we have not yet presented on the blog. The second will take place on Monday the 09.03.2015 18.30 in N3 and is presented by Frank Fischer of Shareholder Value Management AG eg. Frankfurter Aktienfonds für Stiftungen and is held in english. The topic of this presentation is Value Investing in Crises. You are kindly invited two both presentations but as place is scarce you have to quickly fill out the form below with you name and the number of guest first so that we can plan. We would be glad to host many visitors.

  ebs   Please enter your name into this form to join: http://goo.gl/forms/RyiZmAbqnk Thanks. read more
Dear followers! Here are once again a couple of recent links out of different areas that we found interesting. And regarding the recent actions taken by the ECB, this could help maintain your confidence in stocks and bonds:  
How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. – Robert G. Allen
  Have a great week!
You can find a really good article about amazon and its business model and its long-term perspective in the latest economist, her is the link to the  “short” online version. About the, in our opinion, value trap of taxi medallions and potential value investment in the business behind it due to disruptive innovation such as uber, and the strategy behind BlaBlaCar etc. Related to this you can find an older business insider article about the death of Value Investing due to disruptive innovations. A really interesting article by Wexyboy about European Islamic Bank and the value of shareholder activism. For me even more interesting due to the fact that I have written my bachelor thesis about islamic finance in germany and the potential market size for one bank. Moatology explains you how to use stock screeners to find undervalued gems. A great post from oddballstocks over investing styles   Some thoughts about entrepreneurship and what it has to do with value investing:   The job of an entrepreneur is to figure out where opportunities lie, they do it by tinkering with the market, learning new capabilities and creating value. Normally entrepreneurs blend strategic thinking and opportunistic actions at different junctures and become more strategically focused on a small niche (a value investor would say circle of competence) throughout this process and progress in learning within age and career stage. This extensive planning helps the entrepreneur to spot gaps in the market or simpler opportunities to invest his time and money. Realizing an investment idea for both a product for an entrepreneur or an investment thesis for a value investor which is not seen by the market – usually means overcoming significant resistance by others. The more contrarian the idea is, the greater is the natural resistance and normally the payoff. Due to the fact that entrepreneurship and value investing are an iterative, messy and uncertain process, both require a lot of effort, time and hard work.   Entrepreneurship and Risk taking   Usually everyone seems to know: Higher return = higher risk. This is essentially what every economist will tell you, but is this really the truth? I don’t think so. If you talk to entrepreneurs you will hear that they are trying to reduce risk everywhere they can (this is also called risk mitigation). The main difficulty in creating value is that you have to go against the grain, by delivering something new to the market while creating a profit. This normally includes a high level of uncertainty in the process and the outcome of your venture. Often you have to kill your most loved ideas due to the fact that you cannot sell your product in sufficient quantities to make it worthwhile. For this reason the probability that an entrepreneur will succeed with one idea is by far less than 100%. If you see some outcomes by entrepreneurs and what they initially invest into the venture in terms of money and time you will observe that this is often not the case. And in my opinion it is the same with value investing, you have to overcome many hurdles with different percentages of success. So entrepreneurship and value investing are more like poker where you are faced with uncertain outcomes which are influenced by the player’s capabilities, it is an uncertain game with skill. The game depends to some extend on the luck of the draw, but how you play your hands over time is what creates the true champions. For this reason the capabilities of an entrepreneur or a value investor determine whether he or she sits down at the table and plays at all.   Have a great week  
After I spend a week in Omaha to attend a German value investor conference and the show of Buffett and Munger, we have a couple of more ideas to work on and even more valuable readings. Overall I can say that this week was a unique experience and I have to be deeply grateful to the organisations of the event and particularly to two persons from which I learned the most and have such a great personality. The two guys I owe so much are  M&MMI, thank you guys for all the lessons which you have taught me.   Created with Nokia Smart Cam   I bought Berkshire Hathaway`s letters to shareholders from 1965-2013  for 12 Dollar in a book form, which is a pure bargain for a guy who does not like to read so much on a screen. I will try to summarize them all (after I have finished my studies) and upload them.   Furthermore I`d like to highlight the book “Dream big” which was highlighted by Warren Buffett at the end of the Meeting. You can read a summary here.   You can read the notes of the Meeting here, I would like to highlight WBs answer to the Cost of Capital.   Additionally I would recommend the lessons of failure from the really good moatology blog. As a person who admits to have failed a couple times I can recommend to use such an approach.   Due to the fact that I like entrepreneurship and like to spend my leisure time on edx courses I only can recommend to read about entrepreneurship, strategy  and learn something new in an edx online course! And last but not least I have learned how important a franchise is, so go out and lean-to account for it! (We will try it as well)   And always keep in mind that the intelligent investor estimates likely returns, and invests if the returns are worth the risk.  Most profitable investing takes an uncomfortable view versus the consensus, and buys when the market offers good deals.  If there are no good deals, profitable investing sits on cash, and waits for a better day. Have a great week!    
The book: ” The Art of Investing – How the wold’s best Investors beat the market” written by John Heins and Whitney Tilson, who also publish the Valueinvestorinsight, is a collection of value investing quotes by more or less famous investors. Overall, the book is well written and easy to read, but the price of the book is around 25 Euro which, in my mind, is quiet expensive for a collection of quotes. According to the authors the best investors can articulate in a clear and focused way what they’re looking for, why they’re looking for it and where they’re trying to find it. They have a well-defined and consistently applied process for research and analysis. Furthermore value investors understand the micro factors, such as a company’s competitive advantages and only act when they are able to draw a conclusion which incorporate a margin of safety. Because I stick with the quote of Richard Pzena, here are the best quotes of the book:   Charlie Munger: “All sensible investing is value investing”   Zeke Ashton: “I’ve heard it said many times that value investing is not as much about doing smart things as it is about not doing dumb things”   Lee Atzil: “The first thing is by making sure the potential downside is a small fraction of the upside. That means we avoid stocks that are cheap on an equity-value basis primarily because there’s a mountain of debt. The second important way to have a margin of safety is to have more than one way to win, through earnings growth multiples expansion or free options in the business.”   Seth Klarman: “People should be highly sceptical of anyone’s including their own, ability to predict the future, and instead pursue strategies that can survive whatever may occur.”   read more
More warning signs are rising, companies margins are at their peeks: “A slowdown in profit growth would hardly be surprising, given that profits are at their highest as a proportion of American GDP since the second world war. But that points to another oddity. On the best long-term measure, the cyclically-adjusted price-earnings ratio (which averages profits over 10 years), American equities trade on a multiple of 25.4, according to Professor Robert Shiller of Yale University, well above the historic average.” Read the full article of the Economist here.   Probably the biggest money scandal in Germany in the year of 2014: The nearby bankruptcy of Prokon, where over 75.000 Germans have invested a part of their money. Another example of the famous economic quote: There is no free Lunch! English  short version.   Very good blog and a very good article over the moat of financial service companies on Punch Card Investing, which perfectly fits in our current research process.   And for the first time, a video Link to an interview with the World’s Best Investment Advices from valueinvestors like Warren Buffett, Peter Lynch, John Templeton, Seth Klarman, Charlie Munger, Walter Schloss, Bill Ackman, Bruce Greenwald, …   And one quote  to think about for the week:  “When he was dry, he believed it was alcohol he needed, but when he had a few drinks in him, he knew it was something else, possibly a woman; and when he had it all — cash, booze, and a wife — he couldn’t be distracted from the great emptiness that was always falling through him and never hit the ground.” Denis Johnson