My first inkling of that difference came from a client at Pyramis. He always asked good challenging questions in this friendly laconic way, and occasionally shared his thinking on stocks. I'd analyzed that company for years, knew it in and out. Such things are important on the sell-side. So I was pretty dialed-in on those specifics and on the stock in general, but I didn't see any reason to buy it.
There was no pending growth acceleration. No weather that seasonally drove up the business. No major infrastructure bills. I asked what drove his interest and he told me, quite simply, that it was a great well managed company that seemed cheap with a terrific CEO [Tony Guzzi].
He got no disagreement from me, I just questioned the timing. The problem he and other long term oriented PM's are trying to solve is finding good companies to own, that could be owned for years, that weren't going to keep him up at night and had a high probability that it would grow in value over time.
Over time, I realized I wanted to be more like him someday.
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Ask a sell sider to analyze growth in BVPS and they'll probably ask why that matters but on this side of the desk, it is dear. The consistent creation of value evident over time on a balance sheet is one of the most important elements to consider for long term investors. And now we come to this quarter and this YTD, where performance is offering more lessons. Specifically, questions like, what happens if the companies we own aren't generating long term growth and value as expected?
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What if management and the board start making choices and decisions that conflict with our principles of long term value creation? Even worse, what if they've been making poor choices all along, and we just didn't recognize it? Due diligence is an ongoing process. I hope I'm getting it right over the long term.
I know I'm spending a lot more time than ever thinking about the differences between the research process, the portfolio management process, the valuation process and the ongoing appraisal process. Here's the BVPS of two companies we've recently been investing in still buying them so going to remain vague on tickers Posted by Long Cast Advisers at 8: I haven't posted in awhile.
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Companies I've written about and own haven't been operating as expected and their stocks aren't working either, which has lead to some combination of reflection a good thing and hiding under a rock a less good thing. I've been struggling to sincerely articulate the experiences and painful lessons of "getting punched in the face" and hope to post something on that soon. But I wanted to share my recent response to an email received from a reader on QRHC who asked questions around I'll take the last one first. On the lack of insider buying, I asked the CEO this exact question the last time I spoke with him, and it was the last time he spoke with me.
Putting aside the slight frustration with getting ghosted by management over a layup question, all managers should be aware that avoiding questions is an "amateur hour" technique that's about as useful as a concrete life preserver. It doesn't make questions go away, it just means the askers have to find other sources. Having poked around some, I don't know why the CEO hasn't been buying shares but I do feel comfortable that he is in his wheelhouse building a mid-market focused business, and that he is surrounded by good executives who know what they're doing.
A search on LinkedIn reveals two people who fit tech related roles but I'm not familiar enough with the technology departments at Fairfield University nor East Central University in Ada, Oklahoma to judge their pedigree. Without that, this doesn't work. In contrast to a management team that appears experienced and well-suited for a small mid-market focused business, the Board appears non-functioning.
It is controlled by Mitch Saltz, the Chairman and majority shareholder, even as he sells shares into a guidance I don't believe they will hit. Presuming he too wants a return on his investment, I wrote letters asking him they re-incorporate from NV to DE to better attract institutional investors and that they add an experienced industry expert to the Board to better monitor management, but he said no. Want to see a vague exec comp plan? Getting to the last remaining question on commodity exposure, since the company doesn't own fixed assets, I don't believe commodity exposure on its own is a material driver of revenues or margins.
In conclusion, with this investment, I've been focused almost exclusively on the three things that I think make this business work I am confident on the first two. I have limited visibility into the latter. I've long said that as investors we need to hang our hats on facts that endure even when the market tells us we're wrong or when operations temporarily aren't performing as expected. I feel comfortable knowing what I know and hanging my hat on "this is a simple business with experienced people running it". But I do think it might be time to elevate some Board and corporate governance issues in my investment weighing process.
It certainly can be a more nuanced and potentially effective way of further separating the wheat from the chaff. Posted by Long Cast Advisers at 7: Board Compensation is Shameful.
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When Christopher Byron died last year, I was reminded of the years I knew him, my first two out of college, when I was an editorial assistant at the old New York Observer and he wrote a weekly column about executive compensation. The obscenity of executive pay at the time was still relatively new and it was awesome to hear him talk about the issue. Now executive comp is an old obscenity, like a grandmother's curse. It is certainly the one issue on which all our government representatives tend to agree.
All the more reason to continue to shed light on the practice. Occasionally you see Boards putting skin in the game, though no examples come to mind at the moment. Invuity's latest proxy demonstrates the wrong side of comp, a greedy, do nothing board paying itself an absurd fee justified by nothing.
Posted by Long Cast Advisers at 2: I included this short piece as part of my 1Q18 letter posted on the Long Cast Advisers website. However, as the largest single client in the firm, I definitely feel it when stock prices go down. I recommend the entire article but this paragraph alone blew me away. It speaks to the amount of time, effort and experimentation involved in simply tracking information that might be useful: And he replaced the light filters.
7 pieces of advice for the patient investor: Mayers
Microscope designers typically enhance their instruments' resolution by blasting a sample with as much light as possible. But light that bright kills cells.
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He carefully guided the scope's light beams to make each photon do more work. These shows are a form of theatre — investment advice as entertainment. Even the Mad Money website warns you not to treat anything host Jim Cramer says as anything other than an opinion and not an inducement to buy. There are far better places to turn for investing advice.
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Among these are books that stand the test of time. One volume that deserves a place on the shelf has the unsexy title of Stocks for the Long Run. Among its many endorsements is one from Cramer, while The Washington Post calls the book one of the 10 best investment books of all time. Siegel argues that the stock market is the best place to put your money despite its risk, volatility and unpredictability.
He reviewed years of data and found that U. Within that there are huge fluctuations — like the crash — so the longer your horizon the better. One chapter looks at calendar anomalies including the January Effect which, over a century, has seen small companies outperform large ones in January. A variation says that as goes January, so goes the year — but not always. The truth behind 50 stock market rules of thumb. In the current environment, probably less. Returns are more stable the farther out you go, because they smooth out short term fluctuations.