Columbia Business School has just released the Fall 2018 issue of its Graham & Doddsville newsletter. In it, they interview members of Tweedy, Browne Company such as Roger De Bree, Andrew Ewert, Frank Hawrylak, Jay Hill, Amelia Koh, Tom Shrager, John Spears, and Bob Wyckoff. They also interview Scott Miller of Greenhaven Road Capital.
Additionally, the issue also includes student investment pitches such as long JD.com (JD) and long Qorvo (QRVO)
Tweedy Browne Buys Baidu, Sina, AutoZone
Tweedy recently bought some Chinese equities: search engine giant Baidu (BIDU) and Sina (SINA), which owns Weibo, a popular social media business. They like the profitable advertising business models but have smaller position sizes due to various risks.
Domestically, Tweedy also purchased shares of AutoZone (AZO): "If you lookover the previous 11-yearperiod, its intrinsic value grew by 16% per annum, with a significant percentage of that growth driven by share buybacks. The historical record also revealed a stable and defensive business. Same store sales at AutoZone have grown in 19 out of the last 20 years, including in 2008 and 2009.AutoZone has also historically produced high returns, with a 14% ROA (return on assets) and a roughly 30% lease adjusted ROIC (return on invested capital)."
Greenhaven Road Long Etsy, Fiat, Yelp
Greenhaven Road's founder talks about his positions in Etsy, (ETSY), Fiat Chrysler (FCAU) and Yelp (YELP).
On Fiat, he notes: "Fiat Chrysler is reducing the low margin fleet business by getting out of sedans and focusing on SUVs, aligning themselves with customer preferences and higher margins.They are also going to either spin off or sell their parts division. If you backout the parts business, you're getting the core business for less than 3x earnings excluding net industrial cash and the parts business. That’s an attractive multiple for a growing earnings stream and a business that should remain profitable even if US new car sales decline by 30%."
Graham & Doddsville New Fall 2018 Issue
Embedded below is the new issue:
You can download a pdf copy here.
Monday, October 22, 2018
Graham & Doddsville Fall 2018 Issue: Tweedy Browne, Greenhaven Road & More
Wednesday, August 23, 2017
What We're Reading ~ 8/23/17
New book from Bridgewater's Ray Dalio, Principles: Life and Work [Ray Dalio]
What is and isn't a moat [Johnson Inv]
Always invert [Above the Market]
The stereo speaker company giving sight to self-driving cars [SF Chronicle]
The internal combustion engine is not dead yet [NYTimes]
Is Tesla (TSLA) really a disruptor? And why the answer matters [HBR]
Chill: robots won't take all our jobs [Wired]
TripAdvisor (TRIP) can fly higher [Barrons]
The incredible shrinking Sears (SHLD) [NYTimes]
Amazon vs Maersk: the clash of titans shaking the container industry [Platts]
Jack Ma (BABA) is ahead of Jeff Bezos in grocery store ambitions [Bloomberg]
How Softbank (SFTBY) is reshaping global tech [The Information]
How Baidu (BIDU) will win China's AI race, and maybe the world's [Wired]
Quantum computing comes of age [Alphr]
Your brain on money [A Wealth of Common Sense]
Thursday, March 23, 2017
What We're Reading ~ 3/23/17
Mauboussin: The incredible shrinking universe of stocks [Credit Suisse]
7 traits for active investors to win in the long term [Jim O'Shaughnessy]
How to fight a price war [Harvard Business Review]
Stephen Jarislowsky's secret: buy stocks you never plan to sell [Canadian Business]
The fourth industrial revolution: a primer on artificial intelligence [Medium]
A pitch on Alphabet (GOOGL / GOOG) [Wexboy]
The autonomous vehicle revolution [Rational Walk]
Mohnish Pabrai thinks autonomous vehicles will take 20 years [Benzinga]
Baidu's (BIDU) CEO envisions a spinoff of robot cars arm [Bloomberg]
On Intel's (INTC) purchase of Mobileye (MBLY) [Stratechery]
Apple (AAPL) wants to bring augmented reality to the masses [Bloomberg]
Tech and entertainment in the era of mass customization [Andreessen Horowitz]
How being wrong can help us get it right [Tim Harford]
Advertisers are more interested in Instagram than Snapchat [Fortune]
Interview with Ctrip.com's (CTRP) CEO [Skift]
The billion dollar industry of professional video gaming [Bloomberg]
Soda loses its US crown; Americans now drink more bottled water [WSJ]
Wednesday, February 22, 2017
What We're Reading ~ 2/22/17
Why we dig in with a long held belief instead of changing our minds [Reformed Broker]
Decision making amid uncertainty: improving your process [CFA Institute]
Inside the Snapchat roadshow [Business Insider]
On Quicken loans, the new mortgage machine [NYTimes]
China's artificial intelligence (A.I.) boom [The Atlantic]
Podcast with Ed Thorp [Meb Faber]
Prem Watsa drops long-held bearish stance on markets [BNN]
On Buffett's new stake in Monsanto (MON) [Bloomberg]
Warren Buffett's honor versus 3G [Lawrence Cunningham]
A look at Expedia (EXPE) [Value and Opportunity]
On owning a stock for five full years [Gannon on Investing]
Mark Cuban's two biggest stock holdings [Benzinga]
Apple: the greatest cash machine in history? [Aswath Damodaran]
Billions the TV show versus real life [The Ringer]
McLaren struck gold making supercars for regular drivers this year [Bloomberg]
Wednesday, May 4, 2016
What We're Reading ~ 5/4/16
Concentrated Investing: Strategies of the World's Greatest Value Investors [Benello]
The internet economy [Chris Dixon]
Everything as a service [Stratechery]
A look at Cable One (CABO) [Value Seeker]
Rise of the robots is sparking an investment boom [FT]
Nielsen's blindspot and the fight for the future of TV ratings [The Wrap]
Company profile of TransDigm Group [Rational Walk]
Building failure into your process [A Wealth of Common Sense]
'Free' shipping crowds out small retailers [WSJ]
Africa's market of 1.2 billion people still holds huge promise [Economist]
Is Facebook approaching bubble territory? [Peridot Capitalist]
How grocery stores can survive Amazon [Bloomberg]
In China's Northeast, a daily jostle for jobs [NYTimes]
Baidu's moral dilemma [CNSpoon]
Google's yearly founders' letter [GoogleBlog]
Google has run away with the web search market and no one is chasing [Quartz]
Why are there so many mattress stores? [Marketplace]
The US homeownership rate falls again [WSJ]
How to be a better networker [Both Sides of the Ghost]
Wednesday, April 27, 2016
What We're Reading ~ 4/27/16
Second level thinking: what smart people use to outperform [Farnam Street]
Consumption in China is resilient, despite troubled economy [Economist]
What if China already had a hard landing? [FT Alphaville]
Baidu - a hidden gem [Variant Views]
A look at Expeditors International [Rational Walk]
The curious case of Hercules Offshore [Oozing Alpha]
A subprime boom, insane interest rates, predatory lending: sound familiar? [Motherjones]
Luck meets perseverance: the creation of IBM's competitive advantage [Farnam Street]
A look at India's e-commerce market through Flipkart [Founding Fuel]
The extinction invention [MIT Technology Review]
Learning Larry Page's Alphabet [Fast Company]
The case for investing in Latin America [Bloomberg]
The affordability crisis: what happens when millennials can't afford homes? [Apartment List]
More than 40% of student borrowers aren't making payments [WSJ]
47% of Americans can't come up with $400 in an emergency [The Atlantic]
Will driverless cars mean the end of auto insurance? [CSMonitor]
Inside the fall of SunEdison [WSJ]
Lessons from SunEdison's collapse [BaseHitInvesting]
Facebook wants to be the layer between you and the future [Buzzfeed]
Inside Apple's secretive iPhone factory [Bloomberg]
Wednesday, January 13, 2016
What We're Reading ~ 1/13/16
George Soros: it's the 2008 crisis all over again [CNBC]
Rare interview with Michael Burry (of The Big Short fame) [NYMag]
Daniel Kahneman on intuition and loss aversion [Farnam Street]
Barron's top 10 stock picks for 2016 [Barrons]
The 2016 Crossing Wall St buy list [Crossing Wall Street]
On Amazon's entrance into India [Fortune]
Amazon and world domination [Value Venture]
A painful year for contrarian trades [A Wealth of Common Sense]
The difference between patience and stubbornness [Fool]
In Silicon Valley now, it's almost always winner takes all [New Yorker]
Baidu's Li says investors don't get China's coming internet boom [Bloomberg]
The digital future of consumer-packaged goods companies [McKinsey]
50 unfortunate truths about investing [Morgan Housel]
Cordcutting: myth or reality? [Value Seeker]
How FICO became outdated [PYMNTS]
Meet the 'new' lower margin, lower quality Chipotle [HVST]
Current case for Liberty Global (LBTYA/K) [Jnvestor]
Nearly 95% of young renters want to buy, but many say they can't afford it [WSJ]
Friday, November 6, 2015
Ricky Sandler Long GMCR & ZNGA, Short WAB (Invest For Kids Chicago Presentation)
We're posting up notes from the Invest For Kids Chicago conference 2015. Next up is Eminence Capital's Ricky Sandler who pitched a long of Keurig Green Mountain Coffee (GMCR).
Ricky Sandler's Invest For Kids Chicago Presentation
• At 25 launched his own business Fusion Partners. In '98 started Eminence
• Long idea: GMCR/Keurig Green Mountain.
• Controversial there is a credible short story. Thinks it’s already priced in and an incredible long opportunity.
• Two businesses, hot biz (kcups) and Kold with sodas, brand new.
• Hot platform sell 9MM to 10mm brewers/year and sell 10B to 11B kcups per year.
• Razor/razorblade model.
• Significant room for increased household penetration. Current penetration at 21M to 22M households compared to 70MM homes. With a coffeemaker.
• Think market goes single serve.
• Industry kcup should grow in the LDD range.
• $4 of EPS from the hot business in FY15 estimated.
• Think hot EPS can reach $5 over the next couple years driven by volume growth, $300MM restructuring, normalizing brewer losses form the last holiday season, normalized coffee costs, share buybacks and offsetting some headwinds.
• Kold launched in September with Coca-Cola. Addressable market thinks its 5x – 10x hot.
• Reviews are high on quality but negative on price/value.
• $375 asp per machine and pods more expensive than a can of coke.
• Not so much price of pod, but thinks the range of pods/products.
• Think its convenience/choice. Negatives looking at just price.
• Kold loss 50 cents per share.
• Trades at 15.5x FY15E sept EPS and 13.5x EPS ex kold.
• EPS estimates under pressure – poor 2.0 brewer launch execution and K-cup profitability impacted by mix shift. Finally negative reaction to kold.
• Hot value = 17x -20x hot EPS ($5) or 85-100 plus option value for kold.
• KO owns 17% at $92. Insiders bought at $90.
• Loves Baidu (BIDU), and a top five position.
• Zynga (ZNGA) – mobile gaming. Franchises include Farmville, words with friends.
• Some think games are obsolete, ZNGA has 75MM active users.
• Zynga was late to the consumer shift from desktop to mobile making the last two years rough. • Mobile games for the last year =70% of bookings vs 30% a year ago.
• Expect new titles over the next 12 months.
• Trading at 1x sales when backing out SF real estate ($500MM value). $687MM EV.
• Launch 6 new games, $300MM incremental bookings bringing total bookings to $900MM.
• KING sold for 2.6x sales, using that valuation = $5.
• At a 35% margin, ZNGA generate $315MM EBITDA or trading for 2x.
• Has big infrastructure to support bigger biz. Downside protection by cash and real estate.
• Top hit potential = $1B rev potential.
• Mobile gaming is $20B biz. New categories such as esports and real money gaming growing.
• Wabtec (WAB) – Short.
• Leading supplier of brakes, electronics and other railroad components to the global rail industry.
• 55% - 60% of EBIT comes from NA freight segment.
• LT rail is GDPish industry and cyclical.
• Track record is fantastic – only US listed co whose stock price increased every year for 14 straight years, 19% EPS CAGR form 06 to 15E and hadn’t missed earnings since 09 and 3Q15.
• Bull thesis – not cyclical, high ROIC/ high market share high after market mix/quality biz.
• Product mix is opaque due to acquisition strategy.
• Bulls think EPS will grow double digits for ever.
• WAB is cyclical and currently at the peak of rail equipment super cycle driven by NA O&G activity.
• Demand driven by trail traffic, production of new locomotives and freight cars.
• Rail traffic is weak – CNI talking about laying off employees.
• Locomotives – NSC storing locomotives, expect it to be up to 200. GE orders dropped significantly, only sold compared 3 the last quarter.
• Freightcar peak – industry backlog driven by tank cars oil and covered hoppers i.e. frack sand. 40% downside to deliveries.
• Trading at 20x EPS, 13x EBITDA. Could be peak earnings in FY15. Mid cycle earnings $3.5 - $4. At 16x = $60 or 30% downside.
• Low short interest, favorable sell side ratings.
• Consensus calls for positive organic growth.
Check out the rest of the presentations from Invest For Kids Chicago 2015.
Rupal Bhansali Long GSK & Baidu: Invest For Kids Chicago Presentation
We're posting up notes from the Invest For Kids Chicago conference 2015. Next up is Rupal Bhansali of Ariel Investments who pitched longs of GlaxoSmithKline and Baidu (BIDU).
Rupal Bhansali's Invest For Kids Chicago Presentation
• GSK – UK Pharma company with three pillars to the franchise – (1) respiratory franchise with 50% market share, growth industry. Very hard to enter respiratory biz.
• Advair was a victim of its own success. Believes Advair bear case has already played out. • Competition for blockbuster drug, Advair is priced in.
• 2) Vaccines – market leader in business with high barriers to entry. Margin upside from purchasing Novartis vaccines biz. Vaccines one of the highest barriers to entry biz in the world. Only 4-5 manufacturers of vaccines.
• Consumer – strong brands such as Flonase, Aquafresh, Theraflu and new mgmt. team with a mandate to double the margins. New mgmt. team from L’Oreal.
• Internet penetration of 48% vs 75% - 80% in developed mkt.
• Trades at 16x fwd. EPS and 6% div yield. Margins set to improve to high 20%/30% ROIC.
• Second idea is Baidu (BIDU).
• Baidu = Google + Expedia + YouTube + Opentable + Groupon.
• Internet penetration of 48% vs 75% - 80% in developed mkt.
• “Silicon Valley of China”
• Down 33% over past year due to a profit warning.
• Back to $200, might have some hiccups and could have better entry point
• 3rd inning in 9 inning game. So still good capital appreciation over lt time view.
• Not a family ran business, more like a corporate Anglo-Saxon business. CEO went to Stanford.
• Conservative as they spend through the P&L investments made in core biz versus capitalizing.
Check out the rest of the presentations from Invest For Kids Chicago 2015.
Thursday, October 22, 2015
What We're Reading ~ 10/22/15
10 poor investment theses [Irrelevant Investor]
The case against short selling [Long Short Trader]
The five "why's" in problem solving [Wallbuilder]
The danger of 1-year performance numbers [A Wealth of Common Sense]
Latest post from the Valeant (VRX) bear camp [Bronte Capital]
How bad will it get for American Express? [Bloomberg]
China is not collapsing [Project Syndicate]
Kingmakers of China's internet: Baidu, Alibaba and Tencent [WSJ]
A look at wireless tower stocks [Barrons]
Tribune Media shares at a 50% discount [Barrons]
Fossil Group (FOSL): a value stock with temporary problems? [Value & Opportunity]
Netflix is creating a cordless nightmare for traditional media [Institutional Investor]
Light beer gets in touch with serious side [WSJ]
Auto parts retailers' immunity to Amazon drives stock surge [Bloomberg]
Why investors don't fund dating [Andrew Chen]
Robots and us [MIT]
Friday, February 4, 2011
Shumway Capital Returns Capital to Investors, Will Manage Internal Assets
Chris Shumway's hedge fund Shumway Capital Partners sent out a letter to investors today notifying them that the fund will be returning capital to outside investors. The firm will live on, instead only managing internal capital. Shumway, who has seen 17% annual returns, is one of the widely regarded Tiger Cub hedge funds started by former members of Julian Robertson's Tiger Management.
Late last year, Chris Shumway announced that he would be stepping down from his Chief Investment Officer role. This initiated a wave of redemptions as investors in the funds became wary. Shumway writes,
"In a sense, these changes created more risk for many of you who committed to stay invested in SCP and makes short term results of the fund a primary issue for us all. As a result, it has become more difficult for us to focus on long term investing as we have for the last nine years, which I believe has been a main driver of our success."
It's obvious from the above that Shumway is not fond of Wall Street's and an investor's focus on short-term performance. We'd venture to guess that Shumway also somewhat tired of the 'corporate' nature of running a large investment firm. Catering to each investor's concerns meant less and less of his time was dedicated to investing.
Shumway isn't alone in his desire to focus on investing for the long-term. Fellow Tiger Cub manager Roberto Mignone of Bridger Management closed to new investors, effectively capping assets under management so that he could focus on investing rather than having to worry about running a large organization.
It will be interesting to see who stays behind at Shumway to manage internal capital and who leaves to start their own funds. There are already a few notable Shumway alums managing their own funds including John Thaler's JAT Capital, Anu Murgai's Suranya Capital Partners, and Matthew Crakes' Greenhart Capital. The reason we mention these established and potentially future Shum-alum funds is that some former SCP investors could potentially allocate capital there.
Shumway will return outside capital by the end of the first quarter, which undoubtedly means they'll be selling partial positions. Here are Shumway's top 10 holdings as of September 30th, 2010. We'll get an updated look at their holdings here in a few weeks, so keep in mind the below is quite dated:
1. Apple (AAPL)
2. Citigroup (C)
3. Priceline.com (PCLN)
4. Pfizer (PFE)
5. Las Vegas Sands (LVS)
6. Baidu (BIDU)
7. SPRD Gold Trust (GLD)
8. Target (TGT)
9. Air Products & Chemicals (APD)
10. BP (BP)
A screenshot of Chris Shumway's letter is posted below via ZeroHedge:
(click to enlarge)It will be interesting to see what happens to Shumway's portfolio once outside capital has been returned and the fund is only managing internal capital.
Friday, October 29, 2010
Kleinheinz Capital Says Russia is the Cheapest Emerging Market: Q3 Letter
John Kleinheinz founded Kleinheinz Capital Partners in 1996 and manages the Global Undervalued Securities Fund. He has seen a compound annual growth rate (CAGR) of 26.8% since inception and a total compound return of 3,162%. Given the solid performance, we've added this hedge fund to our portfolio tracking series and today we're detailing Kleinheinz's third quarter letter/market commentary.
Kleinheinz's fund primarily focuses on equities but also invests in emerging market debt. They utilize macroeconomic analysis to identify various investment themes across the globe with solid risk/reward profiles. Prior to founding his fund, he worked in the corporate finance unit of Nomura Securities in Tokyo as well as Merrill Lynch. Kleinheinz graduated from Stanford University with a degree in Economics.
Current Market Commentary
Kleinheinz's fund is up over 18% year to date. Interestingly enough, you can replicate Kleinheinz's portfolio at Alphaclone and investing in their top 5 holdings has returned 31.6% year-to-date and their top 10 holdings 19.7% ytd (get a free membership to Alphaclone here). This past quarter, Kleinheinz has lost money on their puts and hedges as the market practically prices in another round of quantitative easing. Their short positions in the energy sector (specifically in high beta natural gas producers) also hurt the fund.
While talk of an emerging market bubble seems to have increased, Kleinheinz is quick to point out that despite the fierce rallies, these valuations are still "within historical norms and economic fundamentals appear favorable relative to developed market peers." He believes that the formation of a consumer society in these emerging markets will be a key investment theme for them going forward.
Currently, their focus is on the geographies of Russia, Africa, China, and Brazil. In China, they like healthcare, telecom and technology. They also believe Russia is the cheapest emerging market and they're honing in on energy and utilities. Kleinheinz is generally focused on markets "with stable banking systems, under-levered consumers with rising disposable incomes and attractive valuations relative to growth prospects."
Specific Investment: Yahoo (YHOO)
Kleinheinz also dedicates a portion of the letter to talk about Yahoo (YHOO). He feels the market is under-appreciating Yahoo's international assets such as Alibaba Group and Yahoo Japan. He writes, "assuming an average multiple of 8-10x EBITDA for its core U.S. internet assets on a sum of the parts basis, we believe Yahoo could be worth $32 per share, more than double the Fund's acquisition cost and about equal to the price Microsoft was willing to pay for Yahoo during its aborted takeover attempt in May 2008."
Top 10 Positions (as of September 30th):
1. Apple (AAPL)
2. China Mobile (CHL)
3. Research in Motion (RIMM)
4. Baidu (BIDU)
5. LUKoil Holdings
6. Hong Kong Exchange & Clearing (HK:0388)
7. Veeco Instruments (VECO)
8. Google (GOOG)
9. Akamai Technologies (AKAM)
10. Chubb Corp (CB)
Embedded below is Kleinheinz's third quarter letter to investors:
*Update: Letter removed per request of representatives from Klenheinz
For thoughts from more great managers we also posted up Lee Ainslie & Maverick Capital's letter as well as Jeremy Grantham's commentary and Corsair Capital's latest ideas.
