Investment idea generation.


Our thoughts.

The Best Value Traps

Barbarian Capital posted a question to finance Twitter the other day that led to a string of interesting answers.

The question was: You're not a value investor until you have lost money being ...

Here’s the best answers:

Barbarian Capital I'd add low multiple resource names ("my pick is diff because...") and short new category growth (ie CMG MNST)

Dumb Luck Capital ... 2) Coal, 3) Waited "for the Ag cycle to turn," ... 6) Use "mid-cycle earnings" on melting ice cubes

Shortsighted Capital 1) Bought a financial because it's at a big discount to book 2) Believed mgmt estimates of O&G exposure ... 7) Buffett owns it, so it's high quality

Alex Rubalcava Bought emerging market equity b/c value, ignored macro.

modest proposal Korean telcos, Korean preferreds, Japanese net of equity holdings stubs, negative EV stubs in general, net nets run by idiots

FCFYield In a company for its NOLs

Adib Motiwala Company has a full payout, borrows to fund capex, cyclical and has bad balance sheet. But it's low pe

modest proposal discount to real estate value, low multiple cyclicals at peak earnings, insurers, specialty finance co's on backside of growth

Risk Scare-ity  Surprised it hasn't been mentioned:  Long railroads on low P/E while ignoring maint capex and asset depreciation.

Skeletor Capital Asset manager GPs, RAX, Greek banks, IBM, "secret" Malone exposure, GSE preferreds, mortgage servicers

Guillermo Long a "cheap" 2nd or 3rd tier player in a growing industry ("enough demand for everyone!")

CthomasC Long industrials at late in the cycle because they are "cheap" forgetting about where margins are likely headed

PatientInvesting101 SOTPs. The XYZ segment is worth the entire EV, you get the rest for FREE!

Howster "so cheap on FCF! 35% levered FCF yield, we get paid back in 3 years!" Doesn't work on melting ice cubes...

Dean using "normalized" earnings that never normalize, buy cheap declining industry & assuming mgmt will allocate capital properly

james listening to people who "did the research and spoke to mgmt" rather than doing my own work

BWIValue Investing