• 23 Jan
    On Seth Klarman & His <i>Margin of Safety</i>

    On Seth Klarman & His Margin of Safety

    • Understanding value is just the beginning of profitable investing.
    • Would you be able to hold, on average, 33% of your portfolio in cash with peaks above 50%?
    • Studying human behavior through history is what the best hedge fund managers do.

    Introduction

    Seth Klarman’s book Margin of Safety – Risk-Averse Value Investing Strategies for the Thoughtful Investor sells on Amazon (NASDAQ: AMZN) for $1,992.92 new, and $792.33 used. It’s priced that high because it is a collector’s item that was printed in a small run.

    I believe Klarman would agree that it’s better to invest in stocks than to pay that much for a book. I agree and didn’t want to wait for the book turn up at the library, but I finally managed to get a copy.

    I’ll analyze the book, see what is still relevant today as the book was published in 1991, and share Klarman’s insights with you in a series of articles. Before we start with the book, I’ll start with some insight on Seth Klarman, his investing technique, performance, and general view on investing. More →

  • 22 Jan
    Sunday Edition: A “Buy It And Forget It” Diversified Portfolio With 300% to 500% Upside Potential

    Sunday Edition: A “Buy It And Forget It” Diversified Portfolio With 300% to 500% Upside Potential

    Today we are going to take a sneak peak at six globally diversified high growth companies with 10-bagger potential. Companies I believe every serious investor should own.

    But first, I want to talk about a big mistake I see most investors making, which is to “over diversify.” When you own too many stocks, your chance of outperforming the market diminishes because you become the market.

    I’ve shared with our readers before what I believe is the right number of stocks to own so that you have enough diversification to mitigate non-systemic or individual company risk, yet not own too many stocks and hamper your ability to outperform the market. More →

  • 20 Jan
    The Long & Short Term Outlook For Bonds Is Scary At Best

    The Long & Short Term Outlook For Bonds Is Scary At Best

    • As we are still far away from the FED’s target interest rate, bonds have plenty more room to fall.
    • Inflation could force the FED to hike rates and push bonds down very quickly.
    • This is probably the end of the 35-year bond bull market that has beaten the S&P 500 by five times.

    Introduction

    I haven’t written about bonds since back in July when I said that bonds were extremely risky (article available here).

    Unfortunately for bond holders, my call was prescient to the point of perfection because yields went up and consequently bonds prices went down. More →

  • 19 Jan
    Analysts Have It All Wrong On Tesla

    Analysts Have It All Wrong On Tesla

    • In order to justify current market valuations, Tesla should increase car sales at least 12-fold, but there aren’t any sell recommendations for the company.
    • GM has a market capitalization per vehicle sold that is 79 times lower than Tesla’s.
    • Analysts are extremely exuberant about the market and are misleading investors. A better risk reward model is necessary in order to prevent tragic investment situations.

    Introduction

    As we are in the eighth year of this wonderful bull market, investors, analysts, and asset managers spend much more time analyzing potential rewards than analyzing risk because we easily forget to think about risk which is in opposition to Warren Buffet’s first and second rule of investing:

    “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.”

    Not losing money means we should spend more time analyzing risk than we should on analyzing potential future investment rewards. Unfortunately, this is neither fun nor cool, and demands high levels of discipline, a very cyclical and long term perspective on investing with strong self-awareness, and confidence in what you’re doing so as to not just follow the crowd. More →

  • 18 Jan
    Get Ready: ETFs Could Shake The Market Like 2008

    Get Ready: ETFs Could Shake The Market Like 2008

    • ETFs have the potential to shake the markets similar to how subprime debt and CDOs did.
    • Potential risks come from illiquid underlying assets on secondary markets and poor capital allocation.
    • However, this should also create amazing individual investing opportunities for those who are ready.

    Introduction

    Last week, we discussed the best way to use ETFs in 2017, and I warned a bit about herd behavior. Today we’ll dig deeper into overall financial market risks and/or—depending how you see it—the amazing investing opportunities that a reversal in the ETF trend could create. More →

  • 17 Jan
    Is Retail Really Uninvestible? Sven Doesn’t Think So

    Is Retail Really Uninvestible? Sven Doesn’t Think So

    • As some analysts categorize retail as uninvestable, it’s time to look for bargain investment opportunities.
    • Sales are shifting to e-commerce, but earnings are what are going to determine your investment results.
    • The combination of brick and mortar and e-commerce might be the investment winner as it gives you fundamentals and growth.

    Introduction

    A Wells Fargo analyst, Ike Boruchow, recently called the retail sector “uninvestable,” at least in the short term. He based his statement on changing consumer dynamics that compress valuations, the favorable weather, easy comparisons to 2015 which have made retail look ok, and the 25 companies that have cut their guidance in the last two weeks.

    I’m attracted by such statements because the best investments are usually found where all others have given up. Especially when a whole sector is surrounded by negative sentiment, even prices of good companies decline and create amazing long term opportunities.

    In today’s article, we’ll analyze how the retail sector is priced in relation to its long-term fundamentals. More →

    By Sven Carlin Investiv Daily Retail
  • 16 Jan
    Gruesome Industries For Trading, Not Investing

    Gruesome Industries For Trading, Not Investing

    • Even if the industry has wonderful growth numbers, profitability might remain out of reach.
    • We’ll define and describe the industries long term investors should avoid.

    Introduction

    Most of you are familiar with Warren Buffet’s comment on the airline industry in his 2007 letter to shareholders:

    “The worst sort of business is one that grows rapidly, requires significant capital to engender the growth, and then earns little or no money. Think airlines. Here a durable competitive advantage has proven elusive ever since the days of the Wright Brothers. Indeed, if a farsighted capitalist had been present at Kitty Hawk, he would have done his successors a huge favor by shooting Orville down.”

    Now, most connect the above statement only to the airline industry. However, in a deflationary environment where our youngsters expect lots of things for free—think WhatsApp—and extremely low interest rates, there will be more industries where shareholder wealth creation will be difficult to achieve.

    In today’s article, we’ll define and analyze some of these industries. More →

  • 15 Jan
    Sunday Edition: A Deep Dive On High Dividend-Paying Stocks

    Sunday Edition: A Deep Dive On High Dividend-Paying Stocks

    As you know, dividends are one of the primary points of focus of the Rebel Income and Retirement Revival investing systems. I’ve written in the past about why I think dividends should be an intrinsic part of a successful income generation system, and why dividend-paying stocks generally have a stronger fundamental profile than stocks that don’t pay a dividend. I’m calling today’s article a “deep dive” because I’ve noticed a lot of buzz in the media lately about high-dividend stocks. There’s a real temptation to focus on stocks paying the highest dividends possible, but the truth is that sometimes that high dividend is really a warning sign of risks that you need to be aware of. More →

  • 13 Jan
    Are You Part Of The Herd?

    Are You Part Of The Herd?

    • The current market has all the symptoms of herd behavior: safety in numbers, lack of proper information, and absence of competitive edge.
    • Market timing and contrarian investment strategies are tempting because of the high rewards, but fundamental value investing is what wins in the long term.
    • We’ll discuss markets that look safer and are much cheaper than the U.S.

    Introduction

    Yesterday we discussed how the situation in the U.S. economy isn’t sustainable in the long term. However, as the economy and the dollar are strong now, U.S. equities have enjoyed another positive period of inflows.

    In the first week of 2017, ETFs had $13.1 billion of inflows in total and the majority of that money ($8.7 billion) went straight into U.S. equities while $2.8 billion went into U.S. fixed income, and only $1.6 billion to international equity ETFs.

    The $8.7 billion going to U.S. equities is a clear indication of herd behavior. More →

  • 12 Jan
    The Edge Of The Cliff No One Wants To See: A Look At The Economic Cycle & Debt

    The Edge Of The Cliff No One Wants To See: A Look At The Economic Cycle & Debt

    • The economic recovery hasn’t lowered debt levels while interest rates are starting to increase.
    • Expect lower consumer, corporate, and government spending.
    • When you invest, please be aware of what is described below.

    Introduction

    Nature works in cycles, there is winter, summer, drought, rain, monsoons, a year with mosquitos, one without, El Niño, La Niña, a good crop, bad crop, etc. As we are part of nature, cyclicality is inherent to our behavior and our behavior is reflected in the economy as we are the economy.

    It’s important to continually analyze and mark where we are in the economic cycle in order to have a better perspective on how to position ourselves as investors. Most analysts and financial professionals look in the rear-view mirror to predict the future and then focus on only one year. This is because it doesn’t pay to look beyond a year as it would force them to tell the truth and consequently lower their selling commissions because not many would invest if they knew that there was a risk of losing 50% of their investment in the next few years. More →

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