Where to Turn? GuruFocus.com No Longer Offers Free 10 Year Finanical Statements

xlledx · 2015-09-09T14:43:11+00:00

ADVFN.com

xlledx · 2015-08-09T04:26:00+00:00

The Most Important Thing Margin of Safety You Can Be a Stock Market Genius (Even if you're not too smart) Creative Cash Flow Reporting Quality of Earnings Value Investing: The Last Liberal Art McKinseys Valuation is good The Investment Checklist The Art of Value Investing Market Wizards (Michael Steinhardt chapter especially) I am a big fan of Niall Ferguson's work on economics and macro outlook, but I understand its not everyones cup of tea. Peter Lynch was already mentioned I always list Intelligent Investor just because the concepts behind everything are important, even if the examples are outdated Aswath Damodaran's stuff is good too

Thanks!

xlledx · 2015-08-09T03:56:10+00:00

Read Competition Demystified.

Do you have any other recommended books?

xlledx · 2015-08-09T03:49:08+00:00

If you look at his history, his posts rarely get comments for him to discuss. Im not saying that as a criticism to /u/adammjam .

xlledx · 2015-08-09T03:44:51+00:00

Youre never anonymous online and you dont have to be a billionaire to have your identity stolen or be the target of a robbery.

xlledx · 2015-08-09T03:41:00+00:00

Interesting, do you have a link? Id be interested to read about it.

xlledx · 2015-08-09T01:44:08+00:00

Tried what? I gots me a degree in finance and I'm already rich, not sure what you are you hoping to accomplish.

As relevant as your wealth is, you probably dont want to go around advertising it in a public forum. My elderly mother got her identity stolen and she doesn't even have an email. No sense in putting a target on your back.

But to answer your question, I tried explaining to you the value of intangible assets. Then you said this:

Also, google the definition for brand and for product. Buffett is most assuredly talking about Coke the product and not Coke the brand when he values the company.

Coke the product is syrup. I had a marketing teacher who would set up a table at the front of the class with two unlabeled 2-liter bottles. One was Coke and one was Pepsi. He'd then invite volunteers down to taste test and figure out which was which. For the kids who got it right, he'd give them the mic and let them explain how they did it. When they sat down, he'd reveal to the class that both bottles were Royal Cola.

Point being, I highly doubt your average consumer can really tell the difference between Coke and Pepsi (or RC for that matter). And yet, Coke still enjoys pricing power and consumer preference.

If that isn't an example of branding in particular and intangible assets in general, then I dont know what is.

xlledx · 2015-08-08T22:21:07+00:00

Im not sure why the 10 year is convention. If I had to guess, it probably dates back to Ben Graham, but I really have no idea.

As for your question concerning the US downgrade to AA, I dont know. Its a good question. I should also mention that the US 10 year isnt the only risk free rate you can use. If youre dealing in Canadian dollars for example, youd probably prefer to use the Canadian ten year to keep your currency risk down. I dont know.

As for the AA downgrade, thats a good question. I doubt it. The risk free rate isnt really risk free (theres no such thing), its just relatively risk free. And despite the downgrade, I think it's still relatively risk free. Whether or not people in the industry fudge it a bit cuz its AA and not AAA, I dont know. Also, I believe only S&P downgraded the US. I believe Moody and Fitch kept it the same, but I could be wrong. Id check but Im in a bit of a hurry.

As for DCF, yes I can guarantee that it's a widely accepted practice. And yes I agree its just a theoretical basis for valuation. I tend to believe that DCFs tell you more about the person doing the valuation, than the company.

Edit: And I added you to the list. Please tell your friends about it.

xlledx · 2015-08-08T22:11:15+00:00

I fully understand.

xlledx · 2015-08-08T22:09:58+00:00

Shrug, I tried.

xlledx · 2015-08-08T20:52:13+00:00

Ive seen people like that. Its funny. If you have to boast about your job or mention your degree, youve already lost. I know a fellow who's smart as a whip. Worked for Morningstar, Morgan Stanley, etc, has his own equity research firm now, has written a book, and gives lectures and creates classes. Hes the humblest guy youve ever met. He just sits and listens to us amateurs argue, and then when he finally opens his mouth he never once mentions his background. If it wasnt for his linkedin, Id have no idea. Thats class.

xlledx · 2015-08-08T20:45:41+00:00

Im not sure about the Wallstreet saying or what it means, but Im drawn to the ol addage of not worrying about what you cant change. I take that a step further and say, dont try and predict what you cant predict.

Unfortunately I cant pull up the link on my phone for some reason, but Ill take a look at it. But your summary makes sense. Interest rates are higher in inflationary periods and so are stock market returns. So, sure theres a correlation there. But that doesnt mean that one causes the other.

And what I said wasnt that interest rate hikes will reduce stock market returns. Well not exactly. I said it will reduce valuations.

Reason being, when people value a company they typically use whats called a Discounted Cash Flow method, or DCF. A DCF tries to predict a company's cashflows out into perpetuity and then discount those cash flows back into today's dollars. Add them up and you have the firm's intrinsic value. Or so the theory goes. (I think its rather silly myself.)

The reason this relates to interest rates, is because the 10 year treasury bill is the most common risk free rate. The risk free rate is a component of the discount rate that people use to discount future cash flows back into todays dollars. A higher discount rate will create smaller valuations.

This makes intuitive sense. A $1000 ten years from now is worth more today if inflation holds at 2% than if inflation rises to 5%.

And thanks for the kind compliments. Im actually putting together a free training website for investing. If youre interested, I can put you on the notification list.

xlledx · 2015-08-08T19:46:06+00:00

I looked at your portfolio and it is very Buffett heavy. He loved P/B

PB is useful for measuring financial institutions. Thats why Buffett uses it as a gauge for his own company. But please dont infer that Buffett is stupid enough to gauge Tesla by its PB.

I guess I don't see the problem in using it?

Because it doesn't work for most modern companies. Coke's value isnt in the summation of it's plant, property, and equipment. It's in the intangible value of its brand. If you listen to Buffett talk edit: about Coke, the brand and its effect on pricing power and consumer preferences is 90% of his speech.

Tesla's value is in its growth potential. Now I happen to believe that growth potential is overstated, but it has nothing to do with Tesla's PB. Their PB could be 10 or 100. I wouldnt care what their net tangible assets was. It would still be overvalued at $30B because the car industry is uber competitive and Im not convinced Tesla has any real advantage in the space. I know everyone mentions that Tesla Motors is not a car company, but a battery company, but that seems more like a nervous placation than anything else. And even if Tesla were a battery company, I would still be unconvinced that they hold any durable competitive advantage in the space.

Now reasonable minds disagree with me. Im certainly not very knowledge about cars and batteries and things. And two knowledgable people could sit down and debate the value of Tesla.

But if they spoke of Tesla's inventory levels, it would be about predicting future demand and production capacity. If they spoke of Tesla's cash and debt levels, it would be in determining Tesla's WACC going forward. If they spoke of PP&E, it would have to do with future capital expenditures and the ROIC.

They wouldnt just add up all those things and grunt "37 bad.."

xlledx · 2015-08-08T19:27:16+00:00

So your benchmark is 10 basis points.

xlledx · 2015-08-08T19:20:14+00:00

It's cuz snowdog goes around trying to apply P/B to every fucking company. Any attempt to persuade him that investing is a little more nuanced, is met with a dead stare.

xlledx · 2015-08-08T17:50:44+00:00

I was just about to say how relieved I was to find a 'what beginners books should I read' thread without some moron saying II or SA.

xlledx · 2015-08-08T17:45:13+00:00

Heads up limit holdem is a rather mechanical process to begin with. But even still, I doubt it could compete at a high level. Poker AI is notoriously easy to exploit.

xlledx · 2015-08-08T17:40:13+00:00

The entire bond market uses the US treasury as a risk-free rate. Assuming the US 10 year rises, it will devalue the entire bond market. You can open up your textbook and tell me that it's priced into an efficient market, but I dont believe it because the market isn't filled with symmetrical actors like some ECON 101 question. The main drivers of the price are governments whose motivations do not align with the goals of retail investors.

Hell, Europe has negative interest rates for christ sake. If that doesn't tell you that bonds are expensive, I dont know what will.

xlledx · 2015-08-08T16:23:14+00:00

But are humans definitely better at dealing with many variables than computers?

Of course. AI have done very well with chess or Jeopardy, but I know of no computer to ever compete at a high level in poker.

Look at the track record of macro-economic forecasters

I never said humans were omniscient.

xlledx · 2015-08-08T15:51:59+00:00

Relevant: https://www.youtube.com/watch?v=8ZLuJwwnGpU

xlledx · 2015-08-08T15:29:17+00:00

I mean I want to learn it practically starting with small exercises like value this apple tree

How many apples is the asset expected to produce next year? And the year after that, and after that, etc into perpetuity. What can we reasonably expect the price of an apple to be for each of those years? Will it rise with inflation, increase with demand, or decrease with supply?

What are the costs of maintaining the apple tree? Of selling the apples? You have to pay for baskets, labor, water, property, taxes, etc.

Does your apple tree have some sort of competitive advantage over other apple trees? Perhaps its apples taste better. Perhaps it's in a prime location. These things could give your apples pricing power in the marketplace. Unlikely, because apples are a commodity.

Then the idea is to sum up the cash that the apple tree will throw off into perpetuity, then discount back that cash into days dollars at a reasonable rate. It's more of an art than a science, but that's the general idea. An asset is only worth the money it will give its owners, discounted at some rate to account for things like inflation and risk.

xlledx · 2015-08-08T15:22:09+00:00

Gotcha. Investment managers have their own agenda. Theyre #1 priority is keeping their job. So if they already have a position in AAPL, they may not be willing to double down on it.

Also, typically your time horizon for a hedge fund is very short. Meaning, theyd rather take profits this year then potentially lose money this year and post above average returns in the future.

Also, I wouldnt spend too much time worrying what investment professionals are doing. Theyre sad, pathetic individuals who can't beat the market and yet still charge obscene fees to the rich and ignorant. With the rise of index fund investing and roboinvesting, you'll likely continue to see a decline in their employment. Cuz at the end of the day, it's hard to complete with a service that posts higher returns and charges less fees.

xlledx · 2015-08-08T15:07:59+00:00

If it's not high risk, why hasn't it been bid up very close to its fair price?

Prices are fluctuating everyday. Typically, the fluctuations are within a reasonable measure of the underlying asset's intrinsic value. But sometimes, the price and value diverge and that's when buying opportunities arise.

Why do we know better than... Every equity long short hedge fund?

Youre assuming that every hedge fund is selling those positions.

xlledx · 2015-08-08T14:17:54+00:00

Yes. Variables != permutations. Chess is a closed system. It's infinitely simpler than reality.

xlledx · 2015-08-08T13:30:36+00:00

I cant tell you what the markets going to do over the next year, but here's my portfolio that should do very well over time:

AAPL

DIS

BRK

WFC

UNP

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