In the Brooklyn Investor’s analysis of Markel’s 2012 Annual Report (I highly recommend reading it) he highlights four questions that Markel’s equity investment team asks themselves before allocating capital:
Is this a profitable business with good returns on capital without using too much debt?
Is the management team equally and sufficiently honest and talented?
What are the reinvestment dynamics of the business and how do they manage capital?
What is the valuation and what do we have to pay to acquire ownership in the business?
I think those provide a pretty good foundation for any analysis.
2012 was a good year, and I’m pretty sure 2013 will be better.
Mark Cuban is spending Christmas Eve doing an “Ask Me Anything” on Reddit right now. I always enjoy reading Mark Cuban’s blog and think he’s a very smart guy who is well worth listening too.
Brooklyn Investor put together a very casual “dinner table conversation” post on the future of Apple. He highlights how a lot of company’s with “perfect cultures” suffered when their leaders retired or passed on. My favorite quote from the article reads:
“With Apple, they are like the portfolio manager that bets on two or three stocks. When a genius is managing the portfolio, this can be incredibly successful. But what happens when someone different takes over and still tries to manage a three stock portfolio? “ Anyway check it o
Fred Wilson (USV VC) posted some excellent interviews with Benchmark Venture Capitalist Bill Gurley . Who was actually born outside of Houston, Texas and is A Univeristy of Texas MBA Alum (So go Texas). Anyway I highly suggest you take a look at the videos, there are about 6 of them and they’re all worth watching.
As Paul Graham says if you work in the startup world you should live in the future and see what is missing. I think that is great advice.
Loved that quote from Fred Wilson’s blog avc. So in light of that I’m going to try and start posting more regularly via my cell phone. Obviously the entries won’t be as long as in the past, and I am thinking of this as more of a public Evernote. A way to quickly save whatever I’m reading, watching, or listening to in one easy and convenient place. I saw a great slide presentation from kleiner perkins’s Mary meeker on the state of growth of the Internet and what she sees happening over the next decade. Very cool stuff.
CEO Dead Pool (Bronte Capital) – John Hempton, Australian Hedge Fund Manager, always puts out unique insightful blog posts; generally referencing some chinese fraud along with a thorough explanation of his thesis. This post however is about a game called the CEO dead pool, where players try to guess which CEO will be fired or forced to resign within the next 18 months. Players get more points for picking CEOs at seemingly well run companies, where it would take a major personal blunder to get ousted (See Mark Hurd at HP). John mentions its a good way to know who actually has dug deep on their management research, and can help identify good young analysts who know their stuff.
Louie Lopez Crushes It (InfinityList) – Recently I was introduced to a fantastic site called Infinity List. It’s filled with jaw-dropping videos of different action sports from skating, skiing, snowboarding, surfing, flying squirrel suits, and rock climbing among others. I’ve linked to the video I haven’t been able to stop watching this week.
Fireside Chat with Thrillist CEO Ben Lerer (Pando Daily) – The Fireside chats that Sarah Lacy does with up-and-coming or already-on-top-of-the-world CEOs (see: Elon Musk) are awesome. This one with the Ben Lerer looks at growing two “different business models” on one platform. He discusses in-depth on what they’re doing at Thrillist to weave the Thrillist Media brand with their E-Commerce JackThreads acquisition. Fair warning, its pretty long (2 hours).
Learn Anything Faster (Farnam Street): Interesting technique on how to retain the things you learn quickly and easier. Definitely agree that you haven’t really learned something until you can teach it to someone else.
A Primer on Strategy (Farnam Street): This is an excellent article that outlines how people confuse goal setting and arbitrary intangibles with strategy. My favorite line from the article is: “Yet we have become so accustomed to strategy as exhortation that we hardly blink an eye when a leader spouts slogans and announces high-sounding goals, calling the mixture a “strategy.”” Strategy has become a throw away word, and this article does a good job of bringing it back to it’s original definition.
Championship History Infographic (Co.Design): Very cool posters that show the viewer past seasons playoff races in a sharp easy to understand way. If a Houston team would win a championship I’d definitely pick one of these up.
Interview with Chanos (Reformed Broker): Very cool video with Jim Chanos (the man who shorted Enron), on the psychology of short selling and how he approaches asset management. Definitely worth watching.
Smart People Are Reading These Books (Farnam Street): Farnam Street has put up big numbers this post with link backs. The following article goes through a list of books well worth reading. I can vouch for The Lean Startup by Eric Ries, and will definitely be adding the rest to my impossible summer reading list.
Brett Easton Elis’s The Canyons: Bret Easton Elis, author of American Psycho, has come out with a new screenplay called The Canyons. Really enjoy the trailer with all the iconic spots in LA and a great choice of music.
Week was pretty slow on things worth looking at again, but I got 2.
Phil Falcone May Be In Deep Shit (Dealbreaker): Good article that provides some insight into what Phil Falcone did and whether or not it’s illegal. The best part of the article is the title: ”Phil Falcone Is Preparing For Trial on SEC Fraud Charges By Alienating All of His Witnesses”
Student Debt Is Out of Control (ValueWalk): ValueWalk provides some excellent graphs that highlight just how bad our student debt problem is in the United States. I’m firmly in the camp that these kind of debt levels aren’t sustainable especially with the job market for newly minted grads.
After I uploaded tonights post I wanted to take a look and see how many different sources I’ve linked to over the past three months. I was assuming that I would have a large concentration of articles from 6 to 8 sources and the results were anything but.
Over the past three months I’ve linked to 45 different sources and the highest linked source was Distressed-Debt-Investing at 5 (A site I read voraciously and Hunter does a great job with). I really enjoy doing this each Sunday and feel that it helps me recall the more interesting pieces that I read each week. I’m also glad to see that my media intake comes from a very diverse set of venues, and It helps me know that I’m not getting tunnel vision when it comes to what I take in.
The Lack of a Keynesian End Game (Falkenstein): Erik Falkenstein writes a fantastic blog which I’ve been reading for a couple years now. In this post he talks about how a theory or framework that requires a fanciful end game is most likely going to be flawed in some way and thus the entire theory itself is probably wrong. The following quote about Keynesians sums up the post nicely: “A man is likely to mind his own business when it is worth minding, and so those unhappy with their own meaningless affairs will focus on minding other people’s business.”
Howard Marks on Everything (Distressed-Debt-Investing): Hunter summarizes Howard Marks latest memo with some interesting insight on why the distressed debt markets offer fantastic alpha generating opportunities. As always he touches on several of his own investing maxims which provides a great opportunity to see what you can do to improve your own investing framework.
The Rise of the Analysts (Minyanville): The following article provides a fantastic outline on how the equity research analyst role has evolved over the years. From the “irrelevant” cost-center to the age of the all star and finally to todays return to “less-rock-star-analysis”. It’s an interesting piece to see how the position has changed over the past 60 years.
The Europeans Have it Easy (New York Times): This article is fantastic and shows the differences between the European and American mindsets. Recently European courts have ruled that if an employee gets sick on vacation then that employee is entitled to receive more vacation days to cover the days that they were sick. Not a bad gig if you’re an employee, now the next question is, who gets to pay for this?
Guess The Stock Price (Distressed Debt Investing): Hunter provides an excellent exercise where you look at a few financial metrics / statements and try to guess what you think the stock is currently trading at. I think this is an excellent idea for improving your valuation and investing acumen.
Andy in San Diego
