In the 53rd issue of Value Investor Digest we feature our interview with Charles Heenan and Geoff Legg from Kennox Asset Management.
The issue also features the Berkshire Hathaway Annual Shareholders Meeting plus other articles, videos, podcasts and letters from Matt McLennan, Michael Mauboussin, Jeremy Grantham, David Einhorn, Joel Greenblatt, Rich Pzena, Li Lu, William Green, Bill Miller, Ted Seides and Nick Kirrage.
Next week we will also be releasing our latest interview with Andrew Wellington from Lyrical Asset Management.
The Berkshire Hathaway Annual Shareholders Meeting will be streamed live on Yahoo! Finance on Saturday May 1st from 12.30pm ET. If you can’t watch live tomorrow then you can also watch on demand at the same link for 30 days after the event. (Livestream link)
“CAPE for the US is on about 35x. Markets are incredibly expensive just at the moment. By comparison we are happy to pay up to around 12x our sustainable earnings number so a very steep discount to what the market is charging…Because we are paying such frugal prices, we are typically looking at companies facing headwinds, often on depressed earnings. What we want to do is be able to pick up those companies when they are trading at very advantageous valuations…and benefit from those headwinds over time turning to tailwinds. What very often happens when you get that swing from headwinds to tailwinds is that you do get a growth in those earnings accompanied by a rerating of the business as well. That combination can be very powerful.”
“I’m torn at the moment. On the one hand, we’re recovering from a deep cyclical trough, and that’s usually a good time to be an investor. On the other hand, prices aren’t that attractive, and we have all these secular issues…Markets will also have to move beyond the focus on fiscal stimulus to ‘How are we going to pay for all this?’ And we’re going to see the emergence of a new regulatory architecture, which isn’t likely to be any more business-friendly. Inflation expectations have also moved up quite a bit, and what happens if inflation rises more than people expect? These are all issues that can weigh on the market as we roll forward.”