Value Invest

June 2013

Michael Price at the London Value Investor Conference
Michael Price is less well known in the UK but is very well known in the US Value investing community.  He started his career in 1975 as a research assistant at Heine Securities later known as Mutual Shares, by 1988 Michael was the sole owner of the company and he increased the value of assets under management to over $17 billion before selling the business to Franklin Resources Inc. for $670 million in 1996. Michael now manages his wealth through MFP Investors. Both Peter Cundill and Seth Klarman (who began his career working for Michael) have credited Michael with teaching them how to take the net-net concept one step further to value all of a company’s assets. We were delighted that Michael agreed to present at the conference this year and he was among the highest rated speakers on the day.

Joel Greenblatt : Apple, Google are ‘bargains’
Joel Greenblatt, author of the “Little Book that Beats the Market” (the investment strategy of which was analysed by David Harding at the London Value Investor Conference), talks about some of his stock picks, including Apple Inc. Greenblatt referred to Apple as as a “bargain hiding in plain sight” and said that short-termism prevents many people investing in a great franchise company like Apple because “people tend to avoid companies that are not expected to do quite as well in the next year or so.” Greenblatt also discusses some of his stock shorts, including J.C. Penney Co., and his view on Herbalife Ltd.

Charlie Munger Interview
Berkshire’s Vice Chairman, Charlie Munger talks to CNBC’s Becky Quick.  This nearly 40 minute interview covers a lot of ground.  He discusses the Heinz deal and refutes that it is a departure from Berkshire’s usual style of investing.  In addition, he comments on the likelihood of the US following Japan into a 20 year period of stagnation, the Cyprus banking crisis, his recommendations on dealing with the ballooning US Healthcare costs (take fewer tests!).  We liked “I think Berkshire does better because there are nasty fluctuations in the market…not that we wish for them”.

Rising GDP not always a boon for equities
This article looks at some recent research which shows a negative correlation between GDP growth and stock market returns. The reason that it usually given for this perverse relationship is that investors often over pay for growth. However this article goes on to present some additional research which looks at the role that poor capital allocation plays in destroying shareholder value in a growing economy. A cheap stock which is mis-allocating capital is not a cheap stock!

Vitaliy Katsenelson Article on ‘Sideways Markets’
Vitaliy’s Little Book of Sideways Markets, was published in 2010. In this book he made the case that there is a very high probability that we were (and still are) in the midst of a secular sideways market – a market that goes up and down, with a lot of cyclical volatility, but ends up going nowhere for a long time. In this recent article he relates these findings to the stock market valuations we are seeing today.

Quality Street – the latest fashion in equity investing
Perhaps Buffett is most famous for his success from long-term investments in high quality (or “wide moat”) companies like American Express and Coca Cola.   However, he has never strayed from the original Ben Graham approach of not over-paying for the assets he buys. Perhaps convinced by the long time period during which the share prices of such businesses have out-performed, we have noticed that a number of fund managers, who see themselves as part of the value investing camp, appear to have given up almost all discussion of price / value.  It seems that there is almost no price too high to pay for quality.  This article in the Economist explores this phenomenon.

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  • “It’s very much the Rolls-Royce of the investor conference market”
    Paul Scott, Stockopedia
  • “The people in that room were a more powerful cadre of the powerhouse of investment than has been gathered for a very long time”
    Jonathan Ruffer, Ruffer LLP
  • “It’s kind of like Glastonbury isn’t it, for the Value Investing community”
    Nick Train, Lindsell Train
  • “What I like about it is that it is a practitioners conference and it’s an opportunity to come and hear from your peers about the work that they are doing and how they see value investing”
    Hassan Elmasry, Independent Franchise Partners
  • “I think people really look forward to it and enjoy it. There’s a good bunch of people here who have travelled a reasonable way – the speaker after me was from Hong Kong and there’s a big Canadian crew and a big US crew – people come from around the world to see this”
    Nate Dalton, Affiliated Managers Group
  • “If somebody’s already been through that process of seeing what the conference is about and then is willing to pay their money for the effort of coming here, that’s a great filtering process.”
    Gary Channon, Phoenix Asset Management
  • “The conference has become a part of the furniture of the London scene. You can discover that is what lies inside you – that you are innately a value investor.”
    Richard Oldfield, Oldfield Partners
  • “I do speak at a fair number of conferences to investor bases, this one is really quite a good list – some very, very good investors present and some very interesting speakers”
    Jon Moulton, Better Capital
  • “Definitely worth it and I know a number of people who have ‘ummed and arred’ about coming along and I’m sure that they will be regretting that they didn’t come today – and it’s only going to get better as far as I can see”
    Tim Green, Private Investor
  • “Having sat through the whole day as I wanted to come and hear all of the speakers – I’ve been really impressed by the quality”
    Anthony Bolton, Fidelity
  • “I’ve got a bunch of business cards to add to my collection and some folks I’ve been looking forward to meeting, plus some firms I didn’t even know existed but sound really interesting and I’m looking forward to building on that relationship base”
    Mason Morfit, ValueAct Capital
  • “You couldn’t find that anywhere else really, where you’re speaking to the principals who have been voted on to the Board [of Microsoft] to effect change”
    David Shapiro, Willis Towers Watson
  • “What I was impressed with is, because the subject is very similar, value investing, they found a variety of ways of attacking the same subject. I was also very impressed, having done this in another location, of seeing them stay on target time-wise so that it moves along at a great pace and I think the audience is greatly rewarded by that discipline”
    Don Yacktman, Yacktman Asset Management
  • “Very well organised and it was a treat for investors like us to hear some great speakers”
    Roli Saxena, Drona Capital
  • “I came last year and I liked it so much that I have been looking forward to today ever since”
    Dominique Levy, Sonian Capital
  • “We’e got a very sophisticated audience who are used to value investing – I think this is a good audience”
    David Samra, Artisan Partners
  • “The profile of the speakers is one of the main reasons that I came”
    Niels Borgen, Private Investor
  • “When you look at the ideas speakers have put forward in previous years and how they have performed over the last few years, they’ve done very well – if that performance continues it would be quite remarkable. It does show that you can pick up some good ideas at a conference of this sort”
    Jonathan Mills, Metropolis Capital
  • “I came last year as well and I thought that it was the most outstanding event that I have been to”
    Leon Boros, Equity Strategies