Welcome to the 23rd Edition of Value Investor Digest<\/p>\n
In this edition, we feature a Business Insider summary of a recent Baupost letter, a summary of Guy Spier\u2019s approach to using checklists, a video of Tom Russo\u2019s talk at Google on \u201cGlobal Value Investing\u201d, a ValueWalk article on Pzena Asset Management, an FT article on Steve Jobs which analyses the start-up conditions at Apple; plus two more videos at the end of this issue \u2013 one from Bill Miller on why he thinks now is the perfect time to buy US stocks, the other from London Value Investor Conference speaker Jean-Marie Eveillard who speaks about market cycles and the risks he sees ahead from \u201cvaluation problems\u201d brought about by quantitative easing.<\/p>\n
Baupost Letter<\/strong><\/span> Summary of Checklists<\/a><\/span><\/strong> Talks at Google: Tom Russo – \u201cGlobal Value Investing\u201d<\/a><\/span><\/strong> Pzena: Successful Value Investing Provides More Than Passive Exposure to a Value \u201cFactor\u201d<\/a><\/span><\/strong> Imitators take note \u2014 Steve Jobs was more Than a Showman<\/a><\/strong><\/span>
\n<\/a>This Business Insider summary of a recent letter in which Baupost partner Brian Spector, who joined in 1998 and will retire at the end of the year, speaks about the ethos and processes of the company. The letter addresses his views on the advantages of Baupost maintaining high cash positions as well as commenting on the difficulties of having high conviction in \u2018tide markets\u2019:\u201cInvesting in tide markets takes chutzpah. To do so effectively, you need to fly in the face of public opinion, you have to fight normal human emotions, and you have to be prepared to double down on your bets when your conviction is most in question. As Benjamin Graham once said, ‘The investor’s chief problem and even his worst enemy is likely to be himself.’ But most importantly, you have to be at a place that empowers you to succeed\u2014a place that is uniquely situated to take advantage of these market conditions. A place like Baupost.”<\/i><\/p>\n
\nAn investor who has written extensively about the need for checklists is Guy Spier. If you have not yet got around to reading his excellent book \u2013\u00a0The Education of Value Investor<\/a><\/u><\/span>\u00a0then this Hurricane Capital article provides a brief summary of Guy\u2019s approach to using checklists and also includes some of Guy\u2019s checklist items. In addition, it includes some contributions from others \u2013 including Charlie Munger:\u00a0\u201cI\u2019m a great believer in solving hard problems by using checklists, you need to get all the likely and unlikely answers before you; otherwise it\u2019s easy to miss something important.\u201d<\/i><\/p>\n
\nTom Russo gave this hour long talk at Google last month which he referred to as \u201ca good excuse to get away from the markets\u201d. Tom speaks about the advantages of family controlled companies, the problems with management having stock-option driven compensation, the long-term orientation required for successful investment and the pricing power and predictability of demand created by brand loyalty. Tom also goes in to detail on what he sees as some of the superior qualities of the corporate culture created by management at two of his holdings – Nestle and Unilever. Alongside the theme of the need for a longer-term outlook, he also speaks about how growth often hides value, using Buffett\u2019s investment in GEICO as an example he mentions that the owners of a business need to have the \u201ccapacity to let the income statement bear the burden\u201d of the short term investment needed to grow the business.<\/p>\n
\nThis Valuewalk article summarises a recent letter by Pzena Asset Management which discusses the Value Cycle and how many Value Managers have underperformed their growth and momentum counterparts (leaving aside any arguments about the blurred lines between the style distinctions of value and growth). The article goes on summarise the letter from Pzena, including their thoughts on what lies ahead. Pzena mention that by having\u00a0\u201ca disciplined approach, it is hard for us to escape correlation with na\u00efve value benchmarks, but our goal is to add value through understanding the specifics of every individual company we buy\u2026Value investing is not a simplistic factor, but rather a philosophy that requires research to outperform over the long-term.\u201d<\/i><\/p>\n
\nThis FT (subscription) article highlights the different startup conditions present when Apple was being formed, as compared with today’s “Unicorn” tech businesses valued at $1bn+. In the early days of Apple, Steve Jobs – as Apple’s principal founder and subsequent re-inventor – was subject to a lot of pressures which the author believes forged part of the culture of Apple. This is a process that most companies in the sector today may not have been through:\u00a0“The need to stretch every nickel informed the way Apple was run during the early days. It is on that spell, rather than the enormous public profile commanded by Steve Jobs in his later years, that would-be emulators should dwell.”<\/i><\/p>\n