Value Invest

VID November 2020


Issue 50 – November 2020

In the 50th issue of Value Investor Digest we feature both our interview last week with David Samra from Artisan Partners and also access to the replay of the fantastic Female Manager Summit which took place recently.

The issue also features 10 other articles and letters from Greenlight Capital, MITIMCo, Kopernik, Schroders and many others.

David Samra Interview

The latest VID interview with Artisan Partners includes stock ideas on Ryanair and Samsung Electronics. "There are second derivative outcomes of all these changes that you need to think through in terms of what might benefit a company and what might hurt another type of business and then you have to make sure that your valuations reflect that…I think everybody has seen the first derivative outcomes and share prices have reacted - the question is what are the second and third derivative outcomes and where in your portfolio are you exposed to the point where as those start to exhibit themselves can you generate a return from those."


Female Manager Summit

A replay of the Female Manager Summit is now available. It featured Jennifer Wallace, Tania Pouschine, Kim Shannon and Barbara Ann Bernard and was Moderated by Hyde Hsu and Harry Holzer from Willis Towers Watson. A wide range of topics were discussed plus in-depth stock ideas were given by the managers.


Greenlight Capital Q3 2020 Letter

“There are many anecdotes of toppy behavior. We will share one: We recently received a job application with the email subject, 'I am young, but good at investments' from a 13-year-old who purports to have quadrupled his money since February...Bubbles tend to topple under their own weight. Everybody is in. The last short has covered. The last buyer has bought (or bought massive amounts of weekly calls). The decline starts and the psychology shifts from greed to complacency to worry to panic. Our working hypothesis, which might be disproven, is that September 2, 2020 was the top and the bubble has already popped."


The Sharpe Ratio Broke Investors' Brains

"This whole debate centers on what to use as a measure of risk, but William Sharpe never claimed it should be volatility. The Sharpe ratio was originally called 'reward-to-variability' because volatility is not an identity for, nor an analogy to, risk...He never designed it to certify the future performance of investments. Past Sharpe ratios are not indicative of future Sharpe ratios."


Sounding Good or Doing Good? A Skeptical Look at ESG

“Even if you overlook disagreements on ESG as growing pains, there is one more component that adds noise to the mix and that is the direction of causality: Do companies perform better because they are socially conscious (good) companies, or do companies that are doing well find it easier to do good?"


Kopernik Perspectives: Mining

"This white paper explains how we value mining companies and why we currently prefer to own the mining companies, risks attached, instead of the physical commodities. We believe that a position that says 'never' and 'absolutely not' to investing in a security is not well thought out. Pertaining to mining companies today, we see this binary thought process in the extreme—an extreme that we are taking advantage of."


Investment Thinking Episode 28 - Interview with Nick Kirrage of Schroders

"We really believe in this, we believe in it more than ever today. We think the opportunity is, well statistically you could say the best in 100 years for what we do and the question is ‘where might we not be getting it?’…there are these changes and a lot of them could be quite disruptive to what we do but at the end of the day value investing comes down to, as with any investing style, it is not just ‘it has worked’ but ‘why does it work?’ Because if you can work out the ‘why’ you can work out whether you think it will continue to work going forward."


WSJ: Value Stocks May Have Done a Lot Better Than You Think

"When using the traditional definition, as you can see from the accompanying chart, value hit its peak relative to growth in December 2006. When including intangibles, that peak came in December 2016, 10 years later."


The Economist: Does Value Investing Still Work?

"For almost a century the dominant ideology in finance has been value investing. It has evolved over time but typically takes a conservative view of firms, placing more weight on their assets, cashflows and record, and less on their investment plans or trajectory. The creed has its roots in the 1930s and 1940s, when Benjamin Graham argued that investors needed to move on from the pre-1914 era, during which capital markets were dominated by railway bonds and insider-dealing."


Jonathan Boyar Interview with David Rubenstein

This interesting interview discusses how Zoom and other technologies will change how we conduct business going forward, David’s views on how the pandemic has impacted the global economy, how the private equity world is changing in terms of the types of deals they are doing, how The Carlyle Group almost went out of business early in the firm’s existence, key qualities of effective leadership from interviews with many of the world’s most accomplished leaders including: Justice Ruth Bader Ginsburg, Dr. Anthony Fauci, Jamie Dimon, President Bill Clinton, President George W. Bush and more.


MITIMCo: In Manager Selection, Conventional Rules of Thumb are Dumb

"Below are some of the many silly rules of thumb we see used to the detriment of thoughtful manager selection. We have worked hard to train ourselves to be 'organizationally allergic' to these and anything that resembles them."


David Baran: Japan’s Problems with Shareholder Voting Underscores Need for Reform

"Despite the improvements in Japanese corporate governance, investors like Symphony have warned repeatedly that more needs to be done. Some day soon there will be a hostile proxy battle in which the failure to count votes thwarts the outcome shareholders prefer. Prime Minister Yoshihide Suga should make it part of his push for digitalisation. It is time to tackle this problem for the benefit of all shareholders in Japan."


A Fund Manager’s Time Horizon is the Shortest Common Denominator

“If investors have the ability to freely withdraw money from a fund and are focused on monthly performance figures, then the fact that the investment approach is designed to take a five year view becomes almost an irrelevance. Short-term numbers matter...So many professional fund managers extol the virtues of adopting a long-term approach, but how many are in a position or environment that allows their words to be validated by their actions? The structure of influence and incentives within the industry make it increasingly difficult to achieve."


Quote of the Issue - VID 50 (from our collection of investment quotes)

“Cash combined with courage in a time of crisis is priceless.

Warren Buffett

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