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“Fair Values” of Assets and Liabilities – FASB 157

Just came across this interesting article (link here) about Financial Accounting Standards Board (FASB) Statement No. 157. The FASB approved this statement in Sep 06 which introduced a three-level hierarchy for measuring the fair values of assets and liabilities: Level 1 means the values come from quoted prices in active markets. The balance-sheet changes then … Continue reading

Delta Financial Corporation (DFC)

This is my very first post on a company that I’m looking at: Delta Financial Corporation (DFC). As a disclaimer, my writing about a company is not a recommendation nor endorsement, simply jotting down some of the things that I’ve come across that I thought is interesting. Mohnish Pabrai has a $35/share fair value for … Continue reading

Misleading P/E Charts

I was reading an article by John Price on GuruFocus.com (link here) that wrote about Tobin’s Q. It showed a graph illustrating that Robert Shiller’s P/E ratio (price divided by the average earnings per share over the previous 10 years) is a good proxy to use for the comparison between Tobin’s Q with its long-term … Continue reading

Mohnish Pabrai’s Rules on Selling

Just came across this article written by Anastasios Dimopoulos on a talk given by Mohnish Pabrai at the 4th Annual Value Investing Seminar in Italy (link here). Thought its quite interesting. I quote:”Pabrai’s strict rule is “Do not sell if the intrinsic value is above the market price no matter what happens.” He gave an … Continue reading

Valuing Berkshire Hathaway

From what I’ve read so far, its tough to value Berkshire Hathaway. I thought it would be useful, as I come across any such articles, to note down how others have valued Berkshire. Here’s some: Barron’s on 13 Aug 07 carried an interview with Gifford Combs, Managing Director and Portfolio Manager of Dalton Investments (link … Continue reading

Valuation Methodology of John Price from www.conscious-investor.com

I stumbled upon an article by John Price published on GuruFocus.com, which led me to his website http://www.conscious-investor.com. He has put together a neat software that supposedly implements Buffett’s methods. While the software is not free, the website does come with a few videos that showcase the software. If you take a look at the … Continue reading

Valuation Methodology from Roger Montgomery of Clime Asset Management

I’m starting to read a series of articles written by Buffett-style fund manager Roger Montgomery of Clime Asset Management (www.clime.com.au) I’ll probably post some interesting/important takeaways as I read through the articles. Here’s one: Roger Montgomery wrote in one article that his approach is to base valuation estimates on 4 elements: Balance sheet equity Return … Continue reading

Interview with Larry Coats of Oak Value Fund

I just read this piece on BusinessWeek which had an interview with Larry Coats of Oak Value Fund. You can find the article here. I always love it when fund managers reveal their valuation methodology. Here’s Larry Coats’: What kind of discount do you look for when buying a stock? “We’re attempting to buy a … Continue reading

Estimating Return on Re-Invested Capital

I was thinking about how to calculate the return on re-invested capital, i.e. return on retained earnings. In reality, the retained earnings can be used for a multitude of purposes, and the returns could be obtained fully in a single year, or perhaps spread over a couple of years (e.g. if i retain $5 per … Continue reading

Reasons for the Current Liquidity/Credit Crunch

Thought I’d write a short note to document the reasons for the current liquidity/credit crunch. Lack of risk controls in underwriting: Loans were given to weak credit without documenting income, balance sheets, and without appraisals. These weak credit folks typically obtain ARMs with a low teaser rate for a first few years, but adjust back … Continue reading

Quick Compilation of Market Crashes

With the current liquidity/credit crisis, I thought it will be interesting to take a look at past crashes. Here’s a quick compilation (not comprehensive): 1901 – 1903 (17 Jun 1901 – 9 Nov 1903) – 46.1% drop in DJIA. 1906 – 1907 (19 Jan 1906 – 15 Nov 1907) – 48.5% drop in DJIA. 1916 … Continue reading

On Projecting Earnings using Historical Growth Rates

So from my thoughts in my earlier two posts on projecting earnings, here and here, I was thinking further about whether it is reasonable to project earnings using historical growth rates. The answer is yes,  but with 3 caveats: You are making an implicit assumption that the payout ratio and the ROX will continue to … Continue reading

How to Play a Market Crisis

The current liquidity/credit crisis is the first market crisis I’ve experienced since I started investing not too long ago. Prior to this, I was always hoping for a crisis, coz if you look at the historical charts, crisis times are simply the best times to make tons of money =) Those are the times where … Continue reading

Ron Baron Interview on CNBC

Quick summary of points that Ron Baron spoke about in his interview on CNBC – 26 June 07. You can find the clip here: Doesn’t predict macro stuff (e.g. interest rates, oil prices, etc.), except for inflation. Expects price level to double every 15 years, i.e. a 4.6% rate of inflation. Wants to double his … Continue reading

Interview with Ronald Canakaris of Montag & Caldwell

I was reading an excellent interview with Ronald Canakaris of Montag & Caldwell, in the Wizards of Wall Street book  by Kazanjian. Its pretty consistent with the process we have arrived with thus far. Here’s a quick summary of his investment methodology: Screen for companies with 10+% growth. Shows strong earning growth over the intermediate … Continue reading

Best Document to Read when Starting on a Company

Read the S-1 filing, its the best! =) S-1 is the registration statement filed by a company when it first gets listed – tells you alot about the company. The S-1 typically gets filed before the prospectus (Form 424B) gets available to the public. Note that depending on the type of company, the form might … Continue reading

Interview with Bruce Berkowitz on Wealthtrack

Consuelo Mack from Wealthtrack had a show where they invited value manager Bruce Berkowitz, founder and co-manager of FairholmeFund. You can find the video here. Here’s a summary of what Berkowitz said, and what he looks out for: Love serial winners -good management teams. People with Great paper trials Family networth on the line Give … Continue reading

Handling Potential Drops In The Price Of Your Securities

I read an interesting piece in the Shareholder Letter of Weitz Funds annual report (31 March 2007) by Wally Weitz couple of days back. You can find it here. He was writing about the subprime mortgage meltdown. I quote: As fears deepen and the possibility of a temporary, but severe, hit to Countrywide’s earnings looms, … Continue reading

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