The Superinvestors of Graham-and-Doddsville (1984) • Hacker News Board

Re: The Superinvestors of Graham-and-Doddsville (1984)

#31

Post by finfun234 » Tue, Aug 14, 2018, 11:56 PM UTC

There is a case to say that research and valuation is better than following a trend. I’m working on a project to make the research project friction less. I would love feedback on it. A frustration of mine was reading boilerplate text when I read the company risk section. So I applied some machine learning & Natural language processing to extract the unique risks. The way to access it is to visit https://shareseer.com then search for a company name or ticker. You will get the 10k/10 q along with important risks. The other features available are a real time insider transaction feed and a company filings feed:

http://shareseer.com/today/insiders

http://shareseer.com/today/filings I’m trying to learn what are your pain points with your investment research process ? Is this useful? And feature requests?

Re: The Superinvestors of Graham-and-Doddsville (1984)

#32

Post by devdimi » Wed, Aug 15, 2018, 7:58 AM UTC

I have been doing on and off value investing as a hobby investor for 8-9 years now and can share some of the mistakes to avoid. Company valuation is just as important as before. It is just the way it is done has changed quite a lot since Graham. 1. Company Growth (past and future) has to be incorporated in the valuation. Company with P/E 15 growing at 2% per year is more expensive than company with P/E 30 growing at 40%. This is the reason FB and GOOG are actually a value plays nowadays. 2. As already said the value of Intellectual Property, Software and Human Capital can't be easily read from the balance sheet alone. Yet these are the most valuable assets that yield highest returns. 3. If the founder of the company is CEO and large shareholder the company is worth a lot more than if not. 4. Doing all this research on your own is hard and very time consuming. There are some excellent paid stock newsletters with great track record that can do this for you for 300$ per year or less. Do yourself a favor and use them. Your family will thank you.

Re: The Superinvestors of Graham-and-Doddsville (1984)

#33

Post by derivagral » Wed, Aug 15, 2018, 12:33 PM UTC

bunderbunder wrote: post #17

acconrad wrote: post #9

Earlier quoted context omitted.

The same could be said for Facebook. What you're referring to is an irrational market responding to news and creating a sale on an asset. "Facebook on discount, buy now!" If you bought at the nadir of the $FB dip you'd already be up 7% right now. Yes, those things do exist, that doesn't mean those companies are value stocks. Facebook is still trading at a P/E ratio of 28, and an EV/EBIT of 20, both of which are high.…

Curious, how often is it even possible to evaluate a company using Graham and Dodd's methods these days? I haven't read much of their work, just The Intelligent Investor , so there's a lot I don't know. The difference in P/E ratio standards they talked about struck me, yes, but even more than that, I am unsure of how to translate a lot of their ideas about how you limit your potential losses into the modern economy.…

As someone who followed Intelligent Investor (and Klarman's Margin of Safety concepts) as an amateur who made good annualized returns, my partner and I stayed away from the modern tech stocks. We basically agreed with what you say about the risk on the performance of a company like FB: if things go bad, there's no real moat or tech or assets that comes close to the market cap of the company.

What's still reasonably valid is the concept of both moats and float, both of which I think you can get indications of in the 10-Q/A reports that aren't always reflected in current expectations.

Also, focus on where you can win. You aren't pricing AAPL better than the legions of professionals over 5 years, but the boring small-mid cap stocks that are too small for major funds to care about have more opportunity.

And finally: this is why indexing is such a huge thing. This stuff is hard, and using a low fee fund to track the market lets you live your life instead of having an extra job. I personally quit because while the % was good, the scalar wasn't worth the time invested.

Re: The Superinvestors of Graham-and-Doddsville (1984)

#34

Post by acconrad » Wed, Aug 15, 2018, 1:11 PM UTC

aaavl2821 wrote: post #24

acconrad wrote: post #10

Earlier quoted context omitted.

Yes, I agree! Metrics are extremely important in screening out for value stocks. What I'm saying simply is that there is no singular magical metric that can wipe out hours and hours of research. To simply list all stocks by EV/FCF ordered by cheapness will not automatically create a winning portfolio.

There's a sort of common strategy that uses EV / FCF (or something like that) as a metric for cheapness and ROIC as a metric for "good" businesses (to avoid value traps). I believe it has done pretty well

It's the Magic Formula (EV/EBIT and ROIC) and it has not always performed well:

https://seekingalpha.com/article/4116677-greenblatts-magic-w...

Re: The Superinvestors of Graham-and-Doddsville (1984)

#35

Post by bunderbunder » Wed, Aug 15, 2018, 8:03 PM UTC

derivagral wrote: post #33

bunderbunder wrote: post #17

Earlier quoted context omitted.

Curious, how often is it even possible to evaluate a company using Graham and Dodd's methods these days? I haven't read much of their work, just The Intelligent Investor , so there's a lot I don't know. The difference in P/E ratio standards they talked about struck me, yes, but even more than that, I am unsure of how to translate a lot of their ideas about how you limit your potential losses into the modern economy.…

As someone who followed Intelligent Investor (and Klarman's Margin of Safety concepts) as an amateur who made good annualized returns, my partner and I stayed away from the modern tech stocks. We basically agreed with what you say about the risk on the performance of a company like FB: if things go bad, there's no real moat or tech or assets that comes close to the market cap of the company. What's still reasonably v…

That's more-or-less what I concluded after reading II, too, and why I never made a serious go of it. With the amount of money I had to play with, even if I managed to double market returns, which I assumed was a very optimistic outcome, it would still be a lower return on my time, in terms of $ per hour, than just working the occasional contract job after hours.