Crossroads Capital Letter: Our Own Link to the Past

November 24, 2020 in Document, Equities, Letters

This article by MOI Global instructor Ryan O’Connor is excerpted from a letter of Crossroads Capital, based in Kansas City, Missouri.

Our story begins not in Crossroads’ home of Kansas City, but in Omaha, when a young Warren Buffett set out on a path that would change both his and his investors’ lives. It’s a story that turns on an investment strategy that remains every bit as well-conceived and evergreen in 2020 as it was some 64 years ago. It’s also a story that goes to the very heart of our own mission, to who and what Crossroads is and aspires to be. After all, we’ve modeled our Fund after the investment partnerships managed by Buffett from 1956 to 1969, what we call “Buffett 1.0”. It was at this time that he established not just his reputation, but also an investment vehicle that was as unusual at that time as it was successful, and one that delivered his best years of performance relative to the market across his storied six-decade career. In fact, the Buffett LPs not only crushed the market consistently, they never experienced a single down year.

The reality is that none of what would eventually happen at Berkshire Hathaway would have been possible without those early LPs that served as the foundation for how the Oracle of Omaha built his wealth. What, then, makes those early Buffett LPs so instructive to investors like Crossroads who seek to create a similar hall-of-fame investment record? Let’s dive in and see.

When it came to outperforming the market, Buffett did pretty well (to put it mildly). But the vast majority of his active manager peers did not. In fact, they delivered pretty much the same outcomes in aggregate as they do today – mediocre returns at best, while charging high fees for the privilege. As a result, the ordinary investor seeking diversified exposure to common stocks who did not have the time, inclination, or expertise to do it herself had no other choice (index funds as we know them came on the scene around 1975).

Perhaps unsurprisingly, Buffett saw the structural flaws that compromised the industry-standard operating model from the very beginning. As his early letters attest, he understood that with fees, taxes, over-diversification, and psychology all working against the average active manager, the performance of actively managed trusts and mutual funds would fall far short of the broad market’s returns.

But that isn’t the only reason Buffett held the traditional fund management industry (and Wall Street more generally) in disdain from almost the very start of his career, when he started as a stockbroker working for his father.4 The issue for Buffett was simple: he didn’t like selling stocks because working on commission pitted his personal interests against those of his clients, and in doing so, flipped the role of a true fiduciary on its head. Buffett’s criticisms of the investment management industry have been often been labeled hypocritical. In fact, the opposite is true. As his Berkshire partner Charlie Munger would later put it:

Mutual funds charge two percent per year and then brokers switch people between funds, costing another three to four percentage points. The poor guy in the general public is getting a terrible product from the professionals. I think it’s disgusting. It’s much better to be part of a system that delivers value to the people who buy the product.

While we think there are many good people that do their best in this business, we’re not going to sugarcoat the issue. The situation is simply appalling. And as Buffett’s early letters attest, it’s certainly nothing new. In fact, most of the “risk management” and other common standards within the actively managed equity fund industry represent little more than the triumph of marketing slogans over truth. Indeed, we’d argue the contemporary industry is not only dangerous to your financial fortunes, it’s largely a thinly veiled wealth transfer mechanism whose secular decline is, candidly, long overdue.

The good news, though, is that more and more ordinary investors are figuring this out. Over the past decade, Main Street has shifted trillions of dollars in AUM from conventional actively managed equity funds to lower-cost passive alternatives run by investment firms like Vanguard. Main Street’s very sensible conclusion seems to be that if most active managers can’t beat the market, you might as well just join the market – not only will you likely end up with a better outcome, you’ll pay a lot less in fees along the way (the one by means of the other). As Jeremy Miller, the author of Warren Buffett’s Ground Rules explains, the traditional active management industry now seems headed for oblivion:

Today, all active investors, both professional and individual, have to outperform to justify their action. Most don’t. Many funds, especially the ones investing in hundreds of stocks at a time (Buffett calls these the Noah’s ark school of investing–two of everything), appear to be clinging to a business model whose extinction seems almost inevitable.

So, while it took decades for the active management industry’s chickens to come home to roost, at this point it’s clear that the industry as we’ve known it is in terminal decline. And frankly, we say good riddance. Why? Well, for one we’re not going to bemoan the disappearance of the wanton value destruction taking place at ordinary investors’ expense under any circumstances. In fact, far from being dismayed by value investing falling out of fashion, or the accelerating disruption taking place across conventionally managed equity funds, we’re thrilled. After all, the more active value managers who throw in the towel, the more opportunities there are for us to exploit. We’re reminded of how in the movie Forrest Gump, a storm destroyed all the shrimp boats that had been docked in the harbor. Only Forrest rode out the storm and emerged successful, with his competitors eliminated and the entire catch to himself.

But why do smart, well-staffed, well-resourced, well-connected, experienced investment managers so consistently fail to beat an unmanaged index? And how is it possible for a firm like Crossroads to beat the pants off them when they have a hundred times our resources, better access to company management, and teams of highly credentialed analysts? The truth is that traditional asset managers knowingly act in ways that undermine their own results, and they do this because they have no choice – assuming they want to keep their jobs.

We’re not exaggerating. Active mutual fund managers need to make sure that their results each quarter aren’t too far below that of whatever benchmark they measure themselves against or their ratings, as issued by companies like Morningstar, are likely to dip, which in turn will cause prospective retail and institutional investors alike to look elsewhere. And they need to do it while sticking to an often narrowly defined segment of the market, lest they find themselves accused of “style drift” by fee-skimming financial intermediaries who are generally glorified salesman essentially playing pretend. Even active hedge fund managers can feel the pressure of big institutional investors heading for the exits after a rough stretch of poor performance.

In other words, many active managers sabotage their own results because the business of investing is at odds with the craft of investing. And it’s easy to see why. The minute a manager trades owning 246 stocks in the name of “diversification” for a concentrated portfolio of best ideas, volatility will spike. When volatility spikes, investors get nervous. When investors get nervous, they leave. When investors leave, AUM goes down. When AUM goes down, management fee income goes down. See the problem? In short, it’s a vicious cycle that would require most funds to actually put their clients’ interests above their own. And for that reason alone, will never happen.

Members, log in below to access the restricted content.

Not a member?

Thank you for your interest.  Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:

Timing the Markets: Dow Theory for the 21st Century

November 24, 2020 in Commentary, Document, Letters

The research report linked below is authored by Rory Gillen, founder of GillenMarkets, an investment advisory firm based in Dublin, Ireland.

Stock markets (equities) in democratic and pro-business economies have produced the best returns for investors over the long-term, in the main because industry generates better returns on the capital invested than one can obtain from bank deposits, government bonds or, indeed, gold. So long as one avoids overpaying for assets in the stock markets, an investor that saves and invests through them can reasonably expect to benefit from these superior returns less any costs. That said, stock markets can get overvalued and are regularly negatively impacted by adverse political and economic developments, which can lead to setbacks, and at times significant and prolonged setbacks.

An investor who is investing regularly – for example, with his/her pension monies – gets to invest in rising markets and declining markets. The regular investor carries much less risk as he/she naturally smooths out the inevitable ups and downs in markets and most likely, over the medium- to longterm, gets the average returns that markets generate.

It’s trickier for the lump-sum investor; the investor that (i) needs to protect his/her capital in the short-term or (ii) is unlikely to be in a position to add meaningfully to his/her existing capital and can’t, therefore, benefit from the better values that appear in weaker market conditions. The lumpsum investor has higher risk of investing when markets offer poor value, which normally leads to lower subsequent returns or outright negative returns over shorter timelines.

The lump-sum investor who wishes to participate in the superior returns that the stock markets offer but who also wishes to avoid deep setbacks can choose to try and time his/her entry into and exit from the stock markets (market timing). It’s easier said than done and must be recognised more as speculation than pure investment, but it offers choice and each to his own.

Dow Theory is a 120-year old method of timing the US equity markets first introduced by Charles Dow in 1900, the then editor of the Wall Street Journal. In his 2008 book Dow Theory for the 21st Century, author Jack Schannep brought this theory up to date for developments in markets since.

In this note, we explain Dow’s theory, and Jack Schannep’s version of it, and outline the returns of having followed this approach from 1954 to 2020 inclusive and compare them to:

  • The returns that accrued to a ‘Buy & Hold’ investor in the S&P 500 Index over that period.
  • The returns from hedge and absolute return funds since industry returns were formally recorded from 1998 to 2020 inclusive.
  • The returns from a traditional multi-asset portfolio also from 1998 to 2020 inclusive.

Members, log in below to access the restricted content.

Not a member?

Thank you for your interest.  Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:

This publication has been provided by ILTB Ltd (t/a GillenMarkets). The information has been taken from sources we believe to be reliable. We do not guarantee their accuracy or completeness and any such information may be incomplete or condensed. All opinions and estimates constitute best judgement at the time of publication and are subject to change without notice. The information and material presented in this document are provided for information purposes only. This document is not to be relied upon in substitution for the exercise of independent judgement. Nothing in this document constitutes investment, legal, accounting or tax advice, or a representation that any investment or strategy is suitable or appropriate to your individual circumstances, or otherwise constitutes a personal recommendation to you. GillenMarkets does not advise on the tax consequences of investments and you are advised to contact an independent tax advisor. Please note that the basis and levels of taxation may change without notice. This document is subject to updating, revision and amendment and should not be relied upon as individual investment advice. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. GillenMarkets allows employees to own shares in companies they issue recommendations on, subject to strict compliance with our internal rules governing own-account trading by staff members. Warning: Past performance is not a reliable guide to future performance. The value of your investment may go down as well as up. The return on non-euro denominated investments may be affected by changes in currency exchange rates. All material presented in this document, unless specifically indicated otherwise is copyright to GillenMarkets. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied or distributed to any other party, without prior express consent of GillenMarkets.

Ep. 18: Crowdsourcing Ideas | Red Flags When Analyzing a Company

November 24, 2020 in Audio, Diary, Equities, Interviews, Podcast, This Week in Intelligent Investing

We are delighted to share with you Season 1 Episode 18 of This Week in Intelligent Investing, featuring Phil Ordway of Anabatic Investment Partners, based in Chicago, Illinois; Elliot Turner of RGA Investment Advisors, based in Stamford, Connecticut; and your host John Mihaljevic, chairman of MOI Global.

Enjoy the conversation!

download audio recording

In this episode, John Mihaljevic hosts a discussion of:

Crowdsourcing investment ideas: Phil Ordway shares his thoughts on using social media and other venues to source ideas. We discuss the advantages and disadvantages of such an approach. Phil also addresses a listener question around having “Board-level knowledge” of a company.

Yellow and red flags when assessing a business: Elliot Turner responds to a listener question on the things that might give an investor pause when it comes to moving forward with a potential investment. We discuss some yellow and red flags that may serve as idea disqualifiers.

Follow Up

Would you like to get in touch?

Follow This Week in Intelligent Investing on Twitter.

Engage on Twitter with Elliot, Phil, or John.

Connect on LinkedIn with Elliot, Phil, or John.

This Week in Intelligent Investing is available on Amazon Podcasts, Apple Podcasts, Google Podcasts, Podbean, Spotify, Stitcher, TuneIn, and YouTube.

If you missed any past episodes, you can listen to them here.

About the Podcast Co-Hosts

Philip Ordway is Managing Principal and Portfolio Manager of Anabatic Fund, L.P. Previously, Philip was a partner at Chicago Fundamental Investment Partners (CFIP). At CFIP, which he joined in 2007, Philip was responsible for investments across the capital structure in various industries. Prior to joining CFIP, Philip was an analyst in structured corporate finance with Citigroup Global Markets, Inc. from 2002 to 2005. Philip earned his B.S. in Education & Social Policy and Economics from Northwestern University in 2002 and his M.B.A. from the Kellogg School of Management at Northwestern University in 2007, where he now serves as an Adjunct Professor in the Finance Department.

Elliot Turner is a co-founder and Managing Partner, CIO at RGA Investment Advisors, LLC. RGA Investment Advisors runs a long-term, low turnover, growth at a reasonable price investment strategy seeking out global opportunities. Elliot focuses on discovering and analyzing long-term, high quality investment opportunities and strategic portfolio management. Prior to joining RGA, Elliot managed portfolios at at AustinWeston Asset Management LLC, Chimera Securities and T3 Capital. Elliot holds the Chartered Financial Analyst (CFA) designation as well as a Juris Doctor from Brooklyn Law School.. He also holds a Bachelor of Arts degree from Emory University where he double majored in Political Science and Philosophy.

John Mihaljevic leads MOI Global and serves as managing editor of The Manual of Ideas. He managed a private partnership, Mihaljevic Partners LP, from 2005-2016. John is a winner of the Value Investors Club’s prize for best investment idea. He is a trained capital allocator, having studied under Yale University Chief Investment Officer David Swensen and served as Research Assistant to Nobel Laureate James Tobin. John holds a BA in Economics, summa cum laude, from Yale and is a CFA charterholder.

The content of this podcast is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this podcast. The podcast participants and their affiliates may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated on this podcast. [dkpdf-remove]
[/dkpdf-remove]

Conversation with Christian Billinger: In Defence of Cognitive Biases

November 23, 2020 in Audio, Equities, Interviews, Member Podcasts, Skills

We had the pleasure of speaking with Christian Billinger, Investor at Billinger Förvaltning, a Sweden-based investment company with no external capital.

We discussed Christian’s essay, In Defence of Cognitive Biases, in which he articulates a thesis that cognitive biases may have utility in the real world:

“What we are questioning is the approach of taking these insights [of academic behavioural finance] and directly applying them to a ‘real world’ environment where we are dealing with unknown (and unknowable) payoffs and probabilities. We find that what is considered a ‘bias’ is in fact often a rational and pragmatic rule for dealing with an uncertain and complex environment, especially by those who have spent considerable time developing expertise in the field…”

“Another aspect to consider is that the claims of behavioural finance theorists are often based on individual behaviour as opposed to large aggregates like financial markets, which reflect the behaviour of very large numbers of actors. This makes the relevance of these ideas in practice even less clear.”

“What the research suggests is that most of the time, intuitive thinking works relatively well. This intuition is often also the result of long practice in a specific field. However, intuitive thinking is less likely to work well under time pressure and other kinds of stresses…”

“Behavioural finance and research into cognitive ‘biases’ is today a very large field and as a result we will necessarily need to focus on a few aspects that we feel are key for long-term equity investors; we have there picked four topics/’biases’ that we think are highly relevant to equity investors…”

“Ultimately we are trying to follow Charlie Munger’s advice when he says, ‘Figure out what works and do it’.”

Members, log in below to access the restricted content.

Not a member?

Thank you for your interest.  Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:

About:

Christian Billinger is an Investor at Billinger Förvaltning, a family-held investment company with no external capital. The simplicity of the setup as well as permanent and patient capital provides Christian with the proper environment to pursue his strategy of identifying long term compounders.

Christian focuses first on the qualities of robustness and resilience which limit downside potential before determining the mix of returns on capital and scope for reinvestment opportunity that accounts for the upside. Often, these factors overlap with family-controlled management teams that more conservatively finance their operations.

Prior to Billinger Förvaltning, Christian worked as a European Equity Analyst for various investments funds. Before that, Christian was an associate at PwC. He holds an MS in Accounting and Finance from The London School of Economics as well as Karlstad University. He is also a CFA charterholder. He splits time between London and Sweden.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Q3 Investment Commentary of RGA Investment Advisors: Ignition

November 20, 2020 in Commentary, Letters

This article is excerpted from a letter by MOI Global instructor Elliot Turner, managing director of RGA Investment Advisors, based in Stamford, CT and Great Neck, NY.

It certainly is a bizarre feeling observing the strength in our investment portfolios amidst the backdrop of an unprecedented global pandemic and recession; however here we are. In the third quarter, our portfolios continued the strong trend established in the second quarter. One might think we avoided owning “COVID losers” heading into this period from the results; however, that is actually far from the case, as we have held a few of these positions through the worst of the COVID Crash, while shedding others in favor of more timely opportunities.

We have always proclaimed a key function of portfolio management as positioning a portfolio of businesses such that irrespective of what path the market takes over any shorter time period, we have the ability and temerity to see our best ideas through. We think the strength speaks to the kind of businesses we have focused on investing in and the extent to which we concentrate our portfolio, while maintaining an appropriate level of diversification. We have always believed it is more important to diversify the risk factors to which our companies are exposed, rather than merely diversify by aiming toward a certain number of securities in our portfolios. To that end, we have seen portfolios of hundreds of securities that are less diverse than ours with a central tendency towards twenty-five companies.

Seasons of Change

With a few more months of living with COVID under our belts, we have more information at our disposal to form opinions on how our economy and ecosystem of companies will fare; however, we are cognizant that summer presents drastically different realities than the colder weather of Fall and Winter. To that end, while we feel society settling into a new normal, we are cognizant that one more season of change may be upon us as the heat of Summer gives way to the cooler temperatures of Fall. Perhaps the foremost silver lining of the new realities COVID has imposed on us is how people are finding more ways to spend time outdoors than in the past.

As the weather changes, in an effort to comfortably extend the outdoors season, we find ourselves appreciating the warmth of a well-constructed campfire. The role of fire as one of the four core elements, underlying all of our existence, dates back to the ancient Greeks. Sitting beside a campfire, we can feel a connection to our oldest lived ancestors who first harnessed this awesome power in a way to transform our species from merely another Great Ape into a force called “humanity.” We also find ourselves appreciative of the mesmerizing and enthralling visual dance fire performs as our bodies soak in the radiant heat.

The key point in transforming the mere act of burning fuel (firewood in the case of a campfire) into fire is called the “auto-ignition temperature” or “kindling point.” As a fire crosses this auto-ignition temperature, the act of burning transforms into a self-sustaining fire that will perpetuate so long as we continue adding fuel, in this case, wood. There are two interesting parallels we would like to draw with investing, especially in the wake of COVID that offer valuable insights into where we are investing incremental cash and why we think a few of our strong performers actually present better risk/reward today than they did even at lower prices.

The act of building:

If you want to start a fire with regular logs, you cannot merely put some newspaper, pile the big pieces of wood on top, and strike a match. If you want to start the fire efficiently, your best approach is to start layering together much smaller tinder on top of your newspaper, building up to slightly larger pieces of kindling and then perhaps even one more layer of larger kindling. Once you get this initial foundation burning and to the ignition temperature, you then can add on your larger logs.

This key principle has parallels in company building as well. Some companies are designed from day one to attack large markets; however, the successful ones are unique exceptions. Alternatively, many companies today are encouraged to develop a “minimally viable product” and go after a segment of early adopters. From this position, the company takes lessons from early users, enhances the product, solicits further feedback from the early adopters and a slightly larger customer-base before again taking a further step on the path to more scale.

We have developed a growing affinity for companies that take many years in the testing and learning phase with their product, proving unit economics first and then taking aim at scale. In effect, these companies are honing in on and refining their core offering, building towards and then proving unit economics, and developing an engine to feed more fuel (some combination of marketing and research and development spend) in order to strive for something much bigger. Growing is thus a matter of scaling proven unit economics, not using scale as way to make unit economics work.

In many respects, companies that spend many years on this path end up with a much firmer foundation, built layer upon layer, than those that aim for and launch toward the clouds at birth. That launch would be akin to starting a fire with the logs before the kindling and while that may be possible, especially when using a starter log, the structural soundness and inner “heat” is not the same as when the slower, more methodical path is traveled. Importantly, the firmer the foundation, the stronger the moat as the industry marches towards mass adoption and then maturity.

Roku is an outstanding example of this in action. Roku was founded by Anthony Wood in 2002, its first streaming player was released in 2008 and the company IPO’d in 2017. Two other companies that IPO’d in Roku’s 2017 class are Snap, Inc and Blue Apron, founded in 2011 and 2012, respectively. While all three IPOs were of the same public vintage, each of their back stories varied considerably. Of the three, Roku stands out as a company built with a strong foundation where the IPO itself was an act of leaning into its strengths, scaling proven unit economics and using its public status as a way to amplify and accelerate emergent competitive advantages, rather than merely providing liquidity for investors or accompanying a changed mission and focus. The IPO happened right at that point of ignition; however, the market had yet to appreciate its reality given hardware revenues still at that date exceeded platform revenues. This provided a compelling investment setup, whereby the ignition was underway and unappreciated at the same time.

The point of ignition:

The point of ignition is the very moment when the act of burning turns into self-sustaining heat. Companies can spend many years putting the pieces in place to reach a state where ignition becomes possible. Many times, a well-built campfire foundation is enough to ensure a great fire; though sometimes a slight breeze is needed to add oxygen and combustibility to the situation. COVID has been just such a breeze for many businesses that we have invested in and/or have been watching for some time.

While we would contend the companies we focus our investments in are past the point of ignition and well into the self-sustaining phase, for the purpose of drawing out this analogy, we think there has been a second ignition moment. For many of these businesses, several years of future growth were pulled forward and various hypothetical company product roadmaps were immediately brought into the forefront of reality. A great example of this in our portfolio would be QR code checkout at the point-ofsale for PayPal and Venmo users. Importantly, PayPal had been building this functionality and expanding their capabilities in anticipation of such a reality being within the realm of possibilities, though we were never willing to write that into our analysis. The winds from COVID have offered a helping hand in igniting this situation, transforming possibility into actuality.

Similarly, the breeze from COVID has had a profound impact on Roku, with the early lockdown period bringing a second “Holiday Shopping Season” worth of new Active Accounts and an accompanying hockey stick-shaped surge in the number of hours a day each household watches through the company’s operating system. For these reasons, we meaningfully increased our position early in the quarter.

Our new position:

Our investment process itself follows the campfire analogy. Every day we do work building the kindling, digging in deeper laying the logs in place, warming up to an idea before that point of ignition—the moment when something goes from a compelling idea to an actual investment. Many of the ideas we nurture burn out of fuel before truly igniting, while our best ideas are those where the fire roars with conviction. To that end, this past quarter we commenced a new position. Our work on this position began before COVID and for a while, we thought it “got away” during COVID, though the more we visited and revisited the rationale, the more we appreciated the opportunity. We are going to be tight-lipped about our new purchase last quarter in this section of the letter as we continue to round out our holding. That said, we think the company is an outstanding example of one that spent many years building a strong foundation, and unlike our examples of PayPal and Roku above, it was debatable whether there was a true “point of ignition” for further layers of scale. COVID has dramatically tilted the business past the ignition point and transformed the situation into a self-sustaining reality with years of fuel to burn in striving toward new layers of scale and opportunity. This is a framework we are deploying amidst COVID-induced changes: asking ourselves “which companies have now experienced a self-sustaining ignition where it formerly was unclear?” It is but one way we have used the tree branches of winners and losers from COVID outlined in our Q2 letter to inform directionally the kinds of opportunities we want to work on today.

Elliot Joins the Podcast World:

During the quarter, Elliot was humbled and honored to join John Mihaljevic of MOI Global, Chris Bloomstran of Semper Augustus, and Phil Ordway of Anabatic Investment Partners in founding This Week in Intelligent Investing (TWIII). TWIII is a weekly podcast where the four panelists engage in topical conversations on the investing process, interesting industries and companies, and timely investing topics. You can find TWIII on any of your favorite podcast services or play any episode from this link.

Additionally, Elliot was featured on Andrew Walker’s fantastic Yet Another Value Podcast. You can listen to Elliot share our thesis on Dropbox here.

download printable version

Past performance is not necessarily indicative of future results. The views expressed above are those of RGA Investment Advisors LLC (RGA). These views are subject to change at any time based on market and other conditions, and RGA disclaims any responsibility to update such views. Past performance is no guarantee of future results. No forecasts can be guaranteed. These views may not be relied upon as investment advice. The investment process may change over time. The characteristics set forth above are intended as a general illustration of some of the criteria the team considers in selecting securities for the portfolio. Not all investments meet such criteria. In the event that a recommendation for the purchase or sale of any security is presented herein, RGA shall furnish to any person upon request a tabular presentation of:
(i) The total number of shares or other units of the security held by RGA or its investment adviser representatives for its own account or for the account of officers, directors, trustees, partners or affiliates of RGA or for discretionary accounts of RGA or its investment adviser representatives, as maintained for clients. (ii) The price or price range at which the securities listed.

Ep. 17: Idea Generation | Berkshire’s Q3 | Bond-Style Equity Analysis

November 14, 2020 in Audio, Diary, Equities, Interviews, Podcast, This Week in Intelligent Investing

We are delighted to share with you Season 1 Episode 17 of This Week in Intelligent Investing, featuring Chris Bloomstran of Semper Augustus Investments Group, based in St. Louis, Missouri; Phil Ordway of Anabatic Investment Partners, based in Chicago, Illinois; and Elliot Turner of RGA Investment Advisors, based in Stamford, Connecticut.

Your host is John Mihaljevic, chairman of MOI Global.

Enjoy the conversation!

download audio recording

In this episode, John Mihaljevic hosts a discussion of:

The equity investment idea generation process: Elliot Turner responds to a listener question on idea generation and explains how he finds investment candidates. We discuss the merits of quantitative screening and other methods of uncovering potential opportunities.

Quarterly update on Berkshire Hathaway: Chris Bloomstran takes a look at Berkshire’s Q3 performance and notable events, including share repurchases, an acquisition of gas transmission and storage assets, apparent portfolio changes, growth capex, and a lengthening of debt at low rates.

Duration and bond-style analysis: Phil Ordway reflects on recent market action to describe the concept of duration and how bond-style analysis can inform equity investment decisions. We discuss the implications of assessing common stocks using a fixed income analysis lens.

Follow Up

Would you like to get in touch?

Follow This Week in Intelligent Investing on Twitter.

Engage on Twitter with Chris, Elliot, Phil, or John.

Connect on LinkedIn with Chris, Elliot, Phil, or John.

This Week in Intelligent Investing is available on Amazon Podcasts, Apple Podcasts, Google Podcasts, Podbean, Spotify, Stitcher, TuneIn, and YouTube.

If you missed any past episodes, you can listen to them here.

About the Podcast Co-Hosts

Christopher P. Bloomstran, CFA , is the President and Chief Investment Officer of Semper Augustus Investments Group LLC. Chris has more than 25 years of investment experience with a value-driven approach to fundamental equity and industry research. At Semper Augustus, Chris directs all aspects of the firm’s research and portfolio management effort. Prior to forming Semper Augustus in 1998 – in the midst of the stock market and technology bubble – Chris was a Vice President and Portfolio Manager at UMB Investment Advisors. While at UMB Investment Advisors, Chris managed the Trust Investment offices in St. Louis and Denver. Among his investment duties at the firm, he managed the Scout Balanced Fund from the fund’s inception in 1995 until 1998, when he left to start Semper Augustus. Chris received his Bachelor of Science in Business Administration with an emphasis in Finance from the University of Colorado at Boulder, where he also played football. He earned his Chartered Financial Analyst (CFA) designation in 1994. Chris is a member of the CFA Society of St. Louis and of the CFA Institute. He has served on the Board of Directors of the CFA Society of St. Louis since 2002, where he was elected to sequential terms as Vice President from 2005 to 2006, President from 2006 to 2007 and Immediate Past President from 2007 to 2009. Chris has judged the Global Finals and the Americas Finals several times for CFA Institute’s University Global Investment Challenge. Chris served for a number of years as a member of the Bretton Woods Committee in Washington DC, an institution championing and raising awareness of the International Monetary Fund, the World Bank and the World Trade Organization. He has also served on various not-for profit boards in St. Louis. His resides in St. Louis with his wife and two children.

Philip Ordway is Managing Principal and Portfolio Manager of Anabatic Fund, L.P. Previously, Philip was a partner at Chicago Fundamental Investment Partners (CFIP). At CFIP, which he joined in 2007, Philip was responsible for investments across the capital structure in various industries. Prior to joining CFIP, Philip was an analyst in structured corporate finance with Citigroup Global Markets, Inc. from 2002 to 2005. Philip earned his B.S. in Education & Social Policy and Economics from Northwestern University in 2002 and his M.B.A. from the Kellogg School of Management at Northwestern University in 2007, where he now serves as an Adjunct Professor in the Finance Department.

Elliot Turner is a co-founder and Managing Partner, CIO at RGA Investment Advisors, LLC. RGA Investment Advisors runs a long-term, low turnover, growth at a reasonable price investment strategy seeking out global opportunities. Elliot focuses on discovering and analyzing long-term, high quality investment opportunities and strategic portfolio management. Prior to joining RGA, Elliot managed portfolios at at AustinWeston Asset Management LLC, Chimera Securities and T3 Capital. Elliot holds the Chartered Financial Analyst (CFA) designation as well as a Juris Doctor from Brooklyn Law School.. He also holds a Bachelor of Arts degree from Emory University where he double majored in Political Science and Philosophy.

The content of this podcast is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this podcast. The podcast participants and their affiliates may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated on this podcast. [dkpdf-remove]
[/dkpdf-remove]

Atalaya: Spanish Copper Miner with Strong Balance Sheet

November 13, 2020 in Audio, Equities, Europe, European Investing Summit 2020, European Investing Summit 2020 Featured, Ideas, Small Cap, Transcripts

Santiago Domingo Cebrian of Magallanes Value Investors presented his in-depth investment thesis on Atalaya Mining (UK: ATYM) at European Investing Summit 2020.

Thesis summary:

Atalaya Mining is a Spanish copper company that produced 45ktn in 2019 and will reach 55ktn in 2020.

Its unique producing asset is the Riotinto project, which is an open-pit copper mine in the Iberian Pyrite Belt, 65km northwest of Seville. Riotinto is a legendary mine where the mining giant Rio Tinto Group was born in 1873 (and also the Spanish football), when a British consortium bought the mine to the Spanish State for 92 million of pesetas. Afterwards, the mine changed hands several times until its closure in 2001. The commercial production was restarted in 2016 thanks to the current shareholder base (Trafigura, Yanggu Copper, Liberty Metals & Mining…) and management team (Alberto Lavandeira CEO…).

Atalaya is a mid-high cost producer (AISC 2.2$/lb) but its strong balance sheet is the shelter from any storm.

The copper price should be well above 3$/lb to incentivize new supply which is necessary to fulfil the demand that grows around 2-3% per year and will be boosted by electric vehicle adoption and renewable energy.

All in all, and assuming a copper price of 3$/lb, Atalaya would be trading at EV/FCFF <5x.

The full session is available exclusively to members of MOI Global.

Members, log in below to access the full session.

Not a member?

Thank you for your interest.  Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:

About the instructor:

Santiago Domingo is an investment analyst at Magallanes Value Investors. Magallanes is an independent equity-only asset management, following value investment philosophy and controlled by its founders. Magallanes’ aim is to preserve and increase its clients’ capital by overperforming the market in the long term. Prior to Magallanes, Santiago worked as an equity portfolio manager for Solventis Asset Management, as an analyst for a start-up called OralSurgeryTube and in the Endesa´s financial department. Santiago holds a Bachelor´s degree in Finance and Accounting from University of Zaragoza and a Master´s degree in Institutions and Financial Markets from CUNEF.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

STEF: Dominant Logistics Provider in Highly Fragmented Market

November 12, 2020 in Audio, Equities, Europe, European Investing Summit 2020, Ideas, Small Cap, Transcripts

Jeremie Couix of HC Capital Advisors presented his in-depth investment thesis on STEF (France: STF) at European Investing Summit 2020.

The full session is available exclusively to members of MOI Global.

Members, log in below to access the full session.

Not a member?

Thank you for your interest.  Please note that MOI Global is closed to new members at this time. If you would like to join the waiting list, complete the following form:

About the instructor:

Jeremie Couix is a co-founder of HC Capital Advisors based in Germany. Prior to co-founding HC Capital, he worked at Discover Capital as an investment analyst and later as co-portfolio advisor of the fund Squad Growth. Previously, he worked at FORUM Family Office, a value-oriented investment manager based in Munich. Jeremie graduated from EM Lyon Business School in France with an MSc in Management.

The content of this website is not an offer to sell or the solicitation of an offer to buy any security. The content is distributed for informational purposes only and should not be construed as investment advice or a recommendation to sell or buy any security or other investment, or undertake any investment strategy. There are no warranties, expressed or implied, as to the accuracy, completeness, or results obtained from any information set forth on this website. BeyondProxy’s officers, directors, employees, and/or contributing authors may have positions in and may, from time to time, make purchases or sales of the securities or other investments discussed or evaluated herein.

Highlighted Tweet by wolfejosh

November 8, 2020 in Twitter
MOI Global