One of the things I absolutely hate about Warren Buffett is that he has a ton of quotes that I’ll hear and think “o that’s obvious; how trite”…. and then a few years later I’ll stumble on something and Buffett’s quote will click for me and I’ll think “Gosh darn it; there was so much wisdom in that one damn quote. How does he keep doing this?”
Instead of discipline, I recommend Halo Top. Awesome.
I think you're right that many value investors experienced a lot of FOMO during growth and meme stock outperformance, which for some led to buying into compounder bro type narratives too easily. However I can also see how investors convinced themselves at the time that they have incredible "discipline" in focusing on a long-term value approach to business quality, backed up by equally many Warren/Charlie homilies ("time is the friend of the wonderful business", "our favorite holding period is forever", etc).
In many/most cases genuine business quality was just not there and the apparent compounders were genuine Ponzis. But part of the story is just that forecasting the value of future growth is very difficult and uncertain; and a low probability of massive distant profits seemed to have a lot more present value in a zero-rate environment than it does now. There are likely a few genuine compounder babies being thrown out with the Ponzi bathwater, but they're honestly harder to predict with confidence then we'd all like to think.
Anyway, pass the Halo Top. Too bad Wells Enterprises is private.
I also have no discipline around ice cream so I try to avoid buying it, but hopefully I could avoid eating ice cream that Andrew had dipped his toe into, especially after a sweaty PTON workout.
PTON was a classic hedge fund manager stock. Hedge fund managers are wealthy and competitive and all worked from home when the pandemic hit, so they all bought PTONs. Then they all bought the stock after discovering that all their hedge fund bros had also bought PTONs. What could go wrong? EVERYONE was buying PTONs!!
Groupthink can preserve hedge fund stocks way past their expiration dates, but if the wheels don't come off (mangling infants in their conveyor belts) hedge fund groupthink can permanently inflate valuation multiples, contributing some degree of buoyancy in volatile markets.
Why is the default that you say “yes” to sitting in cash?
What hurt me was the fear of sitting in cash during unprecedented money printing. In retrospect, I would’ve lost less to inflation than I did in securities, but eating a ~9% loss to inflation is no joke either.
Cashflowing companies are so cheap right now, with a clear path to 2x, that it makes it hard to allocate capital to non-profitable growth companies, but if I liked $RNLX at $30, then now at $3 when NOTHING has changed negatively about the business or its prospects I should be loading up. I think that now is the time to back unprofitable growth companies that have catalysts uncoupled from a recession, and access to more capital. But there is no Buffet quote to recommend that, so it is probably the road to ruin!
I have the same sweet tooth issue. I tried switching to cereal, but that descended into putting cookies on top. So yes zero is the only solution.
Enjoyed reading this. I suspect most of us are having a real hard think this year about process. Amazing how price action can drive perception.
On the ice cream front, have you ever tried dishing out a couple scoops and putting the carton back in the freezer? I also have a weakness for ice cream and found this worked for me.
Very good said!We all make misjudgments. And a good quote from Buffet As Buffett said at the 2000 Berkshire Hathaway (BRK-A)(BRK-B) annual meeting: "The first investment primer that I know of, and it was pretty good advice, was delivered in about 600 B.C. by Aesop. And Aesop, you'll remember, said, 'A bird in the hand is worth two in the bush.'"
Weirdly I want to do more research into ponzis now. Also, I am looking at ESG Global Impact Capital. Any tips for researching an asset management company? I know that since the assets are mostly people, I heard people say the line “the ROE could be infinity and beyond,” there is operating leverage because of fixed costs, and if revenue drops, the bottom line drops like a stone. But what else am I missing here? Any known accounting shenanigans with these companies? And also, if the assets are people, how can you do due diligence on them? How could I call someone who knew them in college or something and ask: was this person a douche-canoe? Also, what might signal the employees (read assets) can't leave? I remember a company Michael Burry invested in, and it worked because all the employees were Chinese Nationals, and therefore the most important asset could not leave. I think it was a software company. Also, thank you so much Andrew, for the article. :) Happy Bargain Hunting, and stop eating ice cream.
Instead of discipline, I recommend Halo Top. Awesome.
I think you're right that many value investors experienced a lot of FOMO during growth and meme stock outperformance, which for some led to buying into compounder bro type narratives too easily. However I can also see how investors convinced themselves at the time that they have incredible "discipline" in focusing on a long-term value approach to business quality, backed up by equally many Warren/Charlie homilies ("time is the friend of the wonderful business", "our favorite holding period is forever", etc).
In many/most cases genuine business quality was just not there and the apparent compounders were genuine Ponzis. But part of the story is just that forecasting the value of future growth is very difficult and uncertain; and a low probability of massive distant profits seemed to have a lot more present value in a zero-rate environment than it does now. There are likely a few genuine compounder babies being thrown out with the Ponzi bathwater, but they're honestly harder to predict with confidence then we'd all like to think.
Anyway, pass the Halo Top. Too bad Wells Enterprises is private.
I also have no discipline around ice cream so I try to avoid buying it, but hopefully I could avoid eating ice cream that Andrew had dipped his toe into, especially after a sweaty PTON workout.
PTON was a classic hedge fund manager stock. Hedge fund managers are wealthy and competitive and all worked from home when the pandemic hit, so they all bought PTONs. Then they all bought the stock after discovering that all their hedge fund bros had also bought PTONs. What could go wrong? EVERYONE was buying PTONs!!
Groupthink can preserve hedge fund stocks way past their expiration dates, but if the wheels don't come off (mangling infants in their conveyor belts) hedge fund groupthink can permanently inflate valuation multiples, contributing some degree of buoyancy in volatile markets.
https://www.instagram.com/midtownuniform/
Why is the default that you say “yes” to sitting in cash?
What hurt me was the fear of sitting in cash during unprecedented money printing. In retrospect, I would’ve lost less to inflation than I did in securities, but eating a ~9% loss to inflation is no joke either.
Cashflowing companies are so cheap right now, with a clear path to 2x, that it makes it hard to allocate capital to non-profitable growth companies, but if I liked $RNLX at $30, then now at $3 when NOTHING has changed negatively about the business or its prospects I should be loading up. I think that now is the time to back unprofitable growth companies that have catalysts uncoupled from a recession, and access to more capital. But there is no Buffet quote to recommend that, so it is probably the road to ruin!
I have the same sweet tooth issue. I tried switching to cereal, but that descended into putting cookies on top. So yes zero is the only solution.
Enjoyed reading this. I suspect most of us are having a real hard think this year about process. Amazing how price action can drive perception.
On the ice cream front, have you ever tried dishing out a couple scoops and putting the carton back in the freezer? I also have a weakness for ice cream and found this worked for me.
Very good said!We all make misjudgments. And a good quote from Buffet As Buffett said at the 2000 Berkshire Hathaway (BRK-A)(BRK-B) annual meeting: "The first investment primer that I know of, and it was pretty good advice, was delivered in about 600 B.C. by Aesop. And Aesop, you'll remember, said, 'A bird in the hand is worth two in the bush.'"
Very nice post, Andrew! I agree about eliminating research into obvious Ponzis. Saying "NO" is definitely the hardest part of investing.
Weirdly I want to do more research into ponzis now. Also, I am looking at ESG Global Impact Capital. Any tips for researching an asset management company? I know that since the assets are mostly people, I heard people say the line “the ROE could be infinity and beyond,” there is operating leverage because of fixed costs, and if revenue drops, the bottom line drops like a stone. But what else am I missing here? Any known accounting shenanigans with these companies? And also, if the assets are people, how can you do due diligence on them? How could I call someone who knew them in college or something and ask: was this person a douche-canoe? Also, what might signal the employees (read assets) can't leave? I remember a company Michael Burry invested in, and it worked because all the employees were Chinese Nationals, and therefore the most important asset could not leave. I think it was a software company. Also, thank you so much Andrew, for the article. :) Happy Bargain Hunting, and stop eating ice cream.
My sentiments exactly