What I’ve Read This Week – 1/10/2015

I tend to tweet and retweet articles online throughout the week that I think are of interest.  You can follow me on Twitter if you would like.  I’m also going to try and write a quick weekly recap of articles and stories that I read for the week that I think are of interest to others.  I’ll try and write a little recap as to why I think it’s important, and sometimes I may actually write a separate blog post if I have more to say.   I know that there are a million + 1 blogs that have weekly and daily link fests, so it can’t hurt to add another one! Getting More Out of Saas: Timing is Everything – TechCrunch – This is a great read if you are interested in SaaS companies.  It is written by Nino Marakovic of Sapphire Ventures who has invested in many early to mid growth SaaS companies.  If you are familiar with the host of recent and upcoming SaaS company IPO’s you’ll be familiar with the huge negative cash trends within this sector.  Marakovic covers some of the differences between collecting cash monthly or annually, and the impact on the company’s future. How Do…

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The Basics of Understanding Financial Statements Book Review

The Basics of Understanding Financial Statements Book Review

The Basics of Understanding Financial Statements Book Review The Basics of Understanding Financial Statements: Learn How to Read Financial Statements by Understanding the Balance Sheet, the Income Statement, and Cash Flow Statement by Mariusz Skonieczny This is a pretty simple book, and covers the basics of the three financial statements that investors use to determine the quality and value of a business.  The target audience of this book is definitely a novice in understanding financial statements.  Most of the information can be easily found online on various websites, but it is nice to have everything combined into a single book that can be ready quickly. I would only recommend purchasing this book if you have never read or studied accounting or finance, as this book is just a brief introduction covering the three financial statements and explaining each line item. Purchase The Basics of Understanding Financial Statements: Learn How to Read Financial Statements by Understanding the Balance Sheet, the Income Statement… from Amazon.com  

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Company Turnarounds are Hard

Our conclusion is that, with few exceptions, when a management with a reputation for brilliance tackles a business with a reputation for poor fundamental economics, it is the reputation of the business that remains intact – Warren Buffett   Turnarounds seldom turn. – Warren Buffett I’ll admit that I am interested in finding companies that are in a turnaround.  I feel that if I can locate a company that will be successful, it will result in a high return on my investment.  However, if you are experienced in the markets, or have worked for a company that is in a downward trend, you’ll know that it is very hard to turn a company around.  I have worked for a company that I would classify as in a “death spiral” where revenue and profit are continually decreasing and it is very hard to change the course.  This usually happens with a company that is in a market in decline and being overtaken substitute products or companies thus eliminating any advantages that the company had been relying upon. So, how come I hunt in territories where Warren Buffett and others have warned investors against?  Because for one, I think that it is an…

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100x The Power of Growth in Wealth Creation

100x The Power of Growth in Wealth Creation

Thanks to Ian Cassel from MicroCapClub for tweeting out a link to a paper produced by Motilal Oswal which is a study on companies that have gone on to become 100 baggers within that past 5 years.  A 100 bagger is a company whose share prices as increased 100 times the initial price, or in other words, the company has experienced tremendous growth that has translated into tremendous share price gains. A really great paper analyzing 100-baggers H/T @Anil_Tulsiram http://t.co/Qcoj5cq7Rx Wish someone would do this here in the US #investing — MicroCapClub (@iancassel) December 16, 2014   100x The Power of Growth in Wealth Creation is an excellent read and is under 50 pages long.  The companies used in the study are all in India, however, the study still produces some great insight.  The authors state that they are value investors, and often quote other prominent value investors throughout the paper.  Apparently  this study is written  every year and includes a new 5 year period ending with the current year.  This years study begins in 2009 and spans through 2014. My favorite section of the paper includes this chart: Here the authors have broken down the 5 elements that make up the…

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Smart Links from February 9th 2014

Word Science of Social Media is an infographic created by ShortStack which analyses the titles for highest social media sharing.  The infographic is broken down by Twitter, Facebook and Blog and displays the words in title that get that most shares.  A good read if you want to increase your social media shares. Value Investing goes Back to the Future discusses the apparent change in thinking of value investors (according to Barron’s Conway).  In recent years value investors were concerned with bankruptcy risk and book values but it appears that might have changed to forward-looking metrics like p/e ratios. Vitaliy Katsenelson is always a good read and this week he wrote an article titled What I learned at the Mall about Investing.  It’s a piece about looking back on past mistakes (to try to avoid in the future) with regard to the retail industry. Microsoft, Past and Future by Daring Fireball is an excellent synopsis of Microsoft and what it may hold for the future MicroCapClub wrote up a quick article that contains statistics on micro-cap stocks.  There are 18,726 public companies on all U.S. exchanges (including OTC), with 16,710 companies sporting market caps greater than $1m. Bloomberg’s huge cash…

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Critical Change within Value Investing?

Last month Barron’s published an article by Brendan Conway named Value Investing goes Back to the Future.  In the piece, Conway goes on to try to establish the premise that value investors have changed from using historical prices or backward-looking measures to more risky forward earnings or forward-looking measures. What exactly is value investing? Value investors buy attractively priced stocks, but there are backward-looking measures, as well as forward-looking ones. Lately, the forward measures are winning, and that fact tells an interesting story about what’s driving investors. When value investors start to use forward-looking measures, I immediately begin to think that investors have begun to use more risky predictions on future growth to value stocks and the market overall.  Actions that price stocks/businesses based upon risky future predictions have a high degree of variation and are highly inaccurate.  I’m hoping that value investors are not chasing stocks as prices have risen over the past 5 years since the Great Recession. I’ve noticed that I have caught myself thinking about justifying the stock price of a few companies that I really like, but the price is a little too rich for my liking.  I have an internal voice that tries and rationalize…

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5 Links to read for January 20th 2014

How Momentum Investors Create Narrowing Breadth – As momentum plays run out, investors pile into a smaller pool of stocks thus creating a narrowing breadth of options until no more options are available. No Silver Bullets in Investing – By James Moniter thanks for PMJar.com – A single silver bullet option is not available in investing no matter how much investors try to find it. How To Create Your Own Cryptocurrency – Have you thought about how to create your own Bitcoin?  Well, it’s really not hard to create a new cryptocurrency, but it’s much more difficult to make it successful.  Maybe someone can create an InvestCoin or ValueCoin currency? Why Duolingo Is Hands Down The Easiest Way To Learn A New Language – I’ve started using Duolingo to learn Spanish and find the application very useful.  With a trip last year to Peru and an upcoming trip to Chili I thought it would be useful to learn a bit of the local language. Twelve legendary investors on what to do with your money now – Some recommendations from famous investors on what to do with your money.  I’m not sure I agree with everything here, but it’s interesting to read about the…

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Are Markets Efficient? – Comments by Howard Marks

Howard Marks’ latest memo is a good read and discusses two very interesting topics 1) Role of luck in investing and 2) Are market efficient?  I’m not going to cover the role of luck in investing in this post, but I do believe luck plays a role and luck happens to people who position themselves to take advantage of it. Market Efficiency The theory of efficient markets makes sense, as the more freely and quickly information flows, the market can incorporate that information instantaneously always providing “accurate” pricing using the latest information.  However, humans still play a role in the market and humans can act irrational.  With the proliferation of technology and specialized investment firms, it is hard to find markets that seem deeply undervalued.  In today’s world, I think the markets are close to efficient, but sometimes a wrinkle causes the market to become inefficient.  The latest “wrinkle” occurred during the 2008 Great Recession when the market did not know how to price securities based on the current information.  It is during these times that value investors can make strong positive expected value bets.  However, most of the time markets do not present these types of opportunities. I think that Marks’…

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