Old School Value Nugget Fest (June 20th Edition)

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What We’re Reading in the Media

Gurus

• This Time It’s Different (Howard Marks/Oaktree Capital letter) “Instead, what we’re told is different this time is the relevance of restrictions on future economic and market performance: There doesn’t have to be a recession; Continuous quantitative easing can lead to permanent prosperity; Federal deficits can grow substantially larger without becoming problematic; National debt isn’t worrisome; We can have economic strength without inflation…[etc.]”
• Bruce Flatt & Howard Marks Talk Industry M&A, Credit Market​ (Bloomberg video interview)
  “Bruce Flatt, chief executive officer at Brookfield Asset Management, and Howard Marks, co-founder at Oaktree Capital, discuss the background of Brookfield’s purchase of a majority stake in Oaktree Capital. They speak with Bloomberg’s Erik Schatzker on “Bloomberg Daybreak: Americas.”  

Markets & Investing

• Arlington Value Investor Letters: Five Invaluable Lessons On Value Investing (Macro Ops)
  A synthesis of all of Arlington’s investor letters into 5 key takeaways.
• This Is One Of The Worst Risk/Reward Setups In History (The Felder Report)
  “In all, long-term investors are risking roughly a 60% decline to try to capture a 0% rate of return over the coming decade in the stock market, one of the worst risk-to-reward setups in history.”

Company & Strategy Analysis

• Meatless Future or Vegan Delusions? The Beyond Meat Valuation (Aswath Damodaran)
  Every time I read a detailed valuation by Prof. Damodaran, I learn something. Also, check out his Lecture Note Packet for his Spring 2019 Valuation Class (687 slides! – PDF).
• Moat Erosion Starts Behind the Castle Walls (Intrinsic Investing)
  “Only after the company loses customer focus, gets lazy, or gets weighed down by bureaucracy, do competitors have a chance to destroy the incumbent’s moat.”
• Increasing Returns and the New World of Business (HBR)
  “The assumption of diminishing returns [is that] products or companies that get ahead in a market eventually run into limitations, so that a predictable equilibrium of prices and market shares is reached.” But what if more and more businesses experience increasing returns, i.e., “the tendency for that which is ahead to get further ahead, for that which loses an advantage to lose further advantage.” How would markets work?
• Google Tried to Prove Managers Don’t Matter. Instead, It Discovered 10 Traits of the Very Best Ones (Inc.com)
  I feel like I’ve read multiple articles about this experiment, but in the past, it was informative as a people manager myself. Now, it’s helpful in the context of evaluating a company’s culture and management team. Do they do or support these things?

Podcasts

• John Huber, “Stock Prices Fluctuate Much More Than The Underlying Businesses”(Meb Faber Episode #160)
  John’s investment approach, with high conviction and concentration, resonated with me. He had an interesting take on Wells Fargo (WFC) in here.
• Berkshire Hathaway Annual Shareholder Meetings in Podcast Format (since 1994) (Overcast & RSS link)

Image of the Week

How the tech giants make their billions (Visual Capitalist)
An interesting infographic that’s too big to fit in this newsletter so I’ll just link to it.

Video of the Week

What’s up at Zooplus, TripAdvisor & Berkshire? Fred Liu (Hayden) & Steven Wood (GreenWood) discuss (YouTube)
Fred Liu & Steven Wood on Berkshire, Zooplus & TripAdvisor. 

​Quote of the Week

“We have to practice defensive investing, since many of the outcomes are likely to go against us. It’s more important to ensure survival under negative outcomes than it is to guarantee maximum returns under favorable ones.” 
― Howard Marks, The Most Important Thing: Uncommon Sense for the Thoughtful Investor