What I’ve Been Doing
As you may have noticed over the past several weeks/months I haven’t posted any company analysis articles. Since finishing up and publishing the book in September I have been back searching for companies to write articles about and potentially to invest in. Up to this point I have only been able to add companies to my watch list because everything I have found has been either crap or if it has been a company I want to invest in (some even with some substantial competitive advantages) have all been overvalued. I have searched in countries around the world, on the OTC markets, at higher market caps than I usually look at, spin offs, ADR’s, etc and here are my observations thus far. The following does not mean that I think the market will crash anytime soon.
- Every single company I have found that I want to invest in is overvalued. Most just marginally but I did find a company in Japan that I estimated to be worth AT BEST $20 a share and it was selling for more than $100 a share. Companies with some kind of competitve advantages that I have found and want to invest in are overvalued in comparison to the other cigar butt type companies that I will mention next
- The cigar butt type companies with high cash, low debt, marginal to poor profitability, no moats that I would invest in if they were undervalued enough have been up to this point generally fairly valued in my opinion.
- The companies that I have found to be undervalued enough for me to invest in have all been terrible companies with very low to no cash, high debt, severely declining businesses, unprofitable, Chinese companies, etc that I will likely never touch.
- Markets, or at least individual companies, around the world are in my estimation fairly valued or overvalued at least at the micro level. I have searched in the US, Europe, Asia, and South America for companies to invest in and the companies around the world have all fit into one of the three above categories. Most in the fairly valued to slightly overvalued range.
As you know if you have read this blog for any amount of time I like to put my money where my mouth is, buy the companies I find to be good investments, and write analysis pieces about them. I haven’t even found any particularly egregious or interesting companies to write negative articles about either like I did with Wendy’s in 2012, and Koss last year. The Japanese company I found and alluded to above was a very well run company that I would possibly invest in if it weren’t so overvalued so I didn’t feel a need to write negatively about them.
The reasons above are why I have not been writing more on this blog which I frankly hate to not be able to do but I will not write half-hearted, vague, non quality company analysis articles just to keep the flow of content going. I also will not write my thoughts on other general investing, the process of investing, and other value investing topics because people like Oddball Stocks, Wexboy, CSInvesting, The Red Corner Blog, and others write much better than I can about those kinds of things.
Building Wordly Wisdom and What I Am Doing
In December I decided that I needed to stop banging my head against the proverbial valuation wall since I have now built up a watch list of around 25 companies. Far more than I ever would invest in at one time and already far more than I want to keep track of at one time. For the past two years I have spent nearly 100% of my time either learning about investing or writing the book. Since December I have decided to spend about 50% of my time searching for companies, adding and discarding companies from my current watch list, so that only the best companies are on there when valuations do become better. The other 50% of the time I have caught up on some much needed reading that I severely neglected over the last two years while I was building my value investing knowledge, investment processes, and writing the book.
The below has been done in the last three weeks and is an example of what I will continue to do while awaiting a market crash and investment opportunities.
4 books read:
- Poor Charlie’s Almanack
- Guns, Germs, and Steel
- Only The Paranoid Survive
~500 companies evaluated at at least a minor level, vast majority discarded as only 2% of companies I decided to do further research into.
10 company annual reports and financials read
5 companies valued.
4 companies added to watch list
The above list does not contain anything like articles that I have read on the internet.
In addition to this blog being about company analysis, teaching, and learning about value investing, it is also a bit of a journal so that I can keep track of things that I have done, learned from, and to look back to see where I could have improved. In that vein I periodically plan to update the list above of things I have done to keep track of where I have been.
Until the market crashes I will be doing the above, as Mr. Munger puts its, building my wordly wisdom, among other things like posting links that I have learned from, and depending on how long it takes for the market to crash go back to learning Mandarin again. I have a couple ideas in mind of things that I can do to learn and practice in the meantime and will share any of those if they come to fruition. I will also be giving away some of the books I have read and will announce the first giveaway soon.
For now though I am going to get back to my current research list of OTC’s and ADR’s.