Newsletter - January 18th, 2025

AuditorInvestor

Jan 182 min read

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, below tangible equity, etc.) but don’t meet our investment criteria - and our reasoning.

This may help you avoid some ‘value traps’, and stocks that aren’t sufficiently attractive compared to opportunities available today.

For reports of stocks that pass our quantitative and qualitative standards:

Join Here

David Giroux - T Rowe Price (Part Two)

David Giroux is an investment manager at T. Rowe Price. He takes a contrarian approach to invest opportunistically across stocks and bonds - part two of his interview below:

3:00 Short-term thinking

Over the last 25-odd years, good quality long-term investing has "gone by the wayside". The market seems more focused on short-term thinking and momentum trading. This has increased market inefficiencies - leading to opportunities for the patient investor.

Giroux says there are opportunities to invest in good companies that are going through near-term challenges due to lesser competition. We include such companies in our reports.

5:15 Competitive advantage

As a small investor, your competitive advantage is to exploit inefficiencies among smaller stocks. We are focused on such opportunities where the competition is more limited than larger stocks (also see 18:00 below).

Your job is to outperform the market over your investing lifetime (typically exceeding five years) - such a time horizon gives you an enormous advantage over other market participants when buying stocks.

8:30 Buying indicators

When markets are down, the VIX is high, and there's insider buying - it's generally a strong buy signal for long-term investors.

11:00 Capital allocation

Capital allocation is crucial in selecting investments. As Buffett stated in his Berkshire letters, CEOs get to their positions mostly due to operational excellence - whereas most corporate value during the CEO's tenure is created (or destroyed) by his/her capital allocation decisions.

If management can't allocate capital efficiently, they should distribute as much cash to shareholders as possible. We seek such companies; and we don't assign much value to cash hoarders (because we can't fix sub-par processes).

15:45 Indexing

Indexing forces you to buy mediocre companies. Why not make an 'index' of the most undervalued companies you can find? This is the approach we take.

If you're investing around the world (with a universe of ≈50,000 stocks), you can easily find dozens that fit your criteria - no matter how stringent.

18:15 Have a process

Don't be haphazard when picking stocks. Adopt a process that systematically exploits market inefficiencies.

With the stocks covered in our reports, you can form portfolios that achieve this objective.

To read these reports:

Join Here

Have a great week!

Newsletter - January 18th, 2025

Dear Reader,

Attached is a recent list of stocks that passed value screens (e.g. below net current asset value, below tangible equity, etc.) but don’t meet our investment criteria - and our reasoning.

This may help you avoid some ‘value traps’, and stocks that aren’t sufficiently attractive compared to opportunities available today.

For reports of stocks that pass our quantitative and qualitative standards:

David Giroux - T Rowe Price (Part Two)

David Giroux is an investment manager at T. Rowe Price. He takes a contrarian approach to invest opportunistically across stocks and bonds - part two of his interview below:

3:00 Short-term thinking

Over the last 25-odd years, good quality long-term investing has "gone by the wayside". The market seems more focused on short-term thinking and momentum trading. This has increased market inefficiencies - leading to opportunities for the patient investor.

Giroux says there are opportunities to invest in good companies that are going through near-term challenges due to lesser competition. We include such companies in our reports.

5:15 Competitive advantage

As a small investor, your competitive advantage is to exploit inefficiencies among smaller stocks. We are focused on such opportunities where the competition is more limited than larger stocks (also see 18:00 below).

Your job is to outperform the market over your investing lifetime (typically exceeding five years) - such a time horizon gives you an enormous advantage over other market participants when buying stocks.

8:30 Buying indicators

When markets are down, the VIX is high, and there's insider buying - it's generally a strong buy signal for long-term investors.

11:00 Capital allocation

Capital allocation is crucial in selecting investments. As Buffett stated in his Berkshire letters, CEOs get to their positions mostly due to operational excellence - whereas most corporate value during the CEO's tenure is created (or destroyed) by his/her capital allocation decisions.

If management can't allocate capital efficiently, they should distribute as much cash to shareholders as possible. We seek such companies; and we don't assign much value to cash hoarders (because we can't fix sub-par processes).

15:45 Indexing

Indexing forces you to buy mediocre companies. Why not make an 'index' of the most undervalued companies you can find? This is the approach we take.

If you're investing around the world (with a universe of ≈50,000 stocks), you can easily find dozens that fit your criteria - no matter how stringent.

18:15 Have a process

Don't be haphazard when picking stocks. Adopt a process that systematically exploits market inefficiencies.

With the stocks covered in our reports, you can form portfolios that achieve this objective.

To read these reports:

Have a great week!

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