Category: Missives

Totally Addressable Markets (TAM) are at the heart of what Charlie Munger calls the biggest euphoria episode he has ever seen in his career. We believe that the coming stock market failure emanating from the over-pricing of the U.S. stock market is closely tied to TAM. What is a totally addressable market? When is it useful to think about TAM? Answering these questions could tell us a great deal about where to be invested in the common stock market over the next five years. […]

[…] Buffett wondered if there was something in the water in Omaha. We know it wasn’t the waters of the Pacific. It was the people and their traditions. They practiced a craft that was learned from others, who had mastered it before them. Like these traditions, great investors have left behind things for us to study and refine the same practices they used, applied in today’s world. This is not dissimilar to what the people groups of the Pacific did. They migrated people, customs and culture toward a destination using mastered skills despite unknowns along those journeys. We are blessed to understand their story that helps contextualize our role from the teachings of people like Graham, Buffett, Templeton, Lynch and other great investors. We know this accomplishment may be against the odds perceived by the western world.

In our recent media engagements, we have been asked if the Russian invasion of Ukraine is the cause of the carnage in the stock market this year. Many of the investors suffering stock market failure and financial media participants are looking for some comfort from the declines. They’d like to think that their portfolios have been hit by a Molotov cocktail and that the stock market will repair itself like it did when the pandemic crushed stocks two years ago. The facts appear to say the invasion is only a catalyst for what was already going on. […]

[…] In my 15-year career in the investment business, I don’t think there has been nearly as much weight to making money as there has been in limiting volatility. This creates a good picture of what investors will focus on. It also leaves the stock markets with a problem. If stocks have more volatility than in the recent past, investors will pay less for a broad basket of stocks like the S&P 500 Index, regardless of its underlying economics. Again, they’ve only been trained to pay for or reward strategies and assets with less volatility. […]

We operate under the premise that alpha can be generated by stock selection, courage, concentration, and long-duration holding periods. In today’s missive, we will talk about long-duration holding periods through the lens of our current concentrated position in the oil industry. […]

We were watching CNBC recently and an analyst mentioned what practically nobody besides us has said. She called Amazon’s (AMZN) entry into the grocery business a “failed experiment.” Amazon has been very successful with its Prime subscription model in other areas. Why do experiments usually fail, even among companies which have made other experiments succeed? As the stock market grieves the mass destruction of capital in the early stages of the tech/growth bear market, let’s delve into this very important subject. […]

Ben Graham is ascribed as being the father of value investing. The intellectual framework he brought to investors was using the available accounting to measure value of a business. His way of measuring was book value, the total assets minus all liabilities. By figuring out this number, he could then divide this metric by the total shares outstanding to understand how much book value per share (what some may call net worth) a company had versus what the price the shares were trading for in the stock market. […]

[…] This brings us to Chevron CEO, Mike Wirth. So far, he has neither joined with the European oil producers, who have drunk the ESG Kool Aid. Nor has he led the company to take full advantage of the stock market circumstances/low interest rates and followed up on what he believed was a “perfect fit” nearly three years ago. He needs to figure out what Chevron is going to be. Will he be like the European major oil producers or will he seek to be an oilocrat like Harold Hamm? […]

The beginning to 2022 has been dark to say the least. The year has begun with losses in the index with much deeper red ink spilled across many recently exciting investments. The ominous feeling of the moment reminds me of the suspense I first felt watching The Silence of the Lambs. It was creepy, dark and intellectually intriguing to figure out what would transpire next. Allegorically, the final scene of that movie is like the first week of stock trading in 2022. […]

Most professionals who employ our strategy are wide-asset allocators. We fill a sleeve in the U.S. stock ownership category and for most, that is in the large-cap space. We compete with other value funds and ETFs, which represent themselves as value strategies. Using the James 1:27 test, how do we stack up at the beginning of 2022 with other value strategies and large-cap managers that are portrayed as value managers? […]