January 29, 2021 - I ask myself why I missed GameStop as such a low risk/high reward opportunity because it was in plain sight for me.

I knew the company as I've bought many video games there when I was younger.

I saw that they did have lots of cash on their balance sheet that exceeded their financial debt which didn’t include leases on their retail stores though.

I saw that Michael Burry, who has a great track record as a value investor, was buying the company for his fund and it had lots of signal value because it was one of his larger positions.

What I didn’t though see was the short interest and how this could be such an important catalyst.

This tweet does a great job of giving the backstory going back over a year of what led up to the epic short squeeze in GameStop:


And this tweet does a great job of figuring out the problem of why Robinhood limited trading for its clients:


The reasoning for what made GameStop such a high reward/low risk bet was the high probability of a short squeeze possibly happening.

I don’t remember when exactly the short interest exceeded 100% but my guess was it's been pretty high for a while. Probably at least 50% meanwhile I consider 20% short interest high.

And as a learning exercise I do remember very well why I didn't buy the stock (a silly decision of course with hindsight being 20/20):

1. GameStop did have a lot of cash on hand but they also had leases on their stores which make up a large portion of their business. I don’t recall if they were capitalized on the balance sheet at the time when I was looking at it but leases do complicate the balance sheet if they aren’t capitalized since leases do very much act as debt - there is a consistent cash payment over a term, with a maturity date and depending on the quality of the borrower, the leases can require some form of collateral.

2. The company was and still is most likely a melting ice cube where their business will slowly fade toward bankruptcy. They did just recently make a strategic decision to hire some directors from chewy.com to help their online business but if video games are sold directly on the console to consumers and can be downloaded very quickly by cutting out the middleman, and if GameStop can’t adapt to this which I don’t think they will, then they will be toast.

3. I was looking at this company during coronavirus when much of the economy was shutdown making it difficult for their stores to remain open. I do recall them making "contactless" adjustments in spite of the mandated lockdowns and I viewed this as more of them being closer to their end as they were defying the shutdown mandates.

4. Lastly, I didn’t view this as a capital compounder but a value investment at best similar to Warren Buffett’s cigar butt investments. I thought GameStop could maybe survive part of one more business cycle before the full transition to direct video game sales over the internet but that in the end leads to .50 going to $1 instead of capital compounders which goes from $1.30 to $5 or more.

In the end, this is a great case study in how markets can become irrational and inefficient at times. The stock didn't really do anything for at least a year but when Ryan Cohen from Chewy.com joined GameStop's board that was the huge catalyst that the longs needed.

Perhaps, the short squeeze will force Wall St. to have to deleverage from their more high quality names thus resulting in lower prices for better companies.... or maybe this is just my wishful thinking.

But as I write these thoughts down, it makes me think more and more about how unpredictable the world is and how poor we humans are at predicting it. Therefore, putting yourself in the right position, not just in the markets but in real life as well, to give yourself big opportunity and less risk can go a long way.


December 28, 2020 - AT&T did a good job refinancing a lot of their debt during the depth of the pandemic. AT&T originally had the following debt schedule before they were able to refinance:

2020: $11B

2021: $11B

2022: $12B

2023: $10B

2024: $11B

2025: $11B

They were then able to refinance to the debt schedule below:


2020: $2.3B

2021: $2.8B

2022: $6.5B

2023: $7.7B

2024: $7.8B

2025: $6.4B

This schedule is a lot more manageable over the short-term as it removes much higher liquidity needs over the next 5 years. 


Investors should continue to see a 7% dividend yield at the current price but very little if any at all capital appreciation until AT&T can put themselves in a better financial position as their business is seeing headwinds from the coronavirus due to delays in studio production, revenues from their movie releases (Tenant is an example), accelerated loss of cable subscribers and satellite TV subscribers, and other areas such as T-Mobile gaining market share in mobile subscribers, Spectrum entering the mobile phone market and high fixed costs to maintain their networks and infrastructure.


In addition, the previous CEO walked away with an incredibly large amount of money despite taking on lots of debt which included wasting lots of capital by overpaying for Direct TV. The new CEO is not an outsider but an insider who worked closely with the old CEO who wasted this money on overpaying for Direct TV and by putting AT&T in the position it is in today so it will remain to be seen if the new CEO can put AT&T in a much better position going forward. 

AT&T doesn't have much growth and I expect them to continue to use a lot of their free cash flow on debt repayment and dividends and I don't expect them to raise the dividend over the next year. They will continue to explore divesting non-core assets to raise cash to lower their debt.

I also expect 5G and cap-ex to consume a lot of their operating cash flow.

I am hesitant to add to my position unless the stock price drops to $25-$27 which would give me a higher margin of safety to compensate for their high net debt position, uncertainty on the new CEO and large capital requirements to run the business.  


December 21, 2020 - Are we in a disruptor bubble?

With 0% interest rates since March and with interest rates close to zero for the last decade following the Great Recession plus all of the debt monetization (QE), the popularity of venture capital, huge innovation in technology culminating from the internet in the 90's and now with the surge of software, cloud, data, networks, cybersecurity and other tech companies, plus the popularity of entrepreneurship from unicorns and social media, it looks like we would have all the ingredients for new innovative companies that would threaten the incumbents (disrupt) to create a disruptor bubble.

Then the coronavirus happened which led to an influx of new investors (mostly retail) who received stimulus money and had more time due to government mandated shutdowns and work-from-home to trade stocks.


A lot of the new investors I think realized that the market was in a long bull market from 2010 to the start of 2020 so they waited for an opportunity which finally came in March 2020 when markets around the world were plunging. I don't believe this new influx of money has left the markets and there has also been a lot of money added by the Fed.

It seems like everywhere we look whether its software, cloud, semis, data, cybersecurity, disruptor companies are trading at price-to-revenue multiples of at least 10x.

And I remember thinking back in March and over the summer that I might be able to get Airbnb at a fair valuation like 4-5 times revenue; I was very mistaken. After the first day of trading Airbnb doubled which is a return of 100%... in one day. The stock now trades at a multiple of around 20x revenue.

Has disruption on such a large scale happened before in our history? I would say of course to this question.

The times that come to mind are the 1920's with the innovation of the radio, the huge growth in automobile companies, the innovation of household appliances and I think of the 1990's with the commercialization of the internet. The invention of the railroads was probably another time in the mid 1800s.

I then think, so we have had huge disruption before that has led to large run ups in asset prices and what happened next?

Well there was the collapse of railroad stocks in Ireland and Britain (Railway Mania), the Great Depression that followed the 1920's boom, the Dot Com bubble that led to around a 50% drawdown from 2000-2003 in the S&P (the 9/11 terrorist attack contributed as well to the pessimism toward equities). And the drawdown in the NASDAQ with its 78% drop was much greater than the S&P 500.

So what happens next?


If we vaccinate everyone and develop immunity, will the reopening of the whole economy pull over-allocated funds from "disruptor companies" to the "old, boring incumbent companies?", will there be setbacks in distributing the vaccine and/or getting rid of the threat of the coronavirus, will there be lots of unexpected inflation over the next 2 years, will we be in a similar position to Japan after the late 1980's, will there be global conflict that leads to war?

I don't know but if the Fed continues to have very easy monetary policy with 0% interest rates then they can probably keep the disruptor/coronavirus bubble inflated for longer similar to the 1997-2000 period.

For now, I'll wait on buying the "disruptor" companies but will continue to research since I believe that a much better opportunity will come to buy.

And I just realized that as I'm wrapping up my thoughts on this, Tesla will be included in the S&P 500 index later today at the following valuation:

P/S: 23.5x
P/E: 289x 


December 20, 2020 - ASML makes systems and equipment that use extreme ultraviolet light to put circuit patterns on a semiconductor. ASML is paramount to the process of making semiconductors and they're a supplier to all of the big semiconductor manufactures: TSM, Intel and Samsung.

Problem ASML Solves:

In order for technology to progress to the next level, new industries such as AI, robots, internet of everything need more advanced chips. This requires the advancing of Moore's law of doubling the amount of transistors on the same area of silicon roughly every 2 years. ASML's photolithography systems allow Moore's law to continue which in turn allows technology to continue to advance by using extreme ultraviolet light (EUV) to increase the amount of transistors on the same area of silicon.


ASML has a moat due to their expertise in this area. Their 2 closest competitors are Canon and Nikon but according to Gartner, ASML has 88% of the lithography market. What ASML does is incredibly hard to do and here is are 2 quotes from Brinton Johns and Jon Bathgate of NZS Capital in an interview with Shane Parrish that sums this up:

"These are some of the most complex machines humans have ever built. They're virtually impossible to reverse engineer. And in the case of something like photolithography which allows Moore's law to go ahead, there's only one company that builds the next generation machine that is keeping Moore's law [on] track. It's ASML in the Netherlands."

"ASML, which literally has a monopoly on photolithography, which is probably one of the most kind of complex processes that humankind has ever engineered. I mean, it literally is more difficult than putting a man on the moon or building a 747 or you kind of pick what."

And ASML's very high returns on invested capital over the last 5 years support this:


 2019    2018   2017   2016     2015
21.5%   22%    20%   17.8%   19.6%

Financial Position:


ASML is in a very solid financial position with cash of $4.1 billion and short-term investments of $1 billion and total debt of $5.37 billion.  This results in a net debt position of $200 million which isn’t concerning to me since ASML has been earning free cash flow of $1.7B in 2017, $2.9B in 2018 and $2.8B in 2019.



Valuation is very high in my opinion and this keeps me away from buying at the current price. If the price comes down, I would be more interested in initiating a position. I would be more interested in buying at a P/S ratio of 5-6x and/or a P/E of around 25x. 


TTM P/S:     12.3x

Forw P/S:    10.8x

TTM P/E:     51x

Forw P/E:    40x

TTM P/FCF: 66x



The semiconductor industry has historically been a cyclical industry and although the internet of things and the ubiquitous presence of electronics being so embedded in our daily lives makes this seem unlikely, this can’t be ruled out.

The implementation of new chips can be complex and can result in delays which would affect ASML since the majority of their revenues come from 3 big suppliers – Samsung, TSM and Intel.

Any risks from ASML’s own suppliers would affect ASML. Their biggest supplier is Zeiss who supplies optical systems to ASML for their lithography equipment.

Although unlikely at the moment due to the complexity and difficulty, the risk of another competitor developing the same technology can't be ruled out also. 

The technology war going on between the US and China has put ASML in the middle since the Netherlands government has limited ASML's ability to sell their equipment to SMIC. Maybe not a big risk now but should be kept in mind since this could limit ASML's future revenue growth while the company is currently selling at a multiple that reflects lots of growth and also ASML is also a big supplier to Taiwan Semiconductor.


September 13, 2020 - "The current return on equity is not the correct "normalized" return on equity. If I can buy low P/E and high normalized ROE, that combination is good. I would want to do that too. When you do current high ROE as a metric, you will tend to pick everything at a cyclical peak. The earnings are above trend so the P/E is low and has a high ROE. You will be buying every commodity or manufacturer (like today, February 2, 2005) at its cyclical peak. Be careful of blind screens."


                                                                                                                                                                                                     - Richard Pzena

Source: Joel Greenblatt Special Situation Investing Classes at Columbia Business School


September 8, 2020 -  Decreased my position in PayPal a little this morning. Although I believe Paypal is a great business, I believe the valuation has gotten too high with a price-to-ttm sales ratio of 12 and ttm P/E ratio of 89 or 50 times forward earnings.

The overall future for the company is bright in my opinion but I view the market - mostly certain tech stocks of the market- as pretty overvalued and the sizable drops in the NASDAQ over the last 5 trading days has me believing that the large run up in the market will revert the opposite way now.

I did some reading over the weekend that influenced my thinking most likely.


One article was from Ray Dalio in an old Bridgewater Daily Observation article from January 4, 2000. In order to look at where he expected the market to go over the next decade (2000-2010), he had to look back at previous decades going back to 1920. He noticed that the previous decades looked nothing like the next decade.


With that being said, it doesn't make me so optimistic about 2020-2030. After all, we've had a huge bull market following the 08-09 Great Recession with little growth and low inflation but I did feel the temperament of the market was pretty cautious and calm. It did start to get a little bit more exuberant from 2016-2020 though but I don't think it's been anything like what we've seen in the last 4 months where there has been so much day trading and speculating.


And with all this money printing and my thoughts recently in memory from Ray Dalio's paper I just read over the weekend, my guess is we have another opposite decade for the next one (2020-2030) than the previous one (2010-2020) with a low returning stock market and if not much inflation in the beginning of the decade then the beginning of inflation that really starts to bear it's ugly head sometime from 2027-2029.

My other thought was from the investment manager of Absolute Return Partners in London, Niels Clemen Jensen, whose letters have become some of my favorites to read. I posted an interesting scatterplot that he showed in the images section.

It basically shows what is pretty intuitive - the higher the starting P/E multiple for the S&P 500, the lower the ensuing returns will be over the next decade. What might not be so intuitive was how good of a predictor this was for what the market will do over the next 10 years. Well, the r squared (also known as the correlation coefficient) was .8945 - pretty damn high. And although it's hard to predict earnings due to the effect from the coronavirus, Niels mentions that it seems like the P/E multiple for the S&P 500 right now is around 30 or a little above.

So this has got me wondering about what the market might do next and since I've seen certain tech stocks pretty overvalued over the past couple months I decided to take some profits on PayPal.


September 3, 2020 - Revisiting Wells Fargo:

This position hasn't fared well since I was buying it last year between 40 and 45.

The coronavirus has resulted in higher unemployment, higher bankruptcies, higher delinquencies, lower incomes and the Fed's response has resulted in lower interest rates.

Lower interest rates mean lower interest income for Wells Fargo and the others mean higher credit provisions as Wells estimates what their losses are likely to be on their loans.

In addition they have an asset cap that is preventing them from growing their assets to make up for lost revenue from lower interest income.

I still see value in this bank over the long term though and have added to my position to reduce my cost basis.

I find it more undervalued then last year when I was buying it due to:

Wide moat due to switching costs and economies of scale

Price to tangible book value of .82 and a price to book value of .64.

Cyclically depressed earnings that could increase by a large amount in 3-5 years following the current increases in credit loss provision as vaccines and cures help the world get out of the pandemic.

Lots of stimulus from governments around the world could result in inflation which could increase interest rates and result in higher interest income. At the moment this doesn't look likely though as interest rates are expected to remain around 0% for quite some time.

Some negatives to this thesis are:


If interest rates do remain close to 0% like banks in Japan have done for a long time this would result in a value trap. 

Warren Buffett has been substantially reducing his position in Wells for some time. Although many other money managers have increased their position, it's hard to believe that there is an investment manager better at valuing the big banks and has more information about Wells than Warren does. 


June 11, 2020 - When I first started investing a while ago I bought a deep-water oil driller called Transocean.

What have you learned from this mistake?

That just because a stock is beaten down, it doesn’t mean that it will go back up.  When this position was down 67% you told a friend that it doesn’t make sense to sell now at the cyclical bottom. You were wrong. Cyclical stocks trade on fundamentals and economics just as any other company does over the long-term and as you can see there is no guarantee that a cyclical company at or near the bottom of its cycle will come back. And if it does, waiting for it to come back could become a huge opportunity cost.

Just because a company sells on a low price to sales, low price to earnings, low price to book, high div yield and has a big-name money manager buying shares, doesn’t mean the stock is a buy. Qualitative matters more than the quantitative.

You knew this was a mistake 5 or 6 years ago when you wrote about this being a mistake in MOI. Had you sold it the second you knew it was a mistake then you would have saved yourself more capital.

Spend more time understanding the business, how it makes money and what its risks are. Reading the risks section in the annual report can help with this. Also, take more time in understanding the business as opposed to buying too quickly.

Taking a loss can be beneficial to offset gains and lower taxes.


April 21, 2020 - The passage below is transcribed from the Fairfax 2019 annual group meeting hosted online on 4/16/20. Prem Watsa and Andy Bernard don't see a big effect from COVID 19 on their policies. This is a really good sign for shareholders but I have a feeling that governors and lawyers will fight for them to have to pay and this will likely go on for 1-2 years which may keep the stock price range bound. I'm still bullish though and see an opportunity for long term shareholders. The investment portfolio had some big losses though so need to keep an eye on these companies, specifically Atlas Corp. 

Andy Bernard: This is of course is the headline issue I would say with the insurance industry today. How is business interruption going to impact our losses, our experience. In general, it’s our view and certainly the view of the industry that business interruption requires there to be physical damage to property in order to be triggered. That is the standard coverage in the industry for business interruption and that is the coverage that our companies in general provide. It would therefore require an overturning of the contracts in order to open them up to provide broad based business interruption coverage for losses arising from COVID 19. There are isolated exceptions to that general approach. In Fairfax those are very isolated and limited and are not a source of major concern for us. So we will monitor, we are monitoring, we are involved in some of the industry groups that are engaged in this debate going on in the United States but our view, our feeling, is that we are on very strong ground with the position that this is not covered under the general business interruption coverages that are sold in the marketplace.

Prem Watsa: And Andy just to add to that, of course, in the United States with lawyers and governors trying to overturn this and say you have to pay irrespective, as Andy says, we feel very comfortable in saying to you that it is highly unlikely that we will have to pay any significant amounts of money but if the governors try to change this, some of them are retroactively, this will go we think eventually to the supreme court and contract law is very specific. Contracts in the United States are sacred. And we think just like it is in the UK it is highly unlikely that it will be broken but it is an item that is being discussed in the [inaudible] industry.

Source: https://www.gowebcasting.com/events/fairfax-financial-holdings-limited/2020/04/16/fairfax-financial-holdings-limited-annual-meeting-of-shareholders/play


April 7, 2020 - Howard Marks, with the help of his son, Andrew, added the following information to his most recent memo on market swings during the last two recessions which will be very helpful to keep in mind over the next 3-6 months. 

"Markets rarely clear after one massive decline. In 15 bear markets since 1950, only one did not see the initial major low tested within three months... In all other cases, the bottom has been tested once or twice. Since news-flow in this crisis will likely worsen before it improves, a repeat seems likely." This quote is from Gavekal Research's Monthly Strategy

09/01/00-04/04/01    -27%

04/04/01-05/21/01    +19%

05/21/01-09/21/01    -26%

09/21/01-03/19/02    +22%

03/19/02-10-09/02    -33%

10/09/07-03/10/08    -18%

03/10/08-05/19/08    +12%

05/19/08-11/20/08    -47%

11/20/08-01/06/09    +25%

01/06/09-03-09/09    -27%

Although right now it feels like the bottom has already been reached on March 23rd for the S&P after the market has risen 19% since then and FOMO emotions arise, history says that running out and using up all of my dry powder right away probably isn't the most prudent action to take. 

Source:  https://www.oaktreecapital.com/docs/default-source/memos/calibrating.pdf


March 23, 2020 - I added to Fairfax Financial today. This is very similar to my investment in Oaktree Capital where I am investing alongside, in my opinion, one of the best capital allocators. For my investment in Oaktree, I was investing alongside Howard Marks and with this investment in Fairfax I am investing alongside Prem Watsa.

Prem's goal is to compound book value at 15% per year which if he can achieve this then my investment will be doubling every 5 years. There is no guarantee he can do this but he does have a good track record despite his recent sluggish performance from 2011 to 2016 due to the large hedges he put on based on his macro economic outlook.

At the current price per share of $280 I am investing at a 50% discount to book value. Fairfax is an insurance company that does well when there aren't any natural disasters such as typhoons, hurricanes, earthquakes, etc. Right now we are going through a pandemic related to a virus and I'm unsure how much this is going to affect insurers like Berkshire Hathaway, Markel, and Fairfax. I can't find the answer but I don't think Fairfax's policies insure against this virus so if this guess is correct then this company is even more undervalued since it won't have to pay out policy holders. 

Fairfax currently has a big investment in Atlas Corp which is run by David Sokol who used to be partners with Warren Buffett at Berkshire Hathaway before he resigned due to recommending a stock to Warren without disclosing all of the necessary information that he should have. Despite this setback David has a great track record of compounding capital at his former company Mid American Energy and that is why Prem invested 50% of Fairfax's investment portfolio alongside David. 

Fairfax is very well capitalized but the biggest risk I see with this company is the possibility of poor underwriting and poor investment picks by Prem Watsa. Keep in mind that he's not perfect with his decision to buy Blackberry being one indicator of that and I'm not the biggest fan of his decision to invest in Toys R' Us. Overall he's done very well though and Fairfax also has exposure to India through Fairfax India which is likely to be one of the fastest growing economies over the next 2 decades.


March 20, 2020 - I think ViacomCBS will be a two or three bagger from today's price so I initiated a position today based on the following reasons:

They own lots of valuable content including films such as The Godfather, Top Gun, South Park, Forrest Gump, Titanic (50%), The Wolf of Wall St. (in the U.S.) and Star Trek.

I think the virus will be settled down by the summer and football season will go on therefore CBS should see high advertisement revenue from airing NFL games.

March Madness basketball is canceled this year but I'm expecting high ad revenues next year and beyond as March madness returns.

Owns the BlackRock building at 51 W 52nd street in Manhattan which they're set to sell following the virus.

Own several valuable cable channels including Comedy Central, BET, Showtime, MTV and Nickelodeon.

Insiders are buying including 2 $1M purchases from Shari Redstone over the last 2 months.

Seth Klarman initiated a position in q4 2019 and buying at the current price is a better entry point.

Valuation ratios of TTM P/E of 2.7, P/S of .5, TTM P/FCF of 9 and EV/EBIT of 10.

Return on invested capital has consistently been above 10%.

The market fears that ViacomCBS won't be able to transition to the new streaming environment and they are too leveraged to the old cable business model but in a worse case scenario I see their content as too valuable compared to what the current market price is suggesting. I never invest based on takeovers alone but I do point out that another company acquiring ViacomCBS is an option.

If this goes wrong it's most likely because there is a high debt load arising from the merger of Viacom and CBS last year. 


March 19, 2020 - At the end of the last cycle/bull market (I'm assuming that we're are currently in a recession) I was looking at companies that were less quality businesses because all of the quality businesses were overpriced and the semi-high quality businesses were either overpriced or fully priced.

I bought some due to the limited opportunities available and this resulted in me holding some less quality businesses that I wish I didn't own. I could have used the excess capital to invest in better opportunities right now.

Don't forget this feeling in the next cycle.

Right now I'm focused on companies that have good balance sheets to weather this downturn.  


March 18, 2020 - I looked at Boeing's balance sheet today after I heard both Jim Cramer and Bill Ackman mention that Boeing will need a bailout and won't be able to survive without one.

They have $9.5B in cash and $7.5B in short-term debt. So why won't they be able to survive if they can pay their current debt? 

Because they won't be able to pay their suppliers. Keep this in mind as you research companies because it is important. Boeing also has $51.5B in deferred revenue and I didn't look up what this is in their filings because I'm being lazy but this must be deposits they took from customers for future orders. Right now the last thing the airlines are thinking about is future orders. They may want their deposits back and this would ruin Boeing in addition to all of the accounts payables that needs to be paid.

Although I do think the government will bail this company out, I'm going to pass on this company as an investment.

In contrast to this, Mark Cuban said this morning on CNBC that he is buying stock in two companies: Twitter and Live Nation. I looked up both of their balance sheets and their financial positions are solid. Lots of cash exceeding accounts payable, short-term debt and accrued liabilities.  


March 17, 2020 - Anheuser Busch tapped out their whole credit facility of $9B and I like this decision. It's amazing. Never in my models did I envision a scenario where Anheuser Busch's operations would be operating at such limited capacity.

I thought this company was a bargain at $50-$70 and I never imagined it would be selling for $33-$40 a share. Admit it... you're scared to buy here. Even after everything you've read. And of course I am. I don't know how long this shutdown will last and Anheuser Busch has so much debt there is a lot of uncertainty. Yes, their debt is very spread out with the majority priced in low fixed rates and financed over long periods of time but there are unknowns such as debt covenants. What if there are debt covenants that are based on Anheuser Busch's Debt/EBITDA  ratios that all cause debt to be paid much sooner? This is an unknown that can have a huge effect. Luckily the banks seem to be well capitalized at the moment.  

Anheuser Busch has $7.2B in cash with $5.4B in short-term debt and they just got $9B more from their credit facility. They also have $16B in accounts payable, $1.3 in taxes payable (current liability), and another $6B in accrued liabilities. They're operating at a very limited capacity but it looks like they could get through this year ok now that they tapped their credit facility.

The issue is demand is psychological and just because these shutdowns end it doesn't mean people will be automatically going out as much as they used to. Lots of events will eventually continue such as sporting events which will be a big boost for beer sales but I'm expecting a lag in demand before beer sales reach near the levels they were at in 2018 and 2019 because of the large layoffs the economy is about to see and because there will likely be a delay when consumers rush out to spend money since we're creatures of habit and have been more accustomed to staying at home for weeks.  In testament to this last sentence, consumers in China haven't had a surge in demand following the large drop in cases of coronavirus and the opening up of stores and restaurants.



March 16, 2020 - Added to Shake Shack today. Shake Shack restaurants are always crowded and they have some of the best tasting food thanks to Danny Meyer's great cooking skills and his determination to create the best tasting food.

They're still open for takeout and delivery which should help them stay afloat as the coronavirus takes away a large amount of revenue from the entire industry. Shake Shack has $37M in cash & equivalents, another $36.5M in short term investments and no financial debt. They do have leases on their stores though that they rent out to sell their food. For this year they have $32M due in leases of which about 1/12th of that would be due each month in rent but I expect the virus will calm down during the warmer weather. They also have payables which can be decreased if they need to lay off staff and delay payments on orders for food supplies.

In other words, I see a great company with a short term setback that is very solvable for them which led to the equity being available at a great price for the long term.


February 18, 2020 - This game is hard. You sold Virgin Galactic way too soon and would have realized a lot higher return by being more patient and holding on. This resulted in a sizable opportunity cost for you.

The way to prevent this mistake from happening again is to understand your position a lot more before getting into it. This way you will be able to hold on for the long term without worrying about day-to-day fluctuations. 

February 16, 2020 - The following quotes come from Terry Smith's 2019 annual letter for Fundsmith LLP. He writes why it is better to be a GARP investor instead of a value investor. It comes down to ROIC and how GARP companies compound for long periods of time where value stocks appreciate back to fair value but then need to be sold and the capital needs to find a new place to be invested. This incurs transaction costs and taxes. The hard part about buying GARP companies for value investors is they appear to be expensive rather than cheap but since they are compounding at higher rates they aren't expensive.

"To quote from Investment Adviser ‘Looking at PE ratios there is evidence in abundance that shows that from a relative perspective quality stocks may today be considered expensive.’ The interesting point about that assertion is that it was published on 13th August 2012. A lot of superior returns have been had from those allegedly expensive stocks in the subsequent seven years."

"Value investing has its flaws as a strategy. Markets are not perfect but they are not totally inefficient either and most of the stocks which have valuations which attract value investors have them for good reason — they are not good businesses."

"Moreover, even when the value investor gets it right and this happens, they then need to sell the stock which has achieved this and find another undervalued stock and start again. This activity obviously incurs dealing costs but value investing is not something which can be pursued with a ‘buy and hold’ strategy. In investment you ‘become what you eat’ insofar as over the long term the returns on any portfolio which has such an approach will tend to gravitate to the returns generated by the companies themselves, which are low for most value stocks."

"As Charlie Munger, Warren Buffett’s business partner, said: ‘Over the long term, it’s hard for a stock to earn a much better return


February 3, 2020 - What is a value trap?

It is an investment that appears to be undervalued based on financial metrics such as P/E, P/B, P/S, P/FCF, EV/EBIT, etc., but actually isn't undervalued because the cheap price and cheap financial metrics are due to the business' deteriorating earning power. 

Are KHC, Baidu, and oil stocks (BP, XOM, Shell) value traps?

They were once saying MSFT was a value trap in 2011.

It wasn't a value trap because Microsoft's core business (Windows operating system) was still throwing off lots of free cash flow and when you looked around, computers with the Windows operating system were in universities and offices all around and they were still being bought due to the inconvenience that users would have had to endure if they had to relearn a new operating system (switching moat). The catalyst was it still had this moat and the company was able to use these cash flows to successfully invest in other growth areas like cloud to avoid being a value trap.

Will BP, XOM, and Shell be able to reinvest their cash flows from petroleum into other areas like renewable energy to avoid being a value trap? Since oil and gas are commodities this makes the question harder to answer because there isn't much of a moat compared to Microsoft. I guess the answer is I can't say with as much confidence as I was able to with Microsoft. 

Will Baidu be able to successfully reinvest their cash flows from search into AI and cloud despite heavy competition from Alibaba, Tencent, and ByteDance? I think so because the advertising market in China is so huge that I think all 4 can have their share. Plus I think Baidu has a strong enough moat in search to retain market share for the time being.

Will Kraft Heinz be able to successfully reinvest their cash flows from Heinz to pay off debt and reinvest in the Kraft and Oscar Meyers brands that are in desperate need of R&D and advertising dollars? Will they be able to correctly decipher which brands can and can't be fixed? I think Oscar Meyers cold cuts (not the bacon) is mostly a value trap but most of the other brands like Planters, Philadelphia, A1, Capri Sun, Lunchables, Kraft Dressing, Kraft Cheese, Velveeta and Kraft Mac & Cheese can be turned around.


January 27, 2020 - Exited Virgin Galactic with an overall gain despite realizing a loss on November 7, 2019.  Not sure of the long-term prospects of the business at the moment despite sell side analysts picking up coverage on the stock and giving a bullish outlook.


I thought this would be a part investment for Chamath Palihapitiya's holding company but all of my shares were converted to Virgin through a SPAC instead. I adjusted my position on November 7th to reflect what I thought would have been my allocation had this been the setup that I originally thought it was going to be.

I planned on holding it long-term but then my emotions got the best of me as I saw a gain in the company but wasn't sure how confidently I could value this company due to the uncertainty of what the future business prospects will look like. I'm content with the outcome now because I did realize a quick gain but am not happy that I didn't have the emotion to do what I originally intended to do - hold this long term.

Setting up a system that prevents me from checking stock prices too often would be very helpful for me but then again I am comfortable holding my other positions long term so perhaps my uneasiness with holding this one for the long term was a sign that I needed to sell.

"If you don't feel comfortable owning a stock for 10 years, you shouldn't own it for 10 minutes."

                                                                                                                                             -  Warren Buffett