#WeeklyInvestorReader | wk. 48

Note to readers: #WeeklyInvestorReader contains a few of the articles I read during the week. Visit my Twitter @HurriCap for any other articles not included. If any of the articles are behind paywalls it may be possible to read them by searching for the article’s title via Google News.

How Google is Challenging AWS – Stratechery, November 30, 2016 | Big companies are often criticized for having “missed” the future — from the comfortable perch of a present where said future has come to pass, of course — but while the future is still the future incumbents are first more often than not. Probably the best example is Microsoft: the company didn’t “miss mobile” — Windows Mobile came out in 2000 — but rather was handicapped by its allegiance to its license-based modular business model and inability to envision a world where its core product (Windows) was a planet orbiting mobile’s sun; everything about Windows Mobile’s design presumed the exact opposite.

Apple may have finally gotten too big for its unusual corporate structure – Vox, November 27, 2016 | Mark Gurman reported for Bloomberg on Monday that Apple is ceasing development of its Airport line of wifi routers as well as its Time Machine wireless backup disks. That comes hot on the heels of an October public announcement that the company would no longer be making external displays, and will instead partner with LG to create a sort of Apple-blessed display manufactured and branded by the Korean company.

How Benjamin Graham Revolutionized Shareholder Activism – Bloomberg, May 17, 2013 | Today, Benjamin Graham is known primarily as Warren Buffett’s investing mentor and the author of multiple classics about value investing. Toward the end of his life, in the 1973 edition of “The Intelligent Investor,” Graham wrote, “Ever since 1934 we have argued in our writings for a more intelligent and energetic attitude by stockholders toward their managements”.

Swedish banks: house mafia – Financial Times, November 25, 2016 | Crazy-low interest rates, debt-to-income ratios at record highs and millennials revolting over house prices. Not Stockwell — Stockholm. Young Londoners have it easy compared with their peers in the Swedish capital. Sweden’s go-go property market offers a stark contrast with its sober banks. They are among the best capitalised in Europe. As the Riksbank’s latest financial stability report makes plain, they had better be.

Flying Cars are Closer than You Think – The Verge, November 21, 2016 | Marc Andreessen may be the most dedicated optimist in Silicon Valley. During a year when the public’s attention was often focused on international conflict, mass shootings, and a bitter election, the co-founder of venture capital firm Andreessen Horowitz has insistently pointed toward progress. Until it fell silent in September, Andreessen’s hyperactive Twitter feed served as a guide to the good news: people rising out of poverty, the surprising durability of the US economy, and all manner of fast-growing tech products and services.

A Conversation With Dan Ariely on What Shapes our Emotions – Longreads, November, 2016 | Dan Ariely on building an understanding of how humans behave from the ground up.

Meet Europe’s Best Activist Investor – Forbes, August 27, 2015 | Swedish hedge fund manager Christer Gardell is, arguably, the Carl Icahn of Europe. Gardell’s firm, Cevian Capital, is one of the world’s largest activist investors, with roughly $15 billion in assets; it’s also one of Europe’s most active agitators for corporate change, having targeted 15 companies since 2010, according to J.P. Morgan.

On the freight train – how do you value Adidas? – John Hampton, November 29, 2016 | I own a position in Adidas – the German athletic shoe and fashion company. Given how well it has performed the position is nowhere near big enough. I wish all my longs had performed this well. But it poses a fairly typical investment problem for which I have no real answers.

Reddit Is Fighting the Same Kind of War That Twitter Is – Forbes, November 30, 2016 | Can they block the trolls and build a business without killing what makes them special?

Google Pixel Trounced Apple’s iPhone Over the Holiday Weekend – Forbes, November 26, 2016 | Google Pixel is the Black Friday king. Google’s new Pixel smartphones proved popular during the busy holiday shopping season between Black Friday and Cyber Monday.

Too Many Railcars, Too Little Freight – WSJ, December 2, 2016 | Rail equipment sits idle as commodities slump, changes in energy market cut into demand.

Favorite Books of 2016 – The Waiter’s Pad, November 30, 2016 | I’ve done this list the past five years, usually at my personal blog. I let that domain lapse so the list moves here. That works because most readers here are Readers.

The Rockefeller Family Fund vs. Exxon – The New York Review of Books, December, 2016 | Our criticism carries a certain historical irony. John D. Rockefeller founded Standard Oil, and ExxonMobil is Standard Oil’s largest direct descendant. In a sense we were turning against the company where most of the Rockefeller family’s wealth was created. (Other members of the Rockefeller family have been trying to get ExxonMobil to change its behavior for over a decade.) Approached by some reporters for comment, an ExxonMobil spokesman replied, “It’s not surprising that they’re divesting from the company since they’re already funding a conspiracy against us.”

Why Apple Is Getting into the Energy Business – Harvard Business Review, November 25, 2016 | Memo to CEOs who don’t consider themselves in the electricity business: You may not be in the power business today, but you’re more than likely to be in it tomorrow. Consider Apple, hardly a byword in the energy business. This summer, the company applied for federal licenses to sell directly to customers the excess renewable energy it generates on its new campus and in facilities across Oregon, Nevada, and California.

From Peak Oil to Peak Oil Demand in Just Nine Years – Bloomberg View, November 28, 2016 | Peak demand for oil is the big new thing. True, the International Energy Agency, in the annual World Energy Outlook it released earlier this month, didn’t envision a peak coming before 2040 barring a big acceleration in anti-climate-change efforts. But at least it’s talking about the possibility, and forecasting a slowdown in demand growth in the meantime.

Get ready for 24-30% reduction in cost of wind power by 2030 – Wired, November 29, 2016 | Survey of 163 experts sees turbine size going up, costs coming down.

A Behavioral Bias Cure? – CFA Institute, December 1, 2016 | My behavioral finance passion extends not just to categorizing new biases, which is rather humdrum, but in searching for and documenting actual tools to overcome them. Enter a globally recognized neuroscientist, Ulrich Kirk of the University of Southern Denmark. With his fellow researchers, Kirk has tested people’s ability to master behavioral biases and has found something remarkable: Meditation is a way to conquer biases.

Anheuser-Busch Stock Is Finally An Attractive Buy – The Conservative Income Investor, December 3, 2016 | If you are starting with a dividend of around 4%, and you are paying fair value for a stock, you need 6% earnings per share growth to get long term total returns of 10%. That is what I expect from Anheuser-Busch. Over the long haul, I anticipate revenue growth in the 2-4% range and earnings per share growth in the 4-7%. Given Anheuser-Busch’s high debt burden, I don’t think you can expect anything greater than 7% earnings growth per share over the next two decades. And the likelihood is probably a bit below that.

ESPN Subscriber Loss: How Far From Economic Crisis? – The Conservative Income Investor, December 3, 2016 | The manifested risk, however, is that the subscriber counts are falling fast. Just five years ago, ESPN subscribers existed in over 100 million households. ESPN has lost over 1 million subscribers in the past two months, which is historically high and worrisome for ESPN executives because the fall months have football and the attrition rate is usually slower.

Home Depot’s Poor Stock Buyback Record – The Conservative Income Investor, December 2, 2016 | In 2007, it had 1.69 billion shares of stock. Profits were at $4.2 billion per year. When the recession came, profits fell to $2.8 billion. The stock price fell from $42 to $17. The valuation was at 9x earnings. Guess how many shares Home Depot management decided to reduce the share count by while the stock was cheap? Z-z-zero. None. Nada. Home Depot carried 1.69 billion shares through 2008, 2009, and 2010. The average price of the stock during this time was $23.43 per share.

10,000 hours or 10 minutes: what does it take to be a “world-class” investor? – Pension Partners, December 1, 2016 | The 10,000 hour rule does not apply to trading/investing.

What do Elite Venture Investors Read Every Morning? – Ramen Profitable, November 22, 2016 | The Most-Read Blogs and Newsletters of the World’s Top VCs.

You Would Have Missed 780% In Gains Using The CAPE Ratio, And That’s A Good Thing – Meb Faber, December 2, 2016 | 780%. That’s the amount of gains you would have missed had you followed the market timing strategy I’m going to describe in the following article that utilizes the CAPE ratio.

Amazon Gets Real About Fakes – Bloomberg Technology, November 28, 2016 | The company is starting a new initiative to banish counterfeiters.

Buy and Hold? Sure, but Don’t Forget the ‘Hold’ – The New York Times, July 2, 2006 | ASSUMING that the future is like the past, you can outperform more than 80 percent of your fellow investors over the next several decades by investing in an index fund — and doing nothing else.

Best books of 2016: Business – Financial Times, December 2, 2016 | A round-up of must-read titles.

How Effective are Boards of Directors? – Egregiously Cheap, November 30, 2016 | Directors are supposed to represent shareholder interest. Isn’t it ironic then that new directors are usually a) handpicked by the CEO and b) not shareholders? How can a director represent shareholder interest when they haven’t been a shareholder? The situation is even worse when a hired CEO who has little share ownership himself is picking directors.

He’s not picky–he’ll take whatever is wounded – CNN Money, January 15, 1999 | Ted Aronson is not your average money manager, and that’s only half the story. Listen in to Jason Zweig’s eye-opening conversation with him.

Michael Dell Bought His Company Too Cheaply – Bloomberg View, June 1, 2016 | If you own a stock that you think is worth $10 a share, and I also own that stock and I think it’s worth $20 a share, I can try to convince you that I’m right. I can make predictions about the company’s future prospects and earnings, and build a discounted cash flow model to prove that the stock really is worth $20. And you can make different assumptions about the future, and build different models, and try to convince me that $10 is the right number. But this is all kind of dumb. I should just pay you $12 for your shares. Then you get paid more than you think the stock is worth, and I get stock that I think is worth more than I paid, and we never have to discuss it. This is called the efficient markets hypothesis.

Appeals Court Concludes That IPOs Are Legal – Bloomberg View, November 25, 2016 | Here’s a thing that happens. When a company goes public, it sells some shares to the underwriters, and the underwriters sell more shares to the public. Let’s say the company sells 100 shares, for $10 each. The underwriters will sell 115 shares, for $10 each, and give the company $1,000 (less fees). The underwriters will keep the other $150 for themselves. They have bought 100 shares and sold 115, so they are short 15 shares. If the stock price goes down over the next few days, they use some or all of that $150 to buy the stock, so it doesn’t go down too fast. This is called “stabilization.” The underwriters’ buying helps keep the stock price close to the IPO price. People think that is good.

With $720 Self-Tying Sneaker, Nike Loosens Ties to Retailers – WSJ, December 1, 2016 | Nike Inc. this week begins selling a pricey sneaker with self-tying laces, a high-stakes test of the company’s technology investments and efforts to sell more products directly to consumers.

Berkshire’s Matter of Trust – WSJ, November 22, 2016 | To invest in Berkshire Hathaway Inc. means to give Warren Buffett the benefit of the doubt. That’s both the beauty and potential drawback of the $392 billion company.

How Humans Became ‘Consumers’: A History – The Atlantic, November 28, 2016 | When Minos Zombanakis devised Libor—the London interbank offered rate—half a century ago, he had no way of knowing it would star in one of history’s greatest financial scandals.

The Man Who Invented the World’s Most Important Number – Bloomberg, November 29, 2016 | Until the 19th century, hardly anyone recognized the vital role everyday buyers play in the world economy.

How to invest like billionaire John Malone for $10 a share – Bloomberg, November 30, 2016 | Gabelli Media Mogul NextShares will begin trading Thursday at $10 each.

Articles in Swedish

Serneke bygger korthus – SvD, November, 2016 | Med sin specialisering på totalentreprenader tar Sernekes byggrörelse risker långt över det vanliga. Trots det tjänar man inga pengar. Resultatet är istället uppblåst av diverse affärer som innebär snabba bokföringsvinster idag men potentiella problem imorgon. När branschvinden vänder kan Serneke med lite oflyt krascha fullständigt. Undvik aktien.

Börsfest blir snabbt bakrus – Dagens Industri, December 2, 2016 | Värdeinvesterarnas främsta skyddshelgon Benjamin Graham har ett välkänt citat som handlar om att börsen kortsiktigt prisar bolag efter dess popularitet, medan den på lång sikt inte bryr som ombytliga åsikter utan bara om underliggande prestation. Börsintroduktioner framstår 2016 som en i högsta grad kortsiktig övning där antalet röster är det som räknas och där fundamenta väger lätt i Benjamin Grahams vågskål. Det betyder att investmentbankernas förmåga att lotsa nya bolag till börsen är helt avhängig av börsklimatet. Penningpolitiken är maxad, populisterna går i armkrok och Shiller P/E på världens viktigaste index, amerikanska S&P500, är på nivåer som bara setts i samband med tidigare toppar.
Det är ingen världsfrånvänd tanke att vi har sett början på slutet och att börsklockan snart har klämtat färdigt för den här gången.

“A reader lives a thousand lives before he dies, said Jojen. The man who never reads lives only one.”

―George R.R. Martin, A Dance with Dragons

Disclosure: #WeeklyInvestorReader contains a few of the articles I read this week and enjoyed the most. I am not receiving any compensation for any of the links provided. 

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