Michael Mauboussin

[petekoch]

Read his work, which is often brilliant.

Legg Mason Funds : Mauboussin Commentary

CAP@Columbia

Expectations Investing

[petekoch]

WARNING ! ! !

Reading Mauboussin's remarks about EPS and PE ratios might shake your belief in Phil Town's 'Sticker Price' evaluation method.

But, of the BIG FIVE numbers, Town did make ROIC #1. For Mauboussin, wealth building comes down to:

ROIC > Cost of Capital

[petekoch]

Mauboussin cites Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets by Nassim Taleb. I first read this a few years ago, which led me to read other books cited by Taleb on the subject of probability, statistics and chance. I found the material addictive (I spend a lot of time at racetracks) and I think I read 6 or 7 books on the subject before I was done. Great stuff!

I haven't read Taleb's latest, The Black Swan: The Impact of the Highly Improbable, a reference to Hume, no doubt.

[Xyvern]

Pete,
Have you read his book, Expectations Investing ?

[petekoch]

Pete,
Have you read his book, Expectations Investing ?

Nope, but my bookseller said my copy shipped last Thursday. Should be arriving any day now....

[npg]

Make sure you let us know your thoughts.... :)

[petekoch]

Originally Posted by npg

Make sure you let us know your thoughts.... :)

I will, indeed.

The web site Expectations Investing offers a preview of what to expect. Also, there are a couple of interesting, albeit opposing, reviews on Amazon.

One thing I do expect is that EI will be thought provoking. Mauboussin usually is, and co-author Rappaport is something of a mentor to MM.

BTW, I'm reading a library copy of Greenwald's Value Investing: From Graham to Buffett and Beyond, but I've decided to buy it. Greenwald teaches the value course at Golumpia B-School, making him Graham's successor, if you will. The 21st Century version, anyway.

And having absolutely nothing to do with anything is the subject of Piggy-backing, i.e., duplicating the actions of great investors. No less a rock star than Michael Price admitted that he did it on occasion, a fine apologia for my going long USG on the heels of purchases by Buffett, Munger, Whitman, and npg.

[petekoch]

I'm having second thoughts about buying Greenwald's book. I did, however, find an interesting 5-part interview with Greenwald from 2004 on Motley Fool (ugh). In it, he raved about the value mining ability of one of his co-authors, Paul Sonkin, another Golumpia B-School prof, who runs Hummingbird Capital. I snooped around on Edgar for Sonkin, but his bag is microcaps, most of which average about zero shares traded a day.

Did find two interesting value sites on the web:

FocusInvestor.com: The Focused Few

http://www.valueinvestigator.com/

Haven't really explored these, but the former is almost a shrine to Graham and Buffett. Don't know if there are any gems to be found here, but the postman rarely delivers diamonds to your door; you have to mine for them.

Got my copy of Expectations Investing yesterday. Unfortunately, I watched the awful Johnny Depp movie Sleepy Hollow the other night and, besides being dreadful, it wasn't very faithful to the original Washington Irving story. I remember the Sleepy Hollow cartoon scaring the hell out of me when I was a kid; the Depp movie just made me snicker a lot. To verify, I picked up a volume of Irving's stories at the library and read The Legend of Sleepy Hollow. The problem here wasn't so much that the movie did, indeed, stray from the original story. The problem is that Irving's writing and language is so wonderful that I'm hooked on reading every last story. I guess no value snooping for a couple of days.

Did pick up Deborah Bennett's Randomness, which I have read before. Contains lots of examples of how counter-intuitive probability can be. Also interesting is her more recent effort on the deception of language. I'm also rereading John Tracy's excellent guide to financial statements. You can't know enough accounting, says Buffett.

Also, last night, went to a minor league baseball game with my cousin, whose son is a student at NYU's Stern School. Planning to talk to the kid about Damodaran's valuation course and books.

Somewhere, probably in the Greenwald MF interview, I read the statement that Buffett raked through 26 annual reports of a company before buying it (or did he decide not to buy -- I don't remember). Besides being brilliant, the man is absolutely tenacious. Emerson was probably right when he said the key ingredient for success is persistence.

[npg]

Originally Posted by petekoch

And having absolutely nothing to do with anything is the subject of Piggy-backing, i.e., duplicating the actions of great investors. No less a rock star than Michael Price admitted that he did it on occasion, a fine apologia for my going long USG on the heels of purchases by Buffett, Munger, Whitman, and npg.

Hihi indeed. All of the above quite successfully piggy-backed as well. And why not? If you understand why you do it and the price is right, then that cannot be so bad. Buffett himself took a lot of cues from other peoples portfolios. Everyone does.

That's why I sincerely recommend reading the "Outstanding Investors Digest". That's money well spent. It's great value too. Because it doesn't publish on a regular rhythm. It only publishes when there is something interesting to report.

[petekoch]

Mauboussin writes about the persistence of ROIC and overoptimism in its use in Discounted Cash Flow models.

http://www.leggmason.com/individuali...o_the_Mean.pdf

Academic in style, but well worth the read.