Thoughts on Investing

Why I would NEVER buy a single share of Tesla

My recent post got a lot of comments by Tesla Fans so I wanted to clarify further why I would Never buy a share of Tesla. If you are a Tesla shareholder or Fan take the time to read and understand what I am trying to say before you downvote. Thanks

This is NOT a recommendation to buy or sell anything and certainly not Investment advice.

So why would I not buy a share of Tesla?

I am an Investor and for every Investment I do I use a checklist. My Checklist is quite long and I won’t share the entire thing here but it includes things such as multiples for sales, cash flows etc.

So just for this reason alone I would never even consider buying Tesla. I would glance at the numbers for about 5 minutes and I would be done with my research. That would be it. It’s ok to miss out if something doesn’t fit your investment criteria.

But lets say it goes past my numbers screening ( or I ignore it) and I would enter the next part of my checklist. My checklist also includes things such as Warning Signs.

My goal is to maximize my gains BUT more importantly I also try to avoid losses. Losses can kill your portfolio and if you lose money its very very hard to get back to where you started. So I try to avoid losing money at all costs.

Warning signs for stocks include : Short seller reports, Media Attention, SEC Investigations, Lawsuits, Accounting irregularities etc.

The thing with Tesla is this: People that are MUCH SMARTER than me spoke out against it. This includes Jim Chanos and recently the “Big Short” Michael Burry as well. So for that reason as well I would just pass on the company. I don’t need to short it either all I need to do is skip it and look for another opportunity.

I would skip on tesla because to me personally I have a risk of capital loss. Thats all there is to it. I don’t need to care about their deliveries, their events etc. I don’t need to care. It’s perfectly fine with me if it goes up another 10x from here.

The markets are full of great companies & opportunities and its not worth it buying something that might hurt your portfolio. Also don’t get pressured into buying something you’re not comfortable with. Fomo is dangerous and can lead to bad decisions.

Thoughts on Investing

Short sellers are GOOD for the Market

Shortsellers are going after our favorite stocks to profit therefore we should despise them right? But are they all really bad?

Don’t just read articles and blog posts that confirm your view about a company. Right now a lot of $TSLA & $NKLA shareholders are mad about shortsellers going after their stock but in fact you should embrace it.

Shortsellers do research that you could never do on your own. In fact I would love it if someone would give me a 50 page report on everything thats wrong with any of my holdings. I know whats right about all the companies I own. What I want to know are the flaws, the accounting issues ( if there are any ) etc.

With Luckin Coffee Muddy Waters Research bought thousands of cups of coffee from different branches and kept an eye on the customers. Thats invaluable research and in the end they were right that the numbers don’t match up.

They probably saved a lot of Luckin Coffee Shareholders from bigger losses ( those who read the report). And of course short sellers should get compensated for this work. There have to be incentives to do this kind of work. Else nobody would do it. Don’t count on auditors which are incentivized to look the other way and keep a paying client.When you’re an analyst you can just say you think revenue will go up but you don’t need to back it up.

Thats it. But when you accuse someone of fraud then you better have a lot of evidence to support this view. Short sellers face potential losses & lawsuit. If they are wrong they lose a lot. Thats why they work hard and only release reports when they have enough to back up their claim. Also what do Companies like Nikola have to worry about ? If everything is fine then the Hindenburg report will turn out false and they continue to enjoy a rising share price. But what if the report is right?

If you are a Nikola shareholder then you should pay attention to it. Read it and work this into your thesis for owning the stock. Is it worth the risk? Maybe limit your exposure.But don’t ridicule the people that release those reports. There is a lot of hard work & money behind it.

Short sellers don’t do this for the fun of it. And if they are right they should be compensated for their work. I would actually say that many short sellers work much harder on research than a long analyst. After all they have to be right to make money. If they’re wrong they won’t be able to enjoy market returns. They would literally get wiped out.

Guru Investors Investing Videos

Why did Warren Buffett invest 6B in Japan?

The other week Warren Buffett invested in Japan and a few people asked what I think about his recent move.

I rather not speculate why Warren Buffett does anything but Invest with Tom gives a great overview why he could have invested in Japan. As always Tom gives some great explanations and also explains the Japanese market a bit. It is definitely worth the watch and one of the better videos on this subject.

My personal thoughts on it : Japan is a value investors dream. There are plenty of overlooked stocks that are selling at low multiples. The problem is that Japan still has a stigma that it is somehow shareholder unfriendly. if people would pay attention they would noticed that they changed a lot in the last couple years ( partially thanks to abenomics). Japanese companies now also embrace buybacks and pay dividends. If you ask me they are definitely worth a look. I’m quite happy that Warren Buffett put some focus on this overlooked market.

Thoughts on Investing

Buying Low Pe stocks is NOT Value Investing

There seems to be a common misconception out there that value investors only buy low PE stocks and ignore high growth stocks. Here is something that might surprise you :

The PE by itself tells us nothing about value.

Here is a sample:
Let’s say a Stock A has a PE of 8 and Stock B has a PE of 15. Is Stock A a better value stock?

What if Stock A is growing its sales and profits at only 2% a year and Stock B grows by 10%?

Even worse what if Stock A is in a commodity business with dismal margins and ROIC of 3% while Stock B has an amazing 30% ?

All of the sudden Stock A doesn’t look cheap at all. In fact people could argue that Stock B is a much better Value stock

Even worse:
What if Stock A has a lot of debt ? The PE won’t factor this in at all. What if the company has a market cap of 1 billion but another 2 billion in debt.

All of the sudden we are looking at and enterprise value of 3 Billion. Can this company even pay it’s interests? When you look at PE you might overlook all the other issues with the company. A low PE could be a good start for your research but by itself its meaningless. 

Another sample :
What if Stock A has a PE of 3 and Stock B has a PE of 100. No real value investor would buy this PE 100 stock. Its obviously overvalued. But is it really?

What if they both had big one off events? Let’s say Stock A sold parts of its business and booked the proceeds as profits.

These proceeds won’t be there next year and the company will likely have a much higher PE once they return to normal. In fact since they sold parts of their Company it is even possible that they will earn less money in the future. All of the sudden that PE 3 stock doesn’t look so cheap anymore.

Same with Stock B. What if it made decent profits year after year and in one year they decided to make a big acquisition that messed up their normal PE.

A lot of people would say right off the back that a PE of 100 is expensive and overvalued. Is it? Next year the big expense won’t be there anymore and the company will likely earn more than before. All of the sudden the PE of 100 turned into a great opportunity

Value investing is a lot more than just running a scanner and looking for low Price Earnings Values. It can be a great start for your research but keep in mind that there are many more variables that should be considered.

As investors we need to create a whole picture out of many small puzzle pieces. PE is just a small piece

Guru Investors

8 best Peter Lynch Quotes on Investing

I’ve been a huge fan of Peter Lynch’s Investing Strategies all my life so I figured its time to put together a few of the best Peter Lynch Quotes on Investing. Long story short here are some of his 8 best quotes:

“Know what you own, and know why you own it”
― Peter Lynch,

“When you sell in desperation, you always sell cheap.”
― Peter Lynch,

“Go for a business that any idiot can run – because sooner or later any idiot probably is going to be running it.”
― Peter Lynch

“Understand the nature of the companies you own and the specific reasons for holding the stock. (“It is really going up!” doesn’t count.)”
― Peter Lynch

“If my favorite Internet company sells for $30 a share, and yours sells for $10, then people who focus on price would say that mine is the superior company. This is a dangerous delusion. What Mr. Market pays for a stock today or next week doesn’t tell you which company has the best chance to succeed two to three years down the information superhighway.”
― Peter Lynch

“The typical big winner in the Lynch portfolio (I continue to pick my share of losers, too!) generally takes three to ten years or more to play out.”
― Peter Lynch

“It takes remarkable patience to hold on to a stock in a company that excites you, but which everybody else seems to ignore. You begin to think everybody else is right and you are wrong. But where the fundamentals are promising, patience is often rewarded—Lukens stock went up sixfold in the fifteenth year, American Greetings was a sixbagger in six years, Angelica a sevenbagger in four, Brunswick a sixbagger in five, and SmithKline a threebagger in two.”
― Peter Lynch

“This is one of the keys to successful investing: focus on the companies, not on the stocks.”
― Peter Lynch

Btw I will also review some of his famous books in the near future so make sure that you come back regularly. Most of the Peter Lynch Quotes you find on this page are taken from his books One up on Wall Street, Beat the Street and Learn to Earn. Also make sure to check the beating the Street Summary I posted the other day

Guru Investors Investing Videos Investment Books

Beating the Street Summary by the Swedish Investor

I read Beating the Street 3 times and I think this book is one of the best investment books out there. If yo haven’t read it yet then this short Beating the Street summary will definitely get you interested and for people that read it before its a great refresher for the memory.

I posted videos by the swedish investor before and this one is just as great as the others. He gets the essence of the book and presents the main topics in a great way with visuals. I believe this can be extra useful for people that are short on time or just want to get a refresher of what Peter Lynch’s famous book was all about. Beating the street is everybody’s dream and Peter Lynch shares some very simple and easy to understand ideas how to do it.

Highly recommended video.

Guru Investors Investing Videos

Mohnish Pabrai on why Investors should invest alone

In this Mohnish pabrai boston college lecture Mohnish explains why Investors should invest alone.

At first it might appear contra productive. Isn’t it better when more people combine their thoughts and ideas ? In investing this is not necessarily the right approach. Everybody is different and has their different views and perspective. What might sound like a good investment to you might not be a good one for another. Mohnish Pabrai mentions that if he would hire an analyst he would pay him NOT to present him Ideas. Instead he would just like to consult him whenever he needs to have a second opinion on a stock he likes already.

I feel the same way. I would hate it if I would have to discuss every Investment Idea with a lot of people. I usually build my own opinion after doing research. If anything I just ask some people that I trust general questions about a sector or if there could be something that I have overlooked. Investing is very personal and nobody really sees a company the same way you see.

All in all a very useful lecture with Mohnish Pabrai. Please let me know in the comments if you prefer to discuss your ideas with others or if you prefer to act alone.

Investing Videos

The Intelligent Investor Summary

Today I want to share with you the best the intelligent investor summary I’ve seen or read in a long time. The Swedish Investor is doing a great job putting the biggest parts of his book into a short Video. The graphics are amazing and especially the part with Mr Market is invaluable. I personally think the concept of Mr Market is one of the most important things in Investing. The market behaves irrational at times and if the Market offers you a great company at a low price it’s the time to buy. As always the Swedish Investor is doing a great job with the graphics and he is getting the main points of the book.

If you haven’t read the Intelligent Investor by Benjamin Graham then I highly recommend that you grab a copy. I read it about ten years ago and even after reading about 70 books on intelligent investing / investing in general I can still say that this book is among the best ever written. The entire Value Investing community builds on the knowledge of Ben Graham. After all he was Warren Buffett’s teacher. Investing strategies evolved a lot since the book was written and I personally think it’s harder nowadays to make money with the so called net nets or cigar butt stocks but nonetheless the knowledge you gain from reading the book is invaluable. The Summary by the Swedish Investor gives you a good primer and it has a lot of the information you need.

This the Intelligent investor summary is the next best thing you will find. Please let me know in the comments how you liked the video. I will make sure to post more great content for everybody that is interested in intelligent investing out there. And make sure you come back in the coming days for more great content.

Investing Videos

Invest with Tom talking about Guru Investor Li Lu

I’ve been a huge fan of Li Lu for the longest time. He is actually the guy that invests Charlie Munger’s money. It’s not easy to find good articles about Li Lu in english so I was quite happy to see that Invest with Tom made a video about him.

Tom’s video explains how Li Lu got started and explains his value Investing strategy in a clear and understandable way. A highly recommended video if you have 10 minutes to spare today. Learning from Guru Investors such as Li Lu will make you a better investor.