Monday, September 25, 2006

Reprise on Emerging Markets- An Interview with a Practioner

The current edition of the Wall Street Transcript (subscription required) features an interview with Charles Wang of Acadian Asset Management who is Senior Portfolio Manager and Director of Research.

Given the events of last week in a number of emerging markets, I thought it might be useful to provide some insights from an expert such as Mr. Wang as well as some of my own reflections.

Years ago, when I first became involved in some emerging markets investment, the field was viewed as highly dangerous and suspect. As Wang points out, "Emerging markets are a small asset class accounting for roughly 7.5% of world equity markets based on MSCI." He adds, a small shift in investor sentiment can lead to meaningful inflows or outflows."

Wang also speaks of the greater global integration that has occurred in these economies and the freedom of moving capital around. Prior to the 1987 crash, there was a belief that most of these emerging markets were segmented...that is, would operate separately and distinctly and in an uncorrelated fashion to large developed capital markets.

The contagion of the Russian Default in 1998 and the Asian crisis of 1987 (which incidently began in Thailand) also seems to rank as a low probability event in Mr. Wang's opinion. Rather than "contagion," Wang describes it as a "liquidity-driven phenomenon." Whatever you call it, the sinkhole of collapsing confidence leads to a drain of foreign capital...stock prices feel the whoosh and the vacuum. Fortunately, this did not occur last week. I remember well what it was like to hold Hong Kong stocks in 1987 (they were considered emerging at that time) as well as some Thai bank shares. Cheap stocks became 30-40% cheaper overnight.

In the interview, Wamg recommends overweightings in Brazil and Turkey and describes "ignoring the background noise of politics and just focus on how companies are doing."

Finally, he acknowledges the importance of discipline: "It's easier said than done. We are adamant about our process and resist human temptations to second guess the strategy. We have a clear mechanism to test new ideas and continue improving the process. Second, we take a multi-factor approach and continue looking for creative ideas and techniques. Last but not least, we strive to understand emerging markets in comparison with developed markets. What's the nature of the emerging markets? Why does it differ from the rest of the world?"

As always, discipline is a significant part of any investment process. Creative, sensible thinking is always the groundwork that helps portfolios thrive. Finally, having some benchmark against which one measures value or growth is an important yardstick to consider in any investment. When measured against domestic benchmarks, Wang finds emerging markets to be fairly valued rather than being a real bargain.

"Emerging markets five years ago, three years ago, or even two years ago were a very attractive asset class, because they were so cheap and fundamentals were improving. But today, I think if you look at the valuations, they aren't necessarily undervalued, but I wouldn't say they are overvalued either. This is just a convergence story."

The most frequently asked question regarding  foreign investment from my clients is what is your China or Indian exposure.  But don't forget the other ASEAN countries. ASEAN already has a combined US$27billion trade surplus with China and India - as well as
tourism. At a recent investment conference sponsored by CLSA, the Finance Minister of Singapore described it as, " In ten years, people will think of Asia as having three pillars: China, India and ASEAN."

The risks may be significant, but the valuations for some markets may create substantial rewards over the years.

Sunday, September 24, 2006

Beer, Banks and Bras...Dealing with the Thai Coup

It’s been an interesting time to be away. I have been away for just over a week in Western Europe, combining some business with some vacation, and as is evident, no blogging! I apologize for the silence...back to business!

Markets, of course, especially the emerging markets have been fascinating. What a week! A military coup in Thailand was achieved bloodlessly. Poland’s coalition government collapsed. Ecuador's President Alfredo Palacio hit the capital markets of South America by saying his government may seek to restructure its external debt. Hungary’s prime minister admitted lying which resulted in street riots. He explained himself with this wonderful quote:

"There is not much choice. There is not, because we screwed up. Not a little, a lot. No European country has done something as boneheaded as we have.Evidently, we lied throughout the last year-and-a-half, two years... You cannot quote any significant government measure we can be proud of, other than at the end we managed to bring the government back from the brink. Nothing."

One might have expected a Mayer Rothschild moment...yes, that Rothschild who is famous for two quotes,” Give me control of a nation’s money and I care not who makes her laws” and his more famous, “Buy on the sound of the war-cannons; sell on the sound of the victory trumpets.” That kind of a panic simply did has not happened.

It appears, for the Thai market at least, that a stalemate of sorts has been broken. Thailand is Asia’s cheapest market on a P/E basis, it was prior to the “crisis” and it remains so after. Based on HSBC estimates, Thailand trades at 9.5 times 2007 earnings estimates compared to emerging Asia’s 11.1 times.However, a very modest earnings growth of an anemic 3.5% compares to 14.3% for the emerging Asian markets. Economist forecasts for GDP growth next year hover around 4.5%. Not exactly growth that will make your socks roll up and down.

Thailand’s significance as a capital market is modest, representing only about 2.4% weight in the Morgan Stanely (MSCI AC Asia ex-Japan) So utilizing index funds or ETF’s does little to provide Thai exposure. The market is up fairly strongly from its June lows despite the coup.

Two closed end funds trading in the States focus on Thailand. The Thai Fund (TTF) trades at a slight premium to net asset value of a current 3.53% versus what has been an extraordinary premium on average over the last ten years of 26.74%. Though it is difficult to justify paying $1.04 for a dollar’s assets, at least the historical premium is down to liveable levels. The management expense ratio is quite high at 1.76%. The Thai Capital Fund (TF) trades at a higher premium to NAV, currently 4.91%. Management expense ratio here is substantially higher at 2.46%. There has been substantial difference recently between these funds in terms of their performance over the last twelve months...TTF is down 6.79% and TF is up 16.94%

Other direct investments in Thailand are racy but somewhat interesting. No ADR’s are available unfortunately, but if you are set up to trade internationally, these may be of some interest. Thai Beverage Public Company is the largest beer and spirits producer in Thailand with market shares of 60% and 74% respectively according to Deutsche Bank research. Not much history as a public company because this is a relatively new IPO.Cash flow from operations has substantially exceeded net income for the last five years. Free cash flow has also been consistently generated.Trading at 9.5 times trailing twelve months EBIT and generating returns on capital for the period of some 21%, the stock seems cheap. Drinking may be a defensive way to sit out the revolution. The Bloomberg symbol is TBEV.BK Given the free cash flow and the IPO, the balance sheet is solid.

Siam Commercial Bank (SCB.BK) has a return on equity for the last year that exceeds 18% and return on assets in excess of 2%. It appears very well capitalized with Tier One capital exceeding 13%.

Hong Kong based Top Form International (0333.HK) is the world’s largest brassiere manufacturer producing 63 million brassieres last year...producing some 35% of them in Thailand. The customer list is impressive with Vanity Fair, Maidenform, and Warnaco all being customers. Chinese production represents about 55% of the total with the Philippines producing the balance. Because of its fairly high Thai production base, the company backed off with the news of the coup. The company has moved its product line upscale to “Sew Free” seamless bras and its average selling prices accordingly. Debt to total assets is only about 15%, return on capital is about 38% for the TTM period, and the ratio of enterprise value to EBIT is merely 6.1 times. The textile business is a tough business worldwide and subject to pesky quotas and trade regulations. Margins in China are compressing somewhat due to labor costs but should be offset by weakness in the Thai baht as uncertainty about the Thai situation remains.

World markets have shrugged off the emerging markets’ news of last week quite well. Sentiment in Asia seems quite positive since the political logjam has been broken. But further reckoning of the delays in the Thai election and budget may lead to delays in purchasing decisions and in infrastructure investment. The much anticipated “contagion” effect of this coup did not occur largely because of the very subdued reaction of the Thai market itself and the apparent harmony in which the country finds itself. Other than getting an extra day off, most workers and businesses suffered little interruption. The simultaneous firing of war cannons and sounding of victory trumpets provided little opportunity for investors to panic. Sorry, but no quick over-reaction opportunity this time Mr. Rothschild. However, a few ideas to ponder with great balance sheets, good profitability and excellent value.

Disclaimer: Neither I, my family, or clients have a current position in any of the securities mentioned in this post.

Wednesday, September 13, 2006

Mutual Fund Performance and Portfolio Manager Ownership

The idea of aligning management interests with that of shareholders has been around for a long time. Stock option programs and restricted stock programs were designed (at least originally) to attempt to symmetrize the position of corporate management with that of shareholders. Needless to say, history has shown that stock option programs per se have generally done little more than aggrandized the wealth of the “front row” at the expense of shareholders. Some companies require executives to maintain a minimum ownership in the equity of the business. An example of this in the U.S. is The Gap Inc (GPS) which describes its ownership requirements as : “The Gap Inc. ("Company") Board of Directors believes that Company executives should have a meaningful ownership stake in the Company to underscore the importance of linking executive and shareholder interests, and to encourage a long-term perspective in managing the enterprise.” Other firms have enhanced their corporate governance to require even higher ownership levels based on executive compensation. A great example is the requirements of the Royal Bank of Canada which now requires its CEO to own a minimum of seven times his average base salary. In addition, corporate directors at RY are required to hold a minimum of $500,000 of stock.

The notion of “eating one’s own cooking” as Buffett describes it has been a factor for selecting securities for some time. As Buffett describes it in his Berkshire “Owner’s Manual”:

“Charlie and I cannot promise you results. But we can guarantee that your financial fortunes will move in lockstep with ours for whatever period of time you elect to be our partner. We have no interest in large salaries or options or other means of gaining an “edge” over you. We want to make money only when our partners do and in exactly the same proportion. Moreover, when I do something dumb, I want you to be able to derive some solace from the fact that my financial suffering is proportional to yours.”

Does this principle apply to mutual fund performance?

Since March of last year, managers of U.S. mutual funds have had to disclose how much they actually have tied up in the funds that they manage.The S.E.C. has stated that,” A portfolio manager’s ownership in a fund provides a direct indication of his or her alignment with the interests of shareholders in that fund.” A recent study by Khorana of Georgia Institute of Technology, Servaes of the London Business School, and Wedge of The University of South Florida has just examined whether higher ownership is linked to performance.

Since the requirements are so new, the statistics represent a very small slice of time, but nonetheless I think are interesting. To quote the study:

While 57% of portfolio managers do not own any stake in the funds they manage, using the most conservative estimates, the average manager has a stake of $97,000 with the 90th percentile of the distribution being $160,000. The average ownership represents 0.04% of assets under management; the 90th percentile is 0.09%.Ownership levels are highest in domestic equity funds, with an average ownership of about $155,000, and a 90th percentile of $510,000. These amounts represent 0.05% and 0.15% of assets under management, respectively. Even though these stakes are modest, we find that they are sufficiently large to affect excess fund performance in 2005.

To my knowledge, very few funds actually mandate that the manager own some of the fund. The Davis Funds, a group I admire for their discipline, has a very unique commitment to their mutual fund family: “As of December 31, 2005, the Davis family, employees and directors have more than $2 billion of their own money invested side by side with shareholders in the various mutual funds managed by the firm. We remain the largest group of shareholders in our investment products, which ensures that our interests are closely aligned with those of our clients.”

It should come as no great surprise that increased ownership in the fund improves the incentives of managers to generate superior returns. The extent of the outperformance is quite surprising.The survey included 1406 funds of all sorts ranging from domestic US equity to balanced, bond, and international funds.The extent of the outperformance is significant.

In the 581 funds where there was management ownership, the mean return was 8.7% and the median was 6.39% as compared to the no-ownership funds with 6.2% and 3.99% respectively.

When measured against the return of the median fund in the matched investment objective (balanced versus median balanced, sector versus sector) what the study called the objective-adjusted return, the owned funds beat the objective with a mean of 1.44% and median of 0.21% as contrasted with the non-owned funds 0.29% and -0.2%.

When risk-adjusted as measured by alpha, similar results were found. Owned funds generated a mean alpha of 1.88 and a median of 0.45 as contrasted with non-owned of 0.59 and =0.21 respectively.

Ownership matters and eating your own cooking is important.This information should be more readily accessible and transparent than current practice.

Learn how your investment manager is compensated. In a study done in 2004, the minimal ties of portfolio manager performance to what the clients received were examined. This study, by Farnsworth and Taylor, at the Washington University School of Business observed:

“The survey indicates that over 45 percent of a portfolio manager's compensation is due to their bonus. More than 44 percent of the money managers responding to the survey said their firm's overall profits have the largest impact on their bonus, greater than any other incentive, including their client's investment performance. Tax efficiency and risk control were ranked as the lowest incentive by the portfolio managers."

Clearly, risk control and tax efficiency should be important attributes for your investments. It appears that one of the best ways of ensuring this is to know that your investment manager is lined up with you!

Disclaimer: I, my family, and some clients have a current position in Berkshire Hathaway.

Monday, September 11, 2006

Festival of Stocks

George at Fat Pitch Financials has hosted the first edition of the Festival of Stocks. Value Discipline is pleased to participate in the festivities.

The festival hones in on stock selection with a wide variety of ideas from which to select. Stocks covered range from tiny microcaps such as Advanced Nutraceuticals with a $17 million market cap to giants like Verizon with over $100 billion in market cap. As I think you will see, the quality of these posts is very high. George has set a high standard for all hosts to emulate, as he has provided interpretive comments as well as links to the stocks that are mentioned.

We are fortunate to have our Ahold post of last week selected for inclusion in this inaugural edition.

I would encourage all of you to look for this new feature.

Friday, September 08, 2006

Festival of Stocks

One of the most innovative bloggers around is George over at Fat Pitch Financials. Not only does he have one of the most comprehensive sites around, with tons of information, he also has run some very unique portfolios which have taken advantage of takeover arbitrage for odd-lot holdings of some stocks.George has developed Fat Pitch News which provides a voting mechanism to highlight what his audience believes are relevant and noteworthy posts of various bloggers. A number of Value Architects posts have been fortunate enough to have been considered worthy by George’s readers.
George has a new brainchild that he will be beginning on Monday. This is called Festival of Stocks.
As he himself describes it, “The Festival of Stocks will be a blog carnival dedicated to highlighting bloggers best recent posts on stock market related topics. This will include research and commentary on specific stocks, industry analysis, ETFs, REITs, stock derivatives, and other related topics.”
I will be pleased to host the Festival from time to time and look forward to participating on a weekly basis with a submission of a post from the prior week.There is some real high powered help that is going to lead the charge with George, Geoff and Bill as well as some others. I have some serious writing to do!
I invite all of you to look this up and to participate.

A Delicious Irony- Lots of Dollars, Little Sense

In checking out this month's bonus edition of Value Investing Insight, a very worthwhile publication that I have recommended before, I noticed a terrific article that I had missed by Steven Pearlstein at the Washington Post.

He points out the delicious irony of large pension funds and endowments chasing down private equity players who of course command huge fees.

As he indicates, the lemming like movement into private equity believes: " it no longer makes sense for them to look for undervalued public companies, or promising new companies looking to go public. Instead, they prefer to put their money into private equity funds, which charge outrageous fees to look for undervalued public companies, or promising new companies looking to go public, and buy them up at a price 20 percent higher than the current stock-market price."

In order to finance these companies," private equity managers have their newly acquired company issue lots of junk bonds, at high interest rates. These bonds are then bought by hedge funds, which also charge outrageous fees and also raise most of their money from pension funds, university endowments and wealthy individuals."

Ultimately, " And to top things off, the new owners invariably offer fat new pay packages to the managers of the company they've just acquired -- in most cases, the same managers who were running the company when it was public. The idea is to give them even greater incentive to maximize the value of the company, so it can be taken public again."

Now let's think about this dog chasing its own tail behavior. Invariably, institutional investors love to have performance that resembles the benchmark index when considering their "normal" common stock portfolios. Highly concentrated positions are to be avoided at all costs in their mandates. The altar of diversification celebrates the sacrament of me-tooism that most pension funds feature. Charging active fees to provide near-index diversification ensures that performance will rarely provide cause for aggregate, as John Bogle points out, it becomes a prescription to underperform the market...we ARE the market when considering all managers in aggregate.

The self-imposed rules of diversification are suspended when you get to the private equity arena. Massive single bets on a single business with a leveraged balance sheet. Give the existing management a promote in terms of additional stock ownership, blather something about his skin in the game, and watch what happens.

Give it a couple of years, IPO it out to the sacrificial lambs...retail and other institutional types and sell off the risk. Ben Stein, commented on the enormous conflict of interest that exists in management buyouts in last Sunday's New York Times. (free subscription required) As he argues, basic fiduciary law requires that managers are required to put the owners' interest (that's we the shareholders) ahead of their own...if they aren't running the business to its maximum profitability, they are breaching their responsibility.Yet, internally, when a buyout is considered, substantially improved economics develop magically.Fairness opinions are contrived according to the whims and desires of the buyer, and minority shareholders get shafted at too low a price.

Yet, all of this behavior is encouraged by plan sponsors who hire buyout firms. Concentrated positions remain verboten to most money managers and mediocrity is encouraged by the plan sponsor rules. Weak results result in driving more and more allocation dollars into private equity funds. As Pearlstein indicates," A weak stock market drives money into private equity funds, draining even more money from the stock market and lowering returns even further. In time, one would expect this process to correct itself as private equity funds are unable to sell their companies into public markets and returns decline. In fact, the latest numbers indicate that this process is already well underway, with only a handful of the best private equity funds now generating above-market returns."

Concentrated positions rather than diversified positions will invariably provide better returns when you know what it is you own. You do assume additional risk, after all diversification is a protection against ignorance, but properly chosen, the reward more than compensates.

There is no magic in private equity buyout firms. Bidding up a stock at a takeout premium and leveraging up a bad business that you intend to take public at some later point depends on a succession of fools...doesn't this seem like a repeat of paying for eyeballs in 1999 and 2000?

Superior results can come from public equities but only if managers are allowed to manage to a disciplined style. Allow and encourage concentration in portfolios. Have an investment horizon that extends beyond settlement date! Trust a methodology that adheres to a discipline.

The worst thing that will happen to you is some private equity fund may take you out at a premium to start the whole Ponzi scheme he or she envisions. The best thing, you will continue to own a business that you understand and that will grow into considerable wealth.

Many years ago, I had complimented my mentor, a senior partner about a takeover a stock in our fund had experienced. "Oh sh#t " he exclaimed, "it means I have to come up with another idea."

Thursday, September 07, 2006

Twenty Best Financial Blogs and Netvibes

Earlier this week, 24/7 Wall Street organized and gleaned a list of the twenty best financial blogs. It is our privilege to be considered to be part of this terrific group. I am greatly honored.

Many of my fellow bloggers were thanked for their help and their encouragement in a post earlier this week. Let me extend my thanks again to you and everyone in this list.

Finally, as Geoff Gannon has pointed out, there is a Netvibes link that will provide you with 18 of the 20 feeds without having to go through all the work yourself. You will have to subscribe to Netvibes, but the link is quite useful. Sign up to Netvibes and then click this link to get the module.

Ahold- Breaking Up is Hard to Do

A funny thing happened last night...Ahold (AHO) the troubled European food retailer reported very positive and encouraging improvement in its profitability. We certainly haven’t seen that happen lately.

Ahold, though not very well known to many in North American investors, has the great bulk of its operations in the U.S. with its ownership of Stop & Shop, Giant-Landover, Tops Friendly Markets, Giant-Carlisle, Martins, and the internet grocer, Peapod. It also owns U.S. Foodservice which services restaurants, hospitals and universities.

Operating profitability in the second quarter at Stop & Shop/ Giant-Landover was up 20% YOY with operating margins of 5.8% versus last year's 4.9%.

At Tops/Giant-Carlisle, operating margin came in at 4.3% versus 3.7% and grew 9.3% YOY.

U.S. Food Service operating profits were up 84% with op margins of 1.8% versus 1%.

In Europe, its Albert Heijn division had operating margins of 6.2% versus 4.4%.

It appears that cash flow from operations has improved significantly, and the balance sheet has improved as well with net debt down by 531 million euros to 5.2 billion.

Despite revenues that seemed relatively weak and a competitive landscape that is hardly improving, Ahold appears to have enjoyed a tremendous shift in its operating profitability.

Some large hedge funds smell blood and have been demanding a break-up, selling off of the U.S. assets. Two funds, Paulson and Centaurus announced Aug 14th that they had accumulated a 6.4% position in Ahold and were attempting to rally some other large shareholders to demand the break-up.

Management may have bought itself some time with the improved results. The U.S. divisions have been valued by some analysts on the basis of the Albertson takeover, but it is hard to argue that the assets are similar. The age profile of many of the Ahold stores suggests that more than just maintenance capex is required. Management has been dedicated to survival and debt reduction rather than refurbishment. Solid progress has been made in debt reduction since net debt back in 2001 was 12 billion euros! Their efforts in operations have paid off for the first time in years.

Much work remains to be accomplished. Contrast AHO's ROA of around 1% to Tesco's exalted 7%. Lesser food retailers have ROA’s of 2-4%. Albertson’s was 2.5%. Ahold's Central European operations are losing money versus Tesco's success. From a valuation standpoint, the EV/EBITDA is around 10 times TTM, not that terribly cheap, given the still relatively low profitability.

A speculation on a break-up is not a particularly inviting investment in my view. Management has refused to meet with the hedge funds as of yet and it appears that these results will kindle more hope for recovery rather than restructuring.

Disclaimer: Neither I, nor my family have a current position in Ahold. However, certain clients do own a current position in Ahold.

Sunday, September 03, 2006

Expressing Some Gratitude-Thank You to ALL!!

Someone once said that feeling gratitude and not expressing it is like wrapping a present and not giving it.

I am feeling very thankful today on a number of counts. Kathy Yakal in Barron's The Electronic Investor has been kind enough to mention Value Discipline in her column. In reviewing 24/7 Wall St, she mentions Value Discipline along with our highly regarded confrere Geoff Gannon and Stock Market Beat. The article appears on page 30 of this week's edition and is available online at the following link.

She describes the original content of 24/7 Wall St as being "often lengthy and analytical, always well-written and capably argued." We hope that Value Discipline's contributions to this terrific blog aggregator help to enhance its great image as a disseminator of news and opinion.

A number of other aggregators are mentioned in the article. Seeking Alpha, has been kind enough to carry many of my posts for quite sometime. Thank you David for including our contributions!

PhatInvestor and The Money Blogs have also been very kind in carrying Value Discipline as a contributor and received mention in the article.

A few others deserve mention and my kindest regards. Market Blogs by Ringsurf is the first aggregator that carried Value Discipline's content. I was flattered and surprised to be part of this after less than one month's existence (the blog...I have been around for more than half a century!)

Geoff Gannon, has one of the most complete catalog of links to value investing and investing sites available to you. Thank you for considering me as "a smart guy who thinks and writes clearly." You are a very tough benchmark Geoff!

StockBlogs also included us among his value investing blogs from a very early stage in Value Discipline's development.

Another aggregator that provides a highly organized and readable reviews of worthwhile posts is "The Market" from Nimble Ferret. As the Ferret describes his blog aggregator, part magazine, part newspaper-dedicated to the world of Wall Street. I am glad to be a small part of "The Market."

These are the large aggregators who have helped Value Discipline cross an important threshold, over 50,000 hits this year. I am very proud to have been able to have drawn this much interest from you, the readers.

Special thanks go out to all of you! In particular, some of you who operate your own blogs, you have been a source of inspiration and information. Particular kind thoughts go out to David Lau, a practising physician whose brilliant thinking and sharing of information has been exemplary. Kind thoughts as well today go out to Jay Walker, The Confused Capitalist, whose musings reflect disciplined thinking, but whose blog reveals a colorful and amusing appreciation for graphics design and comedy. Another reason to love Western Canada! Shai Dardashti, who no doubt labors even on Labor Day has an exemplary investment discipline which will serve him well as he develops his firm. Shai was the first blogger to link to Value Discipline and I am deeply grateful. Thank you and continued success! See you again in Omaha! Dan O'Neil of The Intrinsic Value...Thank you for your innovative use of Google webtools and thoughtful commentary! Dan has shown investment judgment well beyond his years.

I am grateful to The Wall Street Transcript, which has been kind enough to provide me with access to their excellent database of commentary and interviews. You are a terrific partner and a fabulous resource!, part of features a daily view of the investment blog world that deserves your attention. Jim Altucher, the blogger has featured Value Discipline quite frequently. Thank you for including us, Jim! Jim is a hedge fund capitalist extraordinaire who has written extensively on Buffett, and on hedge funds and is a regular columnist with Realmoney and the Financial Times of London. He has authored two books.

Survival is a bittersweet measure of success. Many bloggers with highly worthwhile and innovative ideas fail. It is tough to get noticed, and commentary, if it develops, tends to be vacuous, spammer-produced, or incendiary! Value Discipline has managed to survive and thrive largely inspired by the kind comments of its readers and the co-operation and efforts of my business partners. I am driven by my passion for investing, particularly disciplined value investing and a love of writing and recording of my thoughts. As always, this is intended to not only entertain you, but to make you think a little bit differently about your investments. Hopefully, together we can find a few worthwhile ideas.

One of my former investment partners who had passed away four years ago had started a brokerage firm to focus on value investing. We used to laugh about how silly it was to develop a firm that was based on marketing unpopular ideas that nobody wanted to buy. It reminds me a lot of my mission in Value Discipline. Technical analysis (sorry Bill) and momentum ideas tend to rank much higher in popularity as concepts and as blogs.

So, I am very proud of the readers of Value Discipline. As Buffett says, you get the shareholders you deserve. Thank you for helping to mold this into a readership that makes me very proud! With occasional dry spells for vacations, client needs, laziness, or mental fatigue, I hope to continue to provide commentary on a regular basis as long as you find it worthwhile.

Happy Labor Day to all! Safe travels.

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