Monthly Archives: February 2010

Bruce Greenwald on the Value Investing Process

Columbia University Professor Bruce Greenwald discusses the value investing process and its advantages.

ValueFocus (Issue 10) to be Released

The 10th issue of ValueFocus, our monthly value investing newsletter, will be released to Premium Members on March 1st. For more information about becoming a premium member, see HERE.

Top Value Investor Launches Own Fund

By Sam Mamudi (WSJ)

One of the leading value-stock investors of the late 1990s is returning to mutual funds.

David Marcus, who co-managed many of Franklin Resources Inc’s Mutual Series funds, has launched his own funds, which will use a go-anywhere approach, mixing bonds and stocks and using short-selling strategies when appropriate.

Mr. Marcus, 44 years old, said that with the fund industry moving toward narrower offerings, his funds should have a broad appeal.

“I really believe you can take care of the man in the street and the pension fund and everyone in-between,” he said, adding that he wanted to “offer investors something they’re not getting.”

Mr. Marcus’s new firm, Evermore Global Advisors, has launched two mutual funds, Evermore Global Value Fund (ticker symbol: EVGBX) and Evermore European Value Fund (EVEAX). Each fund will hold about 40 securities, he said, and hold onto them for a number of years. The typical holding period will be two to four years, and sometimes longer.

Mr. Marcus’s former boss at Mutual Series, Michael Price, is on Evermore’s advisory board, along with former Securities and Exchange Commission Chairman Harvey Pitt and Michael Lipper, founder of the Lipper fund-research firm.

“They’re not involved in managing the funds, but believe me, we seek their advice on many issues,” Mr. Marcus said.

Mr. Marcus was at Mutual Series from 1987 to early 2000, and was schooled in value investing by Mr. Price. By the time he left he was manager or co-manger of three Mutual Series funds, and oversaw more than $14 billion in assets.

In the following decade, Mr. Marcus founded and ran two hedge funds, and also started a family office to oversee the affairs of Sweden’s Stenbeck family.

His return to mutual funds comes at a time that several hedge-fund operators are also opening mutual funds. AQR Capital Management LLC debuted its seventh mutual fund in January. Last year, Legg Mason Inc.’s Permal Group, which provides funds-of-hedge-funds, set up a mutual fund.

Mutual Series, founded in 1949 by Max Heine, has grown to an eight-mutual-fund roster with more than $50 billion under management. Franklin bought it in 1996. The Mutual Series funds have been pivotal in establishing the strategy known as deep value investing. Managers using this approach often buy stocks that are facing peril and so are priced cheaply.

In keeping with his Mutual Series roots, Mr. Marcus said he’ll invest in securities that are priced cheaply but which have a catalyst—a reason for believing their stock price will soon rise. As an example he pointed to his investment in Bollore, led by French financier Vincent Bollore. Among its holdings, the firm has stakes in ports, railways and media companies across the globe. Mr. Marcus estimates its stock is trading at 45% discount to the value of its assets.

David Einhorn’s Letter to Investors

David Einhorn of Greenlight Capital has published his Q4 letter. In 2009, Greenlight’s three funds returned 36.9%, 33.7%, and 30.6%, respectively. Since inception in 1996, the fund has returned 1,397% cumulative, or 22% annualized, both net of fees and expenses. Einhorn’s latest letter can be found HERE.

The Little Guide to Prudent Investing

We are excited to introduce our “Little Guide to Prudent Investing”  to readers. Through the guide, we share the process and data behind the investment decisions at ValueHuntr.com

Reminder: VIC Ticket Discount Deadline Approaching

This is a reminder that readers of Valuehuntr will be able to receive a steep exclusive discount for the Value Investing Congress taking place on May 4 & 5, 2010 at the Langham Huntington Hotel & Spa in Pasadena, CA. If you want to hear from some of the best hedge fund managers in the game, then this is the conference to attend. Not to mention, it’s a fabulous networking event and place to acquire wisdom to profit in this irrational market. But over 50% of all seats are already reserved, so readers must act fast.

If you’re unfamiliar with the Value Investing Congress, then here’s what you need to know: One good investment idea could more than pay your cost of admission to this event and net you some great returns. The wisdom gained from listening to these great investors is truly priceless. For a slide show of last year’s event see HERE.

Speakers at the two day event include many of the prominent players we track here on the site on a daily basis. Here is the list of confirmed speakers (more to be announced later) include:

John Burbank, Passport Capital

Patrick Degorce, Thélème Partners

Bruce Berkowitz, Fairholme Capital Management

Eric Sprott, Sprott Asset Management

Paul Sonkin, Hummingbird Value Funds

Mohnish Pabrai, Pabrai Investment Funds

Thomas Russo, Gardner, Russo & Gardner

Lloyd Khaner, Khaner Capital

J. Carlo Cannell, Cannell Capital

Whitney Tilson & Glenn Tongue, T2

Click here to receive the over 30% discount to VIC

You must use discount code: P10VH4 to receive the full discount. Hurry and register!

You’ve got exactly one week to get signed up with these savings. If you work for a firm, get approval to go and have your company foot the bill since this is one of the premier conferences out there. If you’re an individual, we can truly say that the cost of admission is worth every penny.

The regular price of the two day event is $4,295. However, Valuehuntr readers pay only $2,795. That’s over a 30% discount and savings of $1,500!  If you’re from out of town, the Congress has also negotiated lower room rates at the Langham Huntington for attendees.

It’s going to be an awesome and insightful event, to say the least. Make sure you get our exclusive discount for the Value Investing Congress here. Remember that you MUST use the discount code P10VH4 to receive the full discount!

Please let us know if you have any questions or problems when trying to register with the discount code.

Bill Ackman’s Presentation on Kraft Deal

Formula Investing With a Value Mindset

On last year’s Value Investing Congress, Joel Greenblatt gave a presentation on his “Magic Formula” for investment success (slides can be found HERE)  Greenblatt suggests purchasing 30 “good companies”: cheap stocks with a high earnings yield and a high return on capital. He touts the success of his magic formula in his book “The Little Book that Beats the Market”, citing that it does in fact beat the S&P 500 96% of the time, and has averaged a 17-year annual return of 30.8% 

The process for the “Magic Formula” is as follows:

  1. Establish a minimum market capitalization (usually greater than $50 million).
  2. Exclude utility and financial stocks
  3. Exclude foreign companies (American Depositary Receipts)
  4. Determine company’s earnings yield = EBIT / enterprise value.
  5. Determine company’s return on capital = EBIT / (Net fixed assets + working capital)
  6. Rank all companies above chosen market capitalization by highest earnings yield and highest return on capital (ranked as percentages).
  7. Invest in 20-30 highest ranked companies, accumulating 2-3 positions per month over a 12-month period.
  8. Re-balance portfolio once per year, selling losers one week before the year-mark and winners one week after the year mark.
  9. Continue over long-term (3-5 year) period.

Some of the companies passing the “Magic Formula” criteria at the moment are lsited below.

ValueFocus Newsletter: Issue 09 Released

Our 9th issue of Value Focus, our monthly value investing newsletter, has been released to premium members. For more information see HERE.