Value Investing Forum

That's interesting.

I've been meaning to look more into TA (I had found a couple of books that actually attempt to test techniques; I actually think much of it is confirmation bias, etc). It doesn't strike me as too far fetch to combine other techniques with a bottom up approach to figure out when a good entry/exit point is.

In spite of that, Burry himself seems to be discussing the distinction I'm aluding to in one of his posts:

To answer whether this is a good business (and not just apparently cheap based on traditional superficial measures)

So his emphasis is still on finding "good businesses" and not just those that merely appear to be good values.

garry2211,

Which posts are you referring to? The write-ups I posted a link to were based more on the business and fundamentals thereof. That said, I'm primarily using Burry as a means to this other discussion..

Jae,

I'm actually quite alright with that. But for it to be a genuiune value thesis, the value has to actuall play out. Otherwise all you have is someone who found a way to, statistically speaking, predict when the price of an asset (e.g. stock) will go up in price.

For example, if earnings projections are $1 per share but I have reason to believe that they will be $1.1 per share, the price of the stock will go up if that bears out. That's entirely independent of whether or not the price reflects the value of the business (the company itself might be worthless long term).

If you read a bunch of his post he uses a lot of technical analysis to get into and out of trades. He started out reading TA then started to read Graham and the others.

Post edited 11:03 pm – December 12, 2011 by somrh

 Graeme,I don't know who doesn't like chicken but that would certainly limit some options. That which is not chicken still takes like it!

My concern with IBA is that this might be a commodity business so looking for a deeper discount to book value might be more appropriate. It's certainly worth watching.

Jae, you'll have to explain to me how you distinguish special situation from value investing. I guess I still see it as a particular subset of value. For example, spinoffs make nice investments because the sell-off makes them very cheap relative to one's estimate of value.

I consider the real value of a stock all future cash payments (dividends, buyout cash, liquidation cash, etc) that is given to shareholders discounted to the present. Obviously different proxies are used to estimate this real value. Those proxies may or may not reflect actual value.

In the case of most of the Burry write-up stocks, there is no indication that there is any value there. The ones that no longer exist did not provide sufficient cash flows to even return the original price paid much less the discounted numbers. IBA is the only one of the still existing stocks that has paid any dividends at all. If the others never pay a dividend or don't get any other cash payments, then what were they worth? Were they really cheap stocks or did they just appear cheap?

For example, a stock that is fairly valued using an 8% discount rate will return 8% annualized over the course of its life. Most of his picks were far above fair value considering that they never returned even the initial price paid.

Obviously I don't expect Burry to get them all right but I would think that the winners would far make up for the losers. At least this set of picks by Burry doesn't seem to fit the bill. Maybe his hedge fund picks fared better. I don't know.

But you'll have to explain to me how what you view as special situation differs from value investing.

Looks interesting. Just a quick glance at their numbers have put them on my "look at me more" pile for tomorrow. A healthy payout ratio for a dividend means it's an attractive business to hold while the market clues into it's value. 

Who doesn't like chicken, right?