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Posted on 16 Nov 2017 by Steve Johnson

Finding Treasure in the Antinarrative

Buying a business in decline is psychologically difficult. It can also be extremely damaging to your finances.

There are exceptions, of course. The RHG example has been talked to death over the years but the mortgage lender was one business that generated wonderful returns for investors despite shrinking into oblivion. More often than not, though, Charlie Munger’s words ring true: “It is hard to pay a low enough price for a business in decline”.

While we are renowned for investing in unloved and beaten up sectors, we also try and avoid becoming further evidence for Munger’s wisdom (see the webinar below for a detailed discussion on narratives and anti-narratives).

Here are a few things to look for when filtering through the rubble of an unloved sector. Continue reading “Finding Treasure in the Antinarrative”

Posted on 31 Oct 2017 by Gareth Brown

GE: Buffett’s Last Takeover?

GE: Buffett’s Last Takeover?


I’m sure I’m not the only one running the rule over capital goods giant GE (General Electric). Still influenced by the rein of Jack Welch from 1981-2001, the company is number 1 or 2 in an astounding array of businesses. Pretty good businesses at that.

Overhyped in the latter Welch years and hungover under Jeff Immelt, the stock languishes where it was 20 years ago. New CEO John Flannery appears surprisingly intent on shaking things up considering he’s a GE lifer. He’s already ditched the corporate jets and company cars. He considers current cash flow ‘horrible’, that ‘everything is up for examination’ and there are ‘no sacred cows’ in the company’s portfolio.

Continue reading “GE: Buffett’s Last Takeover?”

Posted on 30 Oct 2017 by Alvise Peggion

A Dangerous Time to Doubt Mr Market

A Dangerous Time to Doubt Mr Market


“This stock hit its 52-week low today, I should look at it”. This is often what I tell myself at work. Buying stocks that have fallen a lot is just what value investors do. Isn’t it?

Value investors look at stocks that are out of favour. As Warren Buffett has said “you pay a high price for a cheery consensus”. If you want above average returns you must be prepared to go against the market – be a contrarian.

The reality is that buying plummeting stocks assuming that the market is being too pessimistic, or just plain wrong, often ends with disastrous results. Particularly in the current buoyant market.

Continue reading “A Dangerous Time to Doubt Mr Market”

Posted on 27 Oct 2017 by Steve Johnson

Isentia Shows That “Good” Businesses Can be Risky Too

Isentia Shows That “Good” Businesses Can be Risky Too


Isentia’s shares were trading at $3.50 this time last year. Yesterday the stock closed at $1.05. There’s nothing unheard of about a 70% share price fall. Forager investors have experienced a few of those over the years. What’s interesting about this one is that Isentia was supposedly a “high quality” business – one with a competitive advantage that allows it to earn above average returns on capital.

You expect to lose your money every now and then buying highly leveraged mining services businesses. You don’t necessarily expect it buying at the quality end of the spectrum. Continue reading “Isentia Shows That “Good” Businesses Can be Risky Too”

Posted on 25 Oct 2017 by Gareth Brown

The $1,000 Bagel

The $1,000 Bagel


It’s October 2006 and my wife and I are catching up with an old friend over a bagel in downtown Manhattan. Our conversation went something like this:

Friend: ‘Have you heard about the $1,000 omelette?’

Us: ‘The what?’

Friend: ‘There’s a restaurant here [called Norma’s] trying to sell a $1,000 omelette. They put it on the menu in 2004 and there were no takers for ages, but now they’re selling a bunch each month. As a matter of fact, other restaurants are now trying to do the same.’

Us: [indecipherable]

Friend: ‘Pressed by a local rag to justify the price [which, we later found out, is called the Zillion Dollar Lobster Frittata and has a entire lobster plus $600 worth of caviar on top], the waiter hit back “it’s got 12 eggs” and left it at that. New York, right?’

Continue reading “The $1,000 Bagel”