Jonathan Boyar: Spotting Investment Opportunities In Out Of Favor Industries

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Over the long run, stock markets are fairly efficient. In the shorter term, however, valuations can go to extremes both on the low and high sides. Investors usually create these anomalies by piling into whatever is currently in vogue and indiscriminately selling whatever is out of favor.

When industries fall out of favor, Wall Street sometimes drives the market cap of companies within that sector far below what an acquirer would pay for the entire company. That leads to buying opportunities for discerning investors with the patience to wait for the industry to right itself. Of course, it’s anyone’s guess when the tide might turn—investors may need to suffer through years of under-performance before these investments eventually pay off. It’s often well worth the wait, however.

Peter Sainsbury: Back to backwardation: Why the shape of the futures curve is positive for commodity prices in 2021

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The commodity futures curve has moved sharply over the past few months towards backwardation. This should increase the incentive for long side investors to park their funds in commodities and given numerous macro tailwinds (e.g. a weaker dollar, rising inflation expectations and infrastructure spending), set the market up for a promising 2021.

But first, a little bit of background on the futures curve. When the futures price curve is downward sloping, i.e. the futures price of a commodity in say six months’ time is lower than the current spot price, the market is said to be in backwardation. This is also known as an inverted curve or an inverted market.

Chris Mayer: 100 Baggers, The Lost Chapter

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For 100 Baggers, I originally had the idea that I would pepper the text with little vignettes on people whose stories shed some light on how to nab a 100 bagger. I love these kinds of stories, especially if not particularly well known. So I had nine of them written and more planned. 

Then it occurred to me that, while I thought they were interesting, these stories were distractions to the main ideas of the book. They sometimes didn’t address the core ideas or were just redundant. And they seemed to interrupt the flow. So, I cut them.

Later, while working at Bonner & Partners, I cobbled these vignettes together in a 12-page report and called it -- to make it sound sexy -- “100-Baggers: The Lost Chapter.” 

The "Lost Chapter" contained the following stories:

Felix Dennis: How to Get Rich (It’s not how you expect)

J.R. Simplot: Be Willing to Try Anything

Georges Doriot: How to Make 70,000%

Trammell Crow: Own Real Estate

Arthur Dewing: Forget the Fancy Math – Stick with Common Sense

John Laporte: Buy Right and Sit Tight

T. Rowe Price: Look for Out-of-favor Growth

Philip Carret: Be Patient

Benoît Mandelbrot: Forget About Average – Markets are Wild

Why Buffett Bought Japanese Stocks

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Warren Buffett recently announced he had invested ~$5bn in five Japanese trade companies, a value investment in a country that trades at a steep discount to the United States. The companies Buffett purchased trade at a 35% discount to the broader Japanese TOPIX index and a whopping 79% discount to the S&P 500 on a price-to-book basis.

Why is Buffett investing in Japan today? We bet it has something to do with the massive valuation disconnect shown above: Japan is one of the few value investments available in today’s global developed markets. Large caps in the United States have gotten dramatically more expensive compared to Japan in the last 10 years.

Harris Kupperman: Why This Reflexive Ponzi Scheme Will Continue…

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Since many of you are sick of hearing about Bitcoin, I promise this is my last post on the topic for a while. That said, I’d be remiss if I didn’t point out the unusually lucrative arbitrage trade that is largely responsible for sending Bitcoin parabolic. I glossed over it in my last post and given the questions that I’ve received, a full post on the topic was more than necessary—especially as the mechanism is really quite fascinating.

To start with, I believe that Grayscale Bitcoin Trust (GBTC – USA) is unique in the world of finance in that it facilitates an oddly reflexive Ponzi Scheme. Since we all know what a Ponzi Scheme is, I’m going to gloss over the terminology and instead focus on the concept of reflexivity. Before George Soros focused on destroying American society, he was a remarkably successful investor. His theory of reflexivity asserts that prices do in fact influence the fundamentals and that this newly influenced set of fundamentals then proceeds to change expectations, thus influencing prices; the process continues in a self-reinforcing pattern. In the case of Bitcoin, GBTC is the transmission mechanism for this reflexivity and once you understand how this game works, you’ll realize that Bitcoin is going much higher before it collapses.

Grant Williams Podcast: The End Game Ep. 11 - Jim Rogers

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After a series of brain-churning conversations, take a breather this week and join us for a fun-filled journey around the investment world with the one and only Jim Rogers.

Hear Jim's candid views on Japan, China, North Korea, the UK and the opportunities available in Venezuela, as well as cryptocurrencies, the impossibility of being short anything right now and the subject on everybody's lips post-the U.S. election - Chinese wine stocks...

Goehring & Rozencwajg: Investing in the Uninvestable

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Today’s indisputable un-investable asset class is energy broadly and crude oil specifically. Oil has been (and remains) the most important input to economic growth in the post-World War II world. However, in the span of only a few short years, oil’s importance has gone from being widely accepted to thoroughly rejected. The financial press argues that oil should beavoided at all costs.

Investors are convinced that global oil demand has already peaked and will decline steadily going forward. In such a world, the oil industry’s billions of dollars of upstream capital investments would become economically unviable or “stranded.” Environmentalists meanwhile are beginning to clamor for the oil industry to pay “damages” for the carbon released over the last 50 years, leaving investors to ponder whether energy assets are actually liabilities.