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Thorough analysis isn't what you are doing, it's simplistic analysis. That's the very problem with it. It sounds like you are dying for the Ben Graham era - whe

Thorough analysis isn't what you are doing, it's simplistic analysis. That's the very problem with it. It sounds like you are dying for the Ben Graham era - when simplistic analysis based on financial statements was all that is required because the competition in investing was... not much. It's a very different game now, and you actually have to have deep insight into the companies and the industries they are in. You can't just do a simplistic extrapolation of the last couple years in a spreadsheet. Google couldn't pass your "simple mechanical litmus tests" when it went public. Apple couldn't pass it in the late 90s. Amazon couldn't pass it most of it's life. IBM could for a good number of years (just look at the numbers when Buffett was buying it...) Most of the banks could in 2005/6/7.

systemBuilder 5y ago
Exactly true the rise in the cost of next-generation fabs has completely changed the business model so that only foundries can survive. Benjamin Graham analysis is not capable of detecting this inflection point in industry strategy nor can it detect Intel's stubborn refusal to adapt and change!
- danielmarkbruce 5y ago
  Yup. And by all reports Ben Graham was a brilliant dude. If he were in the game today, I doubt he'd be playing the way he played back in the day. He'd get in there and figure it out.
andrewmcwatters 5y ago
The mathematics of investing haven't changed, but if you have some literature to suggest otherwise, I'd be very interested in reading it. You seem to think that I use these mechanical estimates as the primary method for purchase, but they are not. I'm not sure what your point is about IPOs: they're historically a terrible time to invest, which is common knowledge. And actually all of the companies you have mentioned have easily passed such litmus tests over their life time at different times. Sometimes they're overbought, some times they're oversold. If you buy when they're overbought, you'll end up with a lower IRR than if you hadn't.
- danielmarkbruce 5y ago
  The math hasn't changed - the competition has. All the insanely obvious stuff is gone. You need real insight now. I didn't make a point about IPOs. I made a point about companies where real insight was required, both to see good investments and not make bad ones. Simple rules like "IPOs are bad", "dont pay x times earnings" etc, they haven't worked in years.
  - andrewmcwatters 5y ago
    We are certainly reading two different types of literature on the matter.
    - danielmarkbruce 5y ago
      Same literature, different assumptions on how easy it is to predict cashflows or how to even go about it. A DCF is after all, discounting future cashflows. If it's all as simple as you say - really - just go start a hedge fund. You can start an LLC in a day, throw some money into a brokerage account and be up and running. There are still plenty of LPs who will invest in a simple long only fund, even with vol, as long as the performance is good.

systemBuilder 5y ago

Exactly true the rise in the cost of next-generation fabs has completely changed the business model so that only foundries can survive. Benjamin Graham analysis is not capable of detecting this inflection point in industry strategy nor can it detect Intel's stubborn refusal to adapt and change!

danielmarkbruce 5y ago
Yup. And by all reports Ben Graham was a brilliant dude. If he were in the game today, I doubt he'd be playing the way he played back in the day. He'd get in there and figure it out.

andrewmcwatters 5y ago

The mathematics of investing haven't changed, but if you have some literature to suggest otherwise, I'd be very interested in reading it. You seem to think that I use these mechanical estimates as the primary method for purchase, but they are not. I'm not sure what your point is about IPOs: they're historically a terrible time to invest, which is common knowledge. And actually all of the companies you have mentioned have easily passed such litmus tests over their life time at different times. Sometimes they're overbought, some times they're oversold. If you buy when they're overbought, you'll end up with a lower IRR than if you hadn't.

danielmarkbruce 5y ago
The math hasn't changed - the competition has. All the insanely obvious stuff is gone. You need real insight now. I didn't make a point about IPOs. I made a point about companies where real insight was required, both to see good investments and not make bad ones. Simple rules like "IPOs are bad", "dont pay x times earnings" etc, they haven't worked in years.
- andrewmcwatters 5y ago
  We are certainly reading two different types of literature on the matter.
  - danielmarkbruce 5y ago
    Same literature, different assumptions on how easy it is to predict cashflows or how to even go about it. A DCF is after all, discounting future cashflows. If it's all as simple as you say - really - just go start a hedge fund. You can start an LLC in a day, throw some money into a brokerage account and be up and running. There are still plenty of LPs who will invest in a simple long only fund, even with vol, as long as the performance is good.