WHAT YOU MISSED FROM GEOINVESTING LAST MONTH
September 2022, Volume 2, Issue 8
This month, we are changing things up a little to highlight some useful video clips and discussions that will give you a glimpse into the personalities that have paved the way for many investors in how they approach different strategies to find the best stocks in the market.
Pending your feedback, we would like to make this a staple in our routine because it never hurts to fortify your knowledge with different proven approaches from legends like Peter Lynch, Sir John Templeton, Joel Greenblatt, and more.
To supplement these highlights, we also will be pulling from our own catalog of events that we’ve hosted where we pick the brains of well-respected peers – in this month’s case, Tobias Carlisle and Egor Romanyuk and Quim Abril.
This month we wanted to highlight a particular theme that is relevant in today’s market environment – dealing with volatility and our belief that traditional value investing strategies are about to stage an epic comeback.
VIDEOS IN FOCUS
Featured Video #1
Peter Lynch, former manager of the Magellan Fund at Fidelity, addresses the topic of volatility. From a 1994 National Press Club meeting.
- This segment is especially relevant now that markets are volatile
- To reinforce the concept discussed here, we like to add some context from Quim Abril, with whom we spoke just recently, where he touched upon mitigating risk in markets such as the one we are in right now, speaking on volatility and the indicators that convey we are in the midst of recession, Quim said:
“And right now, that indicator is telling you that we are in recession. We don’t know right now if the recession is going to pass in one quarter or five. We don’t know that, but it makes sense to hedge your portfolio when [there is an indication] that the probability of a recession is high, and this is what I’m doing right now, I’m expensing maybe 1½ percent of my portfolio in put options to try to protect the drawdown for the second [half of the year].”
- Peter Lynch discusses volatility and its underlying opportunities so long as people understand what they own.
- “We’ve had 15 declines in 93 years. So, every six years, the market’s going to have a 25% decline. That’s all you need to know. You need to know the market’s going to go down sometime. If you’re not ready for that, you shouldn’t own stocks. And it’s good when it happens. If you like a stock at 14, it goes to 6, that’s great.”
- The informed investor is able to take advantage of these declines by determining growth potential in the stocks they own during the decline.
Featured Video #2
Joel Greenblatt, co-chief investment officer and managing principal at Gotham Asset Management LLC, defines value investing, discusses passive versus active investing and the company’s overall strategy. He speaks with Erik Schatzker on “Bloomberg Markets.”
- Joel Greenblatt discusses his strategy of value investing – to accurately value a business and then to buy it at a discount.
- Greenblatt points out that people do not often understand the underlying thesis behind each individual pick, but instead look for immediate returns. Because of this, when a stock is doing well, people pile in, and when it is doing poorly, people pile out.
- He discusses his successes with a hybrid combination of active + passive management called the Gotham Index Fund, which combines an index investment with an active long/short overlay.
Featured Video #3
Sir John Templeton discusses his investment strategy:
- John Templeton’s strategy involves searching the world for companies that have the lowest market price at the time in relation to his estimate of the company’s value.
- “To buy when others are despondently selling and to sell when others are avidly buying requires the greatest fortitude and pays the greatest reward.”
Featured Video #4
Tobias Carlisle and Maj talk about the market going down and investing in the micro caps market being tough for the last decade –
- Tobias Carlisle, Principal of Acquirers Funds LLC, believes that during this year of volatility in the market, it would be a good time for value investors to look for undervalued stocks in the small, micro, and midcap markets
- Tobias looks at a five year timeframe when going long on an investment instead of looking to gain returns over the next quarter. Three to five years would give companies the time to withstand the current market conditions and also give investors time to study the fundamentals of the companies they are investing in.
- He states “Most of the time, value tends to do pretty well. And the fact that it’s become so beaten up in the last few years, it sort of became the laughing stock. People have been conditioned to buy the dip in those large growth stocks and that’s what they continue to do”
Featured Video #5
As part of an Avoiding the Crowd episode in May 2021, full time investor Egor Romanyuk and Maj talk about the new retail investor, and how in the end, stock prices always come back to reflect more appropriate valuations.
- Maj Soueidan and Egor Romanyuk discuss how retail investment is a positive force since it brings a lot of new people and new interest into the investing space. However, it is important that new investors pay attention to value investing and company valuation as opposed to investing in “hype stocks” which are more often pump and dump trends.
- Egor explains “The thing about the market is it always comes down to valuation, they could fly really high or go really low. Whatever time it takes, in the end it’s still gonna come back to valuation.”
Featured Video #6
How top rated microcap fund manager Quim Abril manages risk by hedging with options.
- Quim Abril, President and Portfolio Manager of Draco Global, discusses his investment strategy of being long wherein 90% of his portfolio is invested in equities and 10% in cash as a reserve for new investment ideas. He looks at leading indicators that point to a market increase or decline.
- Most young investors haven’t navigated a bear market, experiencing a decrease in portfolios by 50% or 60%. However, it’s important to experience pain because it can help shape your investment character and style
RESEARCH AND IDEA PIPELINE
PROGRESS, YEAR TO DATE
GeoResearch Articles & RFTsPodClipsFireSide ChatsContributor ArticlesManagement Morning Briefings
WHAT YOU MAY HAVE MISSED THIS MONTH
Fitlife Brands Inc (OTC:FTLF) is a manufacturer and marketer of nutritional supplements for health conscious consumers in the United States and internationally. We’re going to start watching FTLF a little closer due to the contents in a mid-year shareholder letter that the company issued in a July 8k in conjunction with its December 2021 year end results. You can see our prior coverage on FTLF here. GeoInvesting research contributor, Avram Fisher, published his bullish thesis on July 29, 2016 at a price of $3.45. We subsequently published a ‘Reasons For Tracking (RFT) piece on the company on November 23, 2018 at a price of $1.38 (report prices adjusted for splits – 1:10 on 4/16/2019 and 4:1 on 12/8/2021).
For you on this labor day, keeping with our promise to break out the stock pitch clips from Maj’s discussion with Quim Abril, they are now available for viewing. Extracted from the August 29, 2022 Podcast between Maj and Quim are segments on…
Continuing to Converse About the Strategies Behind GeoInvesting’s Stock Idea Discovery [GeoWire Weekly No. 47]
It’s ironic that company filings, earnings conference call transcripts, social media, letters to shareholders, data sources, and the internet have made it easier for investors to find InfoArb and use it to their advantage, but so many fail to do so. Why? Besides possibly not having a time to go through all these sources of information, now that more information is available than ever, it’s everywhere, so where do you start? We find the conference call transcripts to be particularly valuable resources. It’s exciting to know that when companies report their quarterly earnings, the “accomplice” to great findings might be that not-so-well-attended live conference call. The call’s transcript will then reside on platforms like Seeking Alpha and Sentieo, which we happen to subscribe to.
It’s Not Just A List, But a Discussion on the Top Things to Look For in Microcap Investments [GeoWire Weekly No. 46]
We believe that stock ideas coming to fruition, especially as a direct result of many of the tenets we use to evaluate the fitness of an investment, are the bright spots when the pervasion of negativity slams the market. These tenets, or as we like to call them, Tier One Microcap Criteria, are at the core of our discoveries in the microcap investment arena. Maj and our new GeoInvesting team member, Sanjay Amarnani, discussed the top 10 of these criteria in detail.
We are in the thick of the calendar Q2 earnings season. This 2022 quarter in particular is a bit of an anxious one since we want to see many of the companies we cover start to follow through with hopeful statements they might have made several quarters back while covid disrupted business operations across the board. Investors are getting weary, and as some larger cap companies are leading the way in what seems to be a stealthy market recovery, it could be an indication that this success is a macrocosm of things to come across the board.