A Few More Value Traps

Some more examples of net-net value traps and why they are poor investments. These ones are super easy to point out so it will be a quick run through. 1. Ocean Power Technologies Inc (NASDAQ: OPTT) OPTT is a company which sells innovative products converting wave power into electricity, mainly for ocean defense systems, offshore [...]

Sears Hometown and Outlet Stores (SHOS) is a Value Trap

I want to make the case for qualitative analysis and research when looking at net-nets. Many deep-value investors apply a blind basket approach and discuss the bias regarding expert opinion- correctly in my opinion, as a glut of information can definitely cloud decision making and affect returns. Despite this I strongly believe that research and [...]

How To Avoid Value Traps

  You can get excellent returns investing in mediocre businesses. Warren Buffett, who advocates investing in businesses with a competitive advantage which generate high returns on invested capital, once said that: “My cigar-butt strategy worked very well while I was managing small sums. Indeed, the many dozens of free puffs I obtained in the 1950s made [...]

What You Can Learn From Warren Buffett’s Career

In any lecture or interview about investing, Warren Buffett often says that you should buy great businesses at fair prices. The idea being that as long as you purchase a great business at a reasonable price, the firm will generate higher earnings in the future than it does now, increasing dividends while using retained earnings [...]

Netflix’s Pie in the Sky Valuation

The valuation of Netflix is in the stratosphere and continues to float away from Earth. If we watch long enough, it may reach outer space. I wanted to present Netflix (NASDAQ:NFLX) as an example of what can go wrong when people become optimistic and emotional about stocks. It also shows how valuing earnings can be very difficult [...]

How Many Eggs Do You Need in Your Basket?

There are two general approaches to diversification in the investor population. The first is to spread your bets and attain an average to somewhat better than average result with basic efforts. The age old quote below sums up this philosophy: "Don't put all your eggs in one basket" - Unknown The second approach is to [...]

The Empirical Evidence for Net-Net Stocks

  “It always seemed, and still seems, ridiculously simple to say that if once can acquire a diversified group of common stocks at a price less than the applicable net current assets alone- after deducting all prior claims and counting as zero the fixed and other assets- the results should be quite satisfactory” – Benjamin [...]

How I got a 53% Return from Leapfrog (LF) in 20 days

I got pretty lucky with this one. I bought it at $0.64 which was about 50% of its NCAV at the time so no doubt it was a good deal. I was very hesitant to buy it for a few reasons: Leapfrog sells educational/gaming devices for children provided by its unique tablets. Sales have been [...]

Why Warren Buffett’s Cigar Butts Still Exist

I explain the basics of net-net stocks and how they are able to consistently beat the market in a short and free eBook which you can download here, so to ensure that I don’t repeat myself too much I will only provide a short summary of them here before diving into this post. Summary of [...]