Apple 'mego-ecosystem'

Apple 'mego-ecosystem'

Have been considering adding to position in Apple (AAPL) recently. It's been on my mind for the last two years as I saw my AAPL position double.

However recently joined a new group Facebook group 'Global Value Investors' which reminded me of the opportunity: https://www.facebook.com/groups/859829347419940/

Read some interesting articles for research so far. In particular the two below were especially helpful in getting back up to date with the company & Icahn's current views:

Carl Icahn's 2015 May letter to Tim Cook Apple CEO: http://www.shareholderssquaretable.com/carl-icahn-issues-open-letter-to-tim-cook/


Icahn sells stake in Netflix and believes Apple holds the similar opportunities for investors: http://www.bloomberg.com/news/articles/2015-06-24/carl-icahn-exits-netflix-stake-after-stock-doubled-this-year

Cheers
SS

Chamillionaire still ridin'

My mother taught me three things, respect, knowledge; the search for knowledge. It's eternal, eternal journey and not to be quiet. If there was something on my mind to speak it and to also listen. She told me this joke, That God gave you two ears to listen and one mouth to speak. And that's where the knowledge comes from, listening. And once you get the knowledge then you speak it." 

-Tupac Shakur

I spoke to my brother on the weekend who mentioned the rapper / entrepreneur Chamillionaire was now involved with in the tech venture capital industry. He's actually now an entrepreneur in residence at Los Angeles venture capital firm Upfront Ventures

After reading the blog by Upfront Ventures general partner Mark Suster I found some interesting points about business and entrepreneurship, two of which I'll summarise below.

1. Know when it's better to beg for forgiveness (or not) than to ask for permission.  He did this by putting some music online for streaming when he knew the record label would be against the idea. However after it led to more recognition and eventual success.“It would be successful and after it was successful nobody would say anything.”

2. Confidence comes from experience. “All the failures that people get so scared of is what I did.  It made me confident about what would work.  Confidence doesn’t come from being a ‘know-it-all,’ it’s because I’ve done this 10 times already.”


Later I also watched some youtube interviews and found another interesting point on the importance of auditing your income. During one interview Chamillionaire mentioned fellow artist Nelly was the first person who recommended he get an audit of his royalties. After some investigation he hired the same auditor that Jay-z used and found his record label had missed paying him $700,000! The interview is worth a watch for anyone interested in the future of music industry.


Lastly for those who want to get a taste or miss his biggest hit song Ridin' here is the link below. Enjoy!

Chamillionaire featuring Krazie Bone - Ridin' : https://youtu.be/CtwJvgPJ9xw

Cringely on reinvestment

Awesome post at Bob Cringely's blog about reinvestment by management - especially for investors in tech companies. Enjoy

Link here:

http://www.cringely.com/2015/06/03/autodesks-john-walker-explained-hp-and-ibm-in-1991/

Share structure on small cap performance

Came across an interesting article today.

The author compares share structure of small caps to their share performance.

The first time I had heard of this from memory:

http://smallcapdiscoveries.com/why-share-structure-tells-you-more-about-a-company-than-you-realize/

Li Lu quote

Li Lu "I'm not ideologically opposed to anything. I am against ideology."

Heilbrunn Center for Graham & Dodd Investing - CSIMA interview - Issue XVIII

Counter Intuition from Deep Value

Deep Value excerpts of interest on counter intuition:
Excerpt 3:


I'm uploaded these quotes as I find most people including myself often mistake and automatically correlate company business performance to their stock price performance.

Excerpt 1:
"As Graham theorized, and Mauboussin has demonstrated, it is the rare company that does not return to the pack. In most cases competition and other corrective forces work on the highly profitable business to push its returns back to the mean. The better bet is the counterintuitive one: deep undervaluation anticipating mean reversion. It’s Warren Buffett in his American Express investment, rather than his See’s Candy investment. An appreciation of mean reversion is critical to value investment."

Excerpt 2:
"These results establish two propositions. First, valuation is more important than growth in constructing portfolios. Cheap, low-growth portfolios  systematically outperform expensive, high-growth portfolios, and by wide margins. The second, more counterintuitive finding is that, even in the value portfolios, high growth leads to underperformance and low or no growth leads to outperformance. This is a fascinating finding. Intuitively, we are attracted to high growth and would assume that high-growth value stocks are high-quality stocks available at a bargain price. The data show, however, that the low- or no-growth value stocks are the better bet. It seems that the uglier the stock, the better the return, even when the valuations are comparable."

Excerpt 3:
"It wasn’t an improvement in the fundamental performance of these unexcellent companies that led to the market price outperformance. Like Peters’ excellent companies, the operating performance of the unexcellent companies declined on average, although not to the same degree as the excellent companies. In the unexcellent companies, 67 percent experienced a decline in asset growth rates, 51 percent had lower average returns on capital, 51 percent had lower average returns on equity, and 56 percent had lower average returns on sales. Strikingly, examined at the end of the five-year period, Peters’ excellent companies were still more attractive on a fundamental basis than Clayman’s unexcellent companies. What stands out, however, is that only three of the unexcellent companies had a decline in the ratio of price-to-book value, which means that the market revalued up 36 of 39 companies. This amounted to an average revaluation across the portfolio of 58 percent, a clear example of reversion to the mean."

Seth Klarman quote on analysis

Seth Klarman quote on the time spent analysing stocks:

But information generally follows the well-known 80/20 rule: the first 80 percent of the available information is gathered in the first 20 percent of the time spent. The value of in-depth fundamental analysis is subject to diminishing marginal returns.

Most investors strive fruitlessly for certainty and precision, avoiding situations in which information is difficult to obtain. Yet high uncertainty is frequently accompanied by low prices. By the time the uncertainty is resolved, prices are likely to have risen.

Investors frequently benefit from making investment decisions with less than perfect knowledge and are well rewarded for bearing the risk of uncertainty.

The time other investors spend delving into the last unanswered detail may cost them the chance to buy in at prices so low that they offer a margin of safety despite the incomplete information.