I haven’t look at CRV for a while, and it was recently covered by another blogger, Expecting Value, which takes the count now to two bloggers that have been skeptical of CRV. I thought I would write a post setting out my thesis again and particularly addressing the issue raised that CRV could be inflating the valuation of its balance sheet.
Last week I was holidaying in France, and when I go away I like to take a stack of reading that I don’t normally have time for. Among my stack were Buffett’s shareholder letters; I’ve read them before but they are always worth a re-read. Upon reading them I came across his thoughts on ‘cigar butt’ investing and wanted to do an article on them because there seems a lot of mis-information about them floating on the web.
I have never been a fan of ‘cigar butts’, and if I recall my positions that have had the highest gains, these have been in growing and strong companies. The market seems to realise true value far more quickly when a company is performing well – and if it doesn’t the business is growing intrinsic value for every year you are waiting.
It’s been a while since I’ve gone over some actual stocks on here, having a low cash balance in my portfolio sort of removes the motivation to research new companies. But it’s about time I got back to the AIM IT Project.
In my last article on the ‘Best Investment for you’ I considered John Paulson’s advice for investors to buy a home. I focused a lot on how to value a house using rental yield to get an idea of whether or not you are overpaying for an asset. What I didn’t do was consider whether John Paulson’s advice was sensible or not and a lot of the discussion in the comments focused on house buying vs renting. So I’m going to rewind and address that question. The easiest way of doing this is to crunch the numbers – lucky for you I’ve tried to do as much of the hard work as possible and here is a model of buying vs renting costs with customizable inputs.
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