House Buying vs Renting

August 1, 2014 1 Comment

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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The best and biggest investment for you

July 28, 2014 8 Comments

John Paulson gave an interview on CNBC in which he described the “best investment for a retail investor”. To some it may come as a surprise that this wasn’t some stock or bond, it was to buy a home (or primary residence).

For many this will represent a large investment, possibly larger than the whole of their equity investments put together. So why is John Paulson saying it is a good idea?

Well over a period of 20-30 years the chances of house prices being below where you buy are minimal due to inflation, but in the short term it can create financial pressure on you. I look at how you can assess house prices in the short term and estimate intrinsic value.

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Technical Analysis for the Value Investor

July 21, 2014 1 Comment

I like to think of myself as open-minded, I try to not to let my pre-existing biases get in the way of learning new things and new ideas. But I also like to think of myself as a skeptic – unless someone can show evidence or proof that an idea is correct, I’ll have a hard time accepting it.

So when it comes to Technical Analysis you can see why I am of two conflicting minds. Like most value investors, I have a tendency to dismiss TA and just focus on valuation, but after attending some friendly get togethers with other investors in London I discovered there are people out there that have been using TA to make money for decades – maybe there is something to this TA after all?

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When cash isn’t really cash – $BDL

July 14, 2014 11 Comments

I recently ran one of my stock screens in the US to try and find some overlooked companies and I came across one company, Flanigan’s Enterprises ($BDL) which runs a chain of restaurants. It appeared cheap on an EV/EBITDA basis, but on further investigation wasn’t appealing. I wanted to go over it because it’s a great example on how investors can get caught out relying on such multiples without doing further research. The problem is: when is a company’s cash really free cash and not an essential business asset?

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Where to invest?

July 10, 2014 3 Comments

If you regularly search for undervalued companies then it probably hasn’t escaped your notice that the US and UK markets are trading at much higher valuations than they were a few years ago. That makes it harder to find bargains – but not impossible. But rather than try harder, why not start looking at cheaper markets? Here are 30 international markets and their valuations.

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Half year portfolio report

July 4, 2014 Leave a comment

It’s that time of year again, I review my portfolio performance every 6 months as a compromise between short term volatility and waiting too long between reviews. The first half of 2014 has been a bit of a roller coaster for my portfolio, driven mainly by swings in the price of my biggest holding Craven House Capital. The rest of the portfolio has been much smoother, seeing nice steady gains.

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The Blog Experiment

June 24, 2014 3 Comments

I’ve always wondered whether I’m wasting my time when researching companies and if instead I should just blindly follow the recommendations of other bloggers I like. I decided to put the theory to the test in what I call the Blog Experiment, where I track the buys/sells of select blogs since 2012. Here are the preliminary results.

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Blog experiment and links

June 20, 2014 3 Comments

I follow quite a few blogs, it’s a great way to get ideas for investments without doing much work. I don’t usually follow bloggers into investments, it’s rare for me to be convinced of a thesis and all too often I find myself unable to get over some fundamental issue I have with the investment. But in the last couple of weeks I’ve seen an unusual number of ideas that I really liked. Firstly I thought I’d share my favorites with you.

I then started thinking, I follow a lot of blogs where the authors have impressive track records and I trust their judgement even if I don’t invest in everything they do. I wondered how I would perform if I skipped due diligence and just made investments in their recommended stocks, spread out over a few blogs to minimize the risk. So I thought I’d do a blog experiment.

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