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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: E_K_S who wrote (60541)	3/19/2018 10:06:44 AM
From: Paul Senior	Read Replies (2) \| Respond to of 78744

"It reminds me (w/ hindsight) that a no brainer investment would have been NFLX" Yes, as I say, they are called that in hindsight. Meanwhile in the fray, for any number of reasons, who considered it a no-brainer? Didn't they have competition-- Redbox or something? What do we mean by "no brainer"? Does it mean "an obvious buy"? Then if NFLX were it, it was obvious only if you saw it. In my case, since I'm not a NFLX subscriber, that'd be one reason I never considered it. I overlooked it. Not that I would necessarily buy it if I were aware of it. What do we mean by "no brainer" Does it mean we don't use our brain at all, but just buy rote, mechanically, routinely? That could apply to me as regards Buffett. Because if I see Buffett buying, I will automatically also buy, if I can get the stock at same or preferably lower price than his price. Because I've found that if I can be patient in holding, then most times, there's a profit to be had with the stock. ...But not necessarily and not always. Which limits the amount of money I'm willing to bet.

To: E_K_S who wrote (60541)	3/19/2018 1:19:58 PM
From: Graham Osborn	1 Recommendation Recommended By E_K_S Read Replies (1) \| Respond to of 78744

In his book Zero to One Peter Thiel talks about 0 to 1 vs 1 to N type innovations. 0-1 is about inventing something qualitatively new whereas 1-N is about scaling that machine. Angel investing is all about 0-1 and mature-stage investing is mostly (IMO) about 1-N. What I like about Buffett is he finds these 10-20 year “smooth patches” where a business has a mature product plus a mature economic machine (the balance sheet is solid and earnings are being retained). The truth is that every smooth patch ends sooner or later, but the investment rewards can be great. Microsoft, Google, Facebook, Coke, Apple, Amgen, Celgene, Oracle, Walmart, Washington Post, GEICO, Texas Instruments, IBM, Adobe, Cisco, and various others all had stretches like that. There are other businesses where the product is mature but the economic machine isn’t. In other words, the balance sheet and the IS/ CFS today aren’t what you expect in 10 years, but you think they will get there. I feel like a lot of businesses including AMZN, NFLX, TSLA, TWTR, Uber, AirBnb, and Spotify fall in that bucket. Sometimes there’s a pot of gold at the end of the rainbow and sometimes there isn’t. If there isn’t a pot of gold it becomes more of a momentum game. I like businesses of Category 1 but that’s not to say that some people haven’t gotten insanely rich from Category 2. Just look at Jeff Bezos and Chris Sacca. I’m willing to give up those opportunities if I don’t have a 5-year rear view mirror on a mature economic machine. Momentum games work well when you catch the cycle but can work poorly when you miss it. Businesses that have “already made it” can self-finance through a downturn (e.g. Apple). So the risk is much less with Category 1 in my view. A good term for a Category 1 might be a "gusher" since it's gushing cash here and now in ever-increasing quantities.