Quick Takes

Every year since the launch of our website, we have posted a piece reviewing KCR’s work from the prior year. Today’s post continues that tradition. We would like to thank our rapidly growing list of readers for their support, engagement, and thoughtful kindness. KCR has updated all the charts below through December 31, 2023.

“Small, independent, decentralized business of the kind that built up our country, of the kind that made our country great, first, is fast disappearing, and second, is being made dependent upon monster concentration.” “I think that we are approaching a point where

In August of 2021, we published Junk Stocks Funded by Junk Bonds, which noted that high-yield spreads had hit record lows. Our view was that record low-spreads on record-low nominal yields were a recipe for ruin. Using the Fed’s definition of financial fragility, we highlighted a group of equities that scored poorly on the Fed’s durability test and ranked poorly in our models.

“Disturbing research warns AI may be the ‘Great Filter’ that wipes out human civilization” -The Independent “…artificial general intelligence or AGI is AI’s ‘big brass ring’ and will become a trillion-dollar industry by the 2030s…it will also do good in the world.” -Business Insider “What is certain is that creating [artificial general intelligence] AGI is the explicit aim of the leading AI companies, and they are moving towards it far more swiftly than anyone expected...

At the start of the year, KCR penned ARKK vs. QQQ in the Dot.Com Bust and Specious vs. Spurious Correlation. The point of both papers was to warn readers that after speculative peaks, stock prices drop swiftly but then rally violently. Post-bubble price patterns were impossible to predict but precise in their message: speculative counter-rallies among the “fallen generals” of speculative cycles were the rule, not the exception...

In 1958 Philip A. Fisher published Common Stocks and Uncommon Profits in the hope of giving investors a systematic process to follow when seeking out great companies. Widely respected and admired, the book creates a process for an investing philosophy focused on growth. Our team shares some variant of Buffett’s quip that Berkshire Hathaway is “85% Graham and 15% Fisher.” 85% of Buffett’s investment process comes from...

Spurious vs. Specious: The Merriam-Webster dictionary tells us that despite both terms featuring deceptive or deceitful in their respective definitions, there is a surprising difference between “specious” and “spurious.” Spurious, of “spurious correlation” fame, is explained as outwardly similar or corresponding to something without having genuine qualities. Specious adds an element of appeal or allure.

2020 was a brutal year for KCR. US bonds rose to offensive levels, offering investors a 0.50% yield, while equities soared to valuations above the dot.com peak. Our evidence-based investment process is driven by historical data, algebra, and common sense. By the end of 2020, there was nothing less common than common sense. Basic math's were tossed out the window and replaced by empirically impossible narratives spouted by promotional fund managers and...

Market Prices Suggest the Movement to a Green Grid Will Fail - Quick piece on some of the market’s cheapest and most unpopular stocks.

How the Rotation from Risk On to Risk Off is…Creating Risk - The Oxford University Press tells us that the principal meaning of being “flush with cash” is having a lot of money, usually for a short period of time. The last part of the definition is interesting considering investors’ newfound interest in holding abundant piles of cash. A recent article headlined with “Retail money market funds inflows are the highest in 30 years as investors seek safety.”

Tap Dancing with TINA & a Moment to Remember in US Monetary Policy - Macro Investing: The Rising Pressure of a Decade of Fiscal Profligacy - KCR’s investment process does not use macro inputs or engage in macro trading. We use historical security-level data around valuation, profitability, quality, and other metrics to identify opportunities for short sellers and long investors alike. Macro investing can be a challenging endeavor.

What Short Sellers, the Voting and Weighing Machine are Offering Investors Today - KCR’s data-driven and historically informed process helps us avoid bubbles, find mispriced quality, and identify stocks that are simply too cheap.