First, an important note: We have no beneficial interest for or against Carvana. Carvana has been panned by us here, here, and here, by Grant’s Interest Rate Observer, Seeking Alpha, Medium and by numerous other skilled and historically informed investors. On January 7th of this year, Carvana was the lead out stock in our “Enron look-alikes” list based on a proprietary KCR screen designed to….identify Enrons.
A warning to long-time readers: we are about to agree with Elon Musk and Cathie Woods on something. They have come out against index funds due to the belief that they deprive investors of winners like Tesla (Ms. Woods) and that they have too much voting power (Mr. Musk).
Is EOG A Good Stock to Buy? The chart below shows the performance of natural gas and crude oil exploration and production firm EOG Resources over the last 3 years. Since the stock’s trough in October of 2020, it has risen over 250%, triggering behavioral errors that often give investors the feeling that they “missed” a stock after it rises that much.
To long-time friends of KCR we are “breaking cadence” this Friday. Instead of a chart about stocks we found this three-minute video moving and thought it might resonate with others. KCR and our research team wish everyone a wonderful weekend.
Before we show you how quality and reasonable valuations are the breeding grounds of greatness, let’s talk about a common analytical error.
When analyzing stocks and investment strategies, using bias-free data is a basic and critical first step. For a beautiful explanation, we guide you to Teddy Koker, a researcher at MIT’s Lincoln Labs, elegant walk-through, complete with programming instructions. For those interested in a less complex example, this post is for you.
(And nobody is listening, hence the opportunity). Hillenbrand 60 Second Summary:
• $3.5bn market cap
• Double digit earnings growth
• 2% dividend yield
• Authorization to buy-back 10% of shares outstanding.
• 11% FCF Yield so could buy that stock back from ongoing FCF
• Founded in 1906 – longevity
• If management just avoids making an expensive acquisition, this stock can deliver significant growth & cash returns to shareholders
• We have been proponents of investing in companies that make what you need, not what you want.
• Behavioral errors often give investors the feeling that they “missed” a stock after it has risen
• KCR believes that Hillenbrand lies at the intersection of two powerful themes we have highlighted: the opportunity in small-cap value stocks and finding growth at a reasonable price
Loss Making Companies in the R2500V vs. the R2500G
• Our recent paper, Russell 2500 Growth Index, explained that the R25G had record exposure to loss-making stocks vs. its own history and compared to the Russell 2500 Value Index
The Chart Below Shows:
• the market cap of just software stocks valued at over 10x price to sales is over $6 trillion
• that means that software stocks priced at preposterous levels are now worth ~30% of US GDP
• KCR thanks Scott McNealy for making investment decisions on stocks valued like this simple
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