The Art of Stock Picking Returns

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Why did the investing public turn its attention from dividends, from asset values, and from average earnings to transfer it almost exclusively to the earnings trend, i.e. to the changes in earnings expected in the future? The answer was, first, that the records of the past were proving an undependable guide to investment; and, second, that the rewards offered by the future had become irresistibly alluring. “The notion that the desirability of a common stock was entirely independent of its price seems incredibly absurd. Yet the new-era theory led directly to this thesis... An alluring corollary of this principle was that making money in the stock market was now the easiest thing in the world. It was only necessary to buy ‘good’ stocks, regardless of price, and then to let nature take her upward course. The results of such a doctrine could not fail to be tragic.” -Graham & Dodd, Securities Analysis, 1934 “Men…recover their senses slowly, one by one.” -Charles Mackay, Extraordinary Popular Delusions and the Madness of Crowds Those quotes led Pilgrim Global’s recent missive to investors. Since 2015, Pilgrim’s founder, Darren Maupin, has generated a gross IRR of 41% per annum: a staggering 11x invested capital. We do not highlight Pilgrim’s approach due to the outsized returns but rather to highlight the method of achievement. The firm embraces a concentrated deep-value approach predicated on embracing a margin of safety. Get our White Papers direct to your inbox: SUBSCRIBE Intellectual affinities aside, Pilgrim shares KCR’s belief that capital allocation has consequences. Few quotes better epitomize that belief than the ones above. As we explained in our piece on ARKK vs. QQQs, recent market action has seen a speculative resurgence nearly identical to the whipsaws seen in the fallout from the dot.com bubble. We believe this resurgence in speculation will be temporary and end poorly for participants. The upside is that evidence-based, conservatively inclined investors are drowning in opportunity. What follows is KCR’s attempt to create a simple walk-through of the risks and opportunities offered today. We believe both the structure and implications of this paper are easy to grasp. Yet implementation could be difficult for some as it requires investors to do the following three things: Silence the speculative urge that still courses through markets today Reduce exposure to index funds, the most consensus investment strategy in the history of public markets, and reduce exposure to private equity with high fees, leverage, and low reported volatility Recognize volatility in public markets is a gift, price distortions are at the widest levels in 40 years, and embrace disciplined, low-cost, evidence-based stock pickers For many, these ideas are heresy. A decade from now, we believe they will be seen as obvious. Let’s rewrite those three concepts in more colloquial language and see if you agree: Avoid speculating on stocks promising profits in the distant future Don’t follow the crowd in the stock market and stop paying high fees for opaque private products that require lots of leverage with empirically dubious reporting Hire active managers who pick stocks using proven methods KCR believes the crisis of capital misallocation is upon us. For those married exclusively to groupthink, the risks are myriad and conventional failure is likely. The opportunities have rarely looked better for those willing to embrace the evidence. Part 1: Avoiding Speculation Made Simple KCR spent much of 2020-2021 highlighting the surfeit of obscene speculation. For new readers, our piece Short Term Stock Speculators Beat a Hasty Retreat offers a cornucopia of charts documenting the epic misallocation of capital. The inventory of the absurd on those pages defies belief. Possibly more remarkable is the scope and persistence of these speculative shares. The chart below shows the percentage of the Russell 3000 that either lose money or have interest expenses greater than operating income. Over 33%, or ~1,000 of America’s largest listed companies, lose money or cannot afford to pay their interest expense. Let that sink in. We have dubbed this group the “Loss Makers and Zombies.” YOU ARE NOW READING BASIC MEMBER LEVEL CONTENT As the chart on the next page shows: consistent with intuition, companies that lose money or can’t afford to pay their interest expenses tend to perform horribly over the long haul. (Remember…there’s almost never been more of them than today) https://kailashconcepts.com/wp-content/uploads/2022/12/image003-274x300.pnghttps://kailashconcepts.com/wp-content/uploads/2021/11/icons8-lock-50.png Subscribe now to unlock the full content 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Z3JhZGllbnRfc3RhcnRfcG9zaXRpb249IjAiIGdyYWRpZW50X2VuZF9wb3NpdGlvbj0iMTAwIiBncmFkaWVudF90eXBlPSJsaW5lYXIiIHJhZGlhbF9kaXJlY3Rpb249ImNlbnRlciBjZW50ZXIiIGxpbmVhcl9hbmdsZT0iMTgwIiBzdHlsZV90eXBlPSJkZWZhdWx0IiBhbmltYXRpb25fZGlyZWN0aW9uPSJsZWZ0IiBhbmltYXRpb25fc3BlZWQ9IjAuMyJdCjxwPllvdSBkb24ndCBoYXZlIGFjY2VzcyB0byBvdXIgbWVtYmVyc2hpcCBsZXZlbCBjb250ZW50PC9wPgpbL2Z1c2lvbl90aXRsZV1bL2Z1c2lvbl9idWlsZGVyX2NvbHVtbl1bZnVzaW9uX2J1aWxkZXJfY29sdW1uIHR5cGU9IjJfNSIgdHlwZT0iMl81IiBsYXlvdXQ9IjFfMSIgYWxpZ25fc2VsZj0iYXV0byIgY29udGVudF9sYXlvdXQ9ImNvbHVtbiIgYWxpZ25fY29udGVudD0iY2VudGVyIiB2YWxpZ25fY29udGVudD0iZmxleC1zdGFydCIgY29udGVudF93cmFwPSJ3cmFwIiBzcGFjaW5nPSJ5ZXMiIGNlbnRlcl9jb250ZW50PSJubyIgY29sdW1uX3RhZz0iZGl2IiB0YXJnZXQ9Il9zZWxmIiBoaWRlX29uX21vYmlsZT0ic21hbGwtdmlzaWJpbGl0eSxtZWRpdW0tdmlzaWJpbGl0eSxsYXJnZS12aXNpYmlsaXR5IiBzdGlja3lfZGlzcGxheT0ibm9ybWFsLHN0aWNreSIgb3JkZXJfbWVkaXVtPSIwIiBvcmRlcl9zbWFsbD0iMCIgbWFyZ2luX3RvcD0iMTBweCIgbWFyZ2luX2JvdHRvbT0iMHB4IiBob3Zlcl90eXBlPSJub25lIiBib3JkZXJfc3R5bGU9InNvbGlkIiBib3hfc2hhZG93PSJubyIgYm94X3NoYWRvd19ibHVyPSIwIiBib3hfc2hhZG93X3NwcmVhZD0iMCIgYmFja2dyb3VuZF90eXBlPSJzaW5nbGUiIGdyYWRpZW50X3N0YXJ0X3Bvc2l0aW9uPSIwIiBncmFkaWVudF9lbmRfcG9zaXRpb249IjEwMCIgZ3JhZGllbnRfdHlwZT0ibGluZWFyIiByYWRpYWxfZGlyZWN0aW9uPSJjZW50ZXIgY2VudGVyIiBsaW5lYXJfYW5nbGU9IjE4MCIgbGF6eV9sb2FkPSJhdmFkYSIgYmFja2dyb3VuZF9wb3NpdGlvbj0ibGVmdCB0b3AiIGJhY2tncm91bmRfcmVwZWF0PSJuby1yZXBlYXQiIGJhY2tncm91bmRfYmxlbmRfbW9kZT0ib3ZlcmxheSIgZmlsdGVyX3R5cGU9InJlZ3VsYXIiIGZpbHRlcl9odWU9IjAiIGZpbHRlcl9zYXR1cmF0aW9uPSIxMDAiIGZpbHRlcl9icmlnaHRuZXNzPSIxMDAiIGZpbHRlcl9jb250cmFzdD0iMTAwIiBmaWx0ZXJfaW52ZXJ0PSIwIiBmaWx0ZXJfc2VwaWE9IjAiIGZpbHRlcl9vcGFjaXR5PSIxMDAiIGZpbHRlcl9ibHVyPSIwIiBmaWx0ZXJfaHVlX2hvdmVyPSIwIiBmaWx0ZXJfc2F0dXJhdGlvbl9ob3Zlcj0iMTAwIiBmaWx0ZXJfYnJpZ2h0bmVzc19ob3Zlcj0iMTAwIiBmaWx0ZXJfY29udHJhc3RfaG92ZXI9IjEwMCIgZmlsdGVyX2ludmVydF9ob3Zlcj0iMCIgZmlsdGVyX3NlcGlhX2hvdmVyPSIwIiBmaWx0ZXJfb3BhY2l0eV9ob3Zlcj0iMTAwIiBmaWx0ZXJfYmx1cl9ob3Zlcj0iMCIgYW5pbWF0aW9uX2RpcmVjdGlvbj0ibGVmdCIgYW5pbWF0aW9uX3NwZWVkPSIwLjMiIGxhc3Q9InRydWUiIGJvcmRlcl9wb3NpdGlvbj0iYWxsIiBmaXJzdD0idHJ1ZSIgdHlwZV9tZWRpdW09IjJfNSIgbWluX2hlaWdodD0iIiBsaW5rPSIiXVtmdXNpb25fYnV0dG9uIHRhcmdldD0iX3NlbGYiIGhpZGVfb25fbW9iaWxlPSJzbWFsbC12aXNpYmlsaXR5LG1lZGl1bS12aXNpYmlsaXR5LGxhcmdlLXZpc2liaWxpdHkiIHN0aWNreV9kaXNwbGF5PSJub3JtYWwsc3RpY2t5IiBjb2xvcj0iY3VzdG9tIiBsaW5lYXJfYW5nbGU9IjE4MCIgc3RyZXRjaD0ieWVzIiBpY29uX3Bvc2l0aW9uPSJsZWZ0IiBpY29uX2RpdmlkZXI9Im5vIiBhbmltYXRpb25fZGlyZWN0aW9uPSJsZWZ0IiBhbmltYXRpb25fc3BlZWQ9IjAuMyIgYWNjZW50X2NvbG9yPSJ2YXIoLS1hd2ItY29sb3IxKSIgYWxpZ25tZW50X3NtYWxsPSJjZW50ZXIiIGxpbms9Imh0dHBzOi8va2FpbGFzaGNvbmNlcHRzLmNvbS9teS1hY2NvdW50L3N1YnNjcmlwdGlvbnMvIiBib3JkZXJfY29sb3I9InZhcigtLWF3Yi1jb2xvcjUpIiBib3JkZXJfdG9wPSIxcHgiIGJvcmRlcl9yaWdodD0iMXB4IiBib3JkZXJfYm90dG9tPSIxcHgiIGJvcmRlcl9sZWZ0PSIxcHgiIGFsaWdubWVudD0iY2VudGVyIl1DaGVjayB5b3VyIHN1YnNjcmlwdGlvbiBbL2Z1c2lvbl9idXR0b25dWy9mdXNpb25fYnVpbGRlcl9jb2x1bW5dWy9mdXNpb25fYnVpbGRlcl9yb3ddWy9mdXNpb25fYnVpbGRlcl9jb250YWluZXJd YOU ARE NOW READING BASIC MEMBER LEVEL CONTENT As the chart below shows: consistent with intuition, companies that lose money or can’t afford to pay their interest expenses tend to perform horribly over the long haul.(Remember…there’s almost never been more of them than today)The chart below shows the compound return on $1 to: Dark blue line: R3000 companies that lose money or cannot afford to pay their interest expensesLight blue line: R3000 companies that earn money and can afford to pay their interest expensesThis is not complicated. Don’t give your money to companies that lose money or cannot afford to pay the interest on debt they owe. Those indebted companies have to pay back the principle as well as the interest.The table below shows the fundamentals of three groups of stocks:1. First row: the Loss Makers and Zombies are incinerating cash at a startling -5.7% of enterprise value (FCF/EV). Looking across that top row. The only positive metric is three-year sales growth at 81%2. Second row: this is the Russell 3000’s value-weighted fundamentals. While hardly impressive, there is a step-change improvement from the Loss Makers & Zombies.3. Third row: these are the fundamentals of buying the Russell 3000 that excludes the Loss Makers and Zombies – the equivalent of the light blue line in the chart above. Considering this is an incredibly weak two-factor screen, the improvement in fundamentals is startling. FCF/EV jumps ~20% from 2.7% to 3.2%, and yet you end up with a collection of companies that have higher ROEs, double the net margins of the broader index, and grow sales at a nearly identical rate (48% vs. 50%, last column).Part 2: Index Funds - Don’t Follow the Crowd in the Stock Market with All Your MoneyWhen we write the second rule in colloquial language, it almost seems insulting. “Don’t follow the crowd with all your money.” Ouch. Yet no insult is intended.KCR is merely highlighting the fact that passive money has overtaken actively managed money. We cannot be certain, but it seems unlikely there has ever been a time in history when so much money followed the same strategy. Buying stocks in proportion to how big they are agnostic of valuation hardly strikes us as compelling.Low-cost index funds are the herd today. Despite overwhelming evidence of inefficient markets, the crowd has embraced the efficient market hypothesis like never before. Once again, we believe the case against their exclusive use is quite simple.The chart below updates our favorite metric for estimating long-run equity returns. We have discussed the efficacy of Warren Buffett’s market cap to GDP metric both at length and briefly.Needless to say, the recent sell-off in equities from the peak on December 31st of 2021 has left us hovering above the peak of the dot.com mania. That is what you are getting when you buy the index today. Let us remind you: a decade after the peak in the dot.com bubble investors were left with -16.7% less money than when they began. Valuation tools like Mr. Buffett’s are useless for timing markets. But they are powerful signposts for estimating long-run returns.Over the next decade, this measure suggests investors should expect ~0% returns from equities. Note: KCR has highlighted the fact that market cap to GDP could be understating the valuation risk due to the explosion in private equity, which now holds assets valued at ~30% of US GDP, according to McKinsey.There are numerous rationalizations for why the valuation metric is flawed and why this time is different. We are an open-minded lot at KCR. Despite receiving numerous arguments about why the measure is broken, we have yet to find one that invalidates such an empirically and intellectually robust measure.In 1999 Mr. Buffett gave an interview explaining why this metric is such a powerful predictor while tying together interest rates, wages, and tax rates. Our piece Economic Cycles and Mean Reversion, put the arithmetic proof behind Mr. Buffett’s comments and provided access to a simple four-input S&P 500 calculator.The big takeaways are that, aside from valuation, interest rates, terminal multiples, and margins matter.The chart below updates the arduous work that went into rebuilding Mr. Buffett’s margin metric with a best estimation of point-in-time data. The results are stunning. Margins have gone higher.At 10%, they are officially at 100-year highs. A full 1% higher than in 1929. KCR believes this is wholly untenable. A mix of onshoring, friendshoring, wage gains from labor, inflation, and taxation all strike us as massive headwinds.For those who believe margins have reached a “permanently high plateau,” we wish you luck. For those who believe in capitalism, innovation, and democracy, we encourage prudence.Let’s move on to the abundance of opportunities today.Part 3: Hire Active Managers Who Pick Stocks Using Proven MethodsMany of today’s investors came of age in the post-GFC era. Financial repression created outsized awards to leveraged speculation. As the leading quote from Graham & Dodd about 1929 demonstrates: this is hardly a new phenomenon.While Benjamin Graham’s teachings have been temporarily out of fashion, KCR would note that his investment process was a wonderful example of the benefits of using a rules-based or quantitative system. Unlike the quants who make headlines with high-speed trading programs, Graham’s rules embraced fundamental data much like KCR’s own work.We have built and released our model portfolios since shortly after our firm’s inception in 2010. With long holding horizons and evidence-based factors that have stood the test of time, they seek to optimize between valuation, earnings quality, and balance sheet strength. In and out of sample results have been strong across market cap and style boxes.For the purposes of this paper, we will show the incredible value spreads on offer by looking at our Large Cap Core and Small Cap Core Model portfolios vs. the Russell 3000 Index used throughout this paper.The chart below takes the price-to-sales multiple (P/S) of the Russell 3000 and subtracts out our Large Cap model portfolio’s P/S multiple. The higher the line, the more expensive the index is vs. the model portfolio. You can see that despite the recent reduction in spreads from the manic peak in December 2021, the broad market index has just now hit the same value spread with our model last seen at the peak of the dot.com bubble. From the peak in 2000 through the trough in 2002, our Large Cap Model portfolio beat the Russell 3000 by 32%. Needless to say: the situation today looks equally compelling.The chart below follows the same process but deducts the valuation of our Small & Mid Cap Model portfolio from the Russell 3000 Index. Once again, you can see that the Russell 3000 is trading at a premium to our model portfolio that is approximately at the same level as the peak of the dot.com bubble. From the peak in 2000 through the trough in 2002, our Small & Mid Cap Model portfolio beat the R3000 by 83%.Once again, KCR believes the outlook is as promising today as it was at the peak of the dot.com bubble. The table below summarizes the fundamentals of every group discussed in this paper. In order of appearance:First Row: chasing sales growth while incinerating epic cash, loss-makers, and zombies look like trouble to us.Second Row: while the Russell 3000 certainly looks better than the Loss Makers & Zombies, with only a 2.7% FCF yield and trading at 23x earnings flowing off the highest margins in 100 years, we are wary of this most-popular product.Third Row: Our S&P 500 Large Cap Model Portfolio offers investors a massive advantage over the Russell 3000 with a 6.9% FCF Yield, trading at only 11x earnings despite a 49% ROE; the portfolio offers investors an opportunity to pay a lot less for a whole lot more fundamental value.Fourth Row: KCR has been pounding the table on active small cap investing strategies. Looking down these rows, we hope our readers can see why. Amidst the speculative frenzy still underway, patient investors looking to compound capital with a margin of safety can opt-in to a collection of stocks with a 12% FCF Yield trading at less than 1x sales that pay owners 8% to hold them.Conclusion:Markets are still clogged with companies that lose money and cannot afford to pay their interest expenses, much less repay the principal on their debtDespite recent market declines, the dislocations have been minor with index level valuations still sitting at dot.com levels on profit margins without historical precedentFundamentally driven portfolios offer investors enormous quality and valuation advantages over the indexes last seen at the peak of the dot.com bubbleHerding and group-think continue to drive market psychology. We believe, based on the data, that those pursuing conventional solutions will walk a comfortable path to failure. There will be plenty of company. Better alternatives strike us as obvious based on overwhelming historical evidence. The impediment to implementation is a willingness to be different. Equally important will be the need to view price volatility as a gift rather than something to be feared. We believe the art of evidence-based stock picking that puts a preference on reasonably priced profits, assets and other items that have stood the many tests of financial history, has rarely looked as appealing as it does today. YOU ARE NOW READING PREMIUM MEMBER LEVEL CONTENT 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 here to download the Premium PDF https://kailashconcepts.com/wp-content/uploads/2021/11/icons8-vertical-line-50.png https://kailashconcepts.com/wp-content/uploads/2021/11/icons8-lock-50.png Upgrade your subscription now to unlock the full content For access to our February S&P500 Top 25 and Small & Mid Cap Top 25 picks. Please click below. If you are interested in seeing the full list of Loss-Makers and Zombies, please reach out to info@kailashconcepts.com. S&P500 Top 25 Picks – February 2023 Small & Mid Cap Top 25 Picks – February 2023 August 31, 2000 – August 31, 2010, the S&P 500 index returned -16.71% cumulative or -1.81% per annum Ironically, the most empirically credible one is for interest rates to go back to zero, the dollar to hold its value and the economy to grow quickly, yet this argument has, understandably, never been put in front of us!As a reminder for our Financial Advisors: our models are available on a continuous basis, and most have been in production for over a decade. If you are looking for a simple, concentrated, low turnover, and hard-hitting GARP investing strategy, we would like to talk with you. Similarly, if you are looking for a model portfolio of the most proven and durable dividend payers that is simple to implement, please let us know. KCR also offers a wide range of easy-to-use but sophisticated tools like our Equity Duration product, which allows you to estimate a given portfolio’s interest rate and inflation risk. Over the last 12 years, KCR has built and offers time-tested and class-leading products built by experienced and proven money managers for fixed to low prices. Kailash Capital’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias. L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded. As a reminder for our Financial Advisors: our models are available on a continuous basis, and most have been in production for over a decade. If you are looking for simple, concentrated, low turnover, and tax efficient model portfolios we would like to talk with you. KCR also offers a wide range of easy-to-use but sophisticated tools. Our toolkits can help identify mispriced stocks with the best and worst risk/reward characteristics, estimate a stock’s duration and warn you when a company is engaging in low-quality accounting. Over the last 12 years, KCR has built and offers time-tested and class-leading products built by experienced and proven money managers for fixed to low prices. Kailash Capital’s sister company, L2 Asset Management, runs market neutral, long/short, large-cap, and mid-cap long-only portfolios with a value and quality bias. L2 employs a highly disciplined investment process characterized by moderate concentration, low turnover, high tax efficiency, and low fees. While nobody can predict the future, we believe the recent resurgence in risk-adjusted returns seen across all products is the beginning of what may be a long period where speculation is punished, and prudence and patience rewarded. Disclaimer The information, data, analyses, and opinions presented herein (a) do not constitute investment advice, (b) are provided solely for informational purposes and therefore are not, individually or collectively, an offer to buy or sell a security, (c) are not warranted to be correct, complete or accurate, and (d) are subject to change without notice. Kailash Capital, LLC and its affiliates (collectively, “Kailash Capital”) shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information herein may not be reproduced or retransmitted in any manner without the prior written consent of Kailash Capital. In preparing the information, data, analyses, and opinions presented herein, Kailash Capital has obtained data, statistics, and information from sources it believes to be reliable. Kailash Capital, however, does not perform an audit or seek independent verification of any of the data, statistics, and information it receives. Kailash Capital and its affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for tax, legal, or accounting advice. You should consult your tax, legal, and accounting advisors before engaging in any transaction. Nothing herein shall limit or restrict the right of affiliates of Kailash Capital, LLC to perform investment management or advisory services for any other persons or entities. 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