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The Idea Farm Weekly - Cultivating New Investment Ideas
 

Mebane Faber
Quick note:  For those attending the TD Ameritrade conference in January, if you want to hear me speak on the new shareholder yield research, vote for my session here!

Long time readers know how much I believe in studying other successful investors for insight into their processes.  After all, the intro quote for The Idea Farm is:

“I believe in the discipline of mastering the best that other people have ever figured out.  I don’t believe in just sitting there and trying to dream it up all yourself.  Nobody’s that smart.”  - Charlie Munger

I've been tracking hedge fund holdings since 2000 through 13F filings, and helped out in the startup phase of AlphaClone.  Looking over the shoulder of Buffet, Klarman, Eveillard, etc. is a wonderful way to learn about investing, as well as find a few gems in the process.

Below are a few publications from John Heins and Whitney Tilson at Value Investor Insight.  The have a monthly publication (VII), as well as a quarterly one (SII) that detail what these top investors are up to.  The best part about the letters is that they not only present the ideas of these top managers, but often the rationale and analysis behind their picks.  

Here are a few pieces from the newsletters:

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First, a few fun quotes:

Julian [Robertson] was maniacal on the importance of management: ‘Have you done your work on management?’ Yes, sir. ‘Where did the CFO go to college?’ Umm, umm. ‘I thought you did your work?’ He wanted you to know everything there was to know about the people running the companies you invested in. Lee Ainslie, 12.22.06

Human beings are subject to wild swings in their levels of fear, risk tolerance and greed. That won’t change. I base my whole approach on buying when others are fearful and selling when others are greedy. The reason Shakespeare is so relevant still today is that his plays were all about human nature, and human nature never changes. Mark Sellers, 6.19.05

Gold kind of scares me because very often the people involved with it seem to be slightly insane. My other problem is I don't know how to value it. That said, I can certainly see why gold could be considered somewhat of an insurance policy, if not an investment in its own right. Any kind of systemic economic turmoil is likely to drive gold prices higher. James Montier, 10.31.08

[W]e basically spend our time trying to uncover the promising turnarounds, dullards and assorted investment misfits in the market’s underbrush that are largely neglected by the investment community. One of the key metrics we assign to our companies is an “analyst ratio,” which is simply  the number of analysts who follow a company. The lower the better – as of the end of last year, about 65% of the companies in our portfolio had virtually no analyst coverage. Carlo Cannell, 3.31.06

If you’re looking, as we are, for extraordinary returns – from companies whose stocks can go up 10x rather than 2x – it’s far more likely to happen because the company’s earnings turn out to be so much better than anyone expected than because you found a temporary 50-cent dollar. John Burbank, 8.31.08

There’s a clarity that comes with great ideas: You can explain why something’s a great business, how and why it’s cheap, why it’s cheap for temporary reasons and how, on a normal basis, it should be trading at a much higher level. You’re never sitting there on the 40th page of your spreadsheet, as Buffett would say, agonizing over whether you should buy or not. Joel Greenblatt, 10.31.06

Here is a screen of the largest new buys from somw top hedge funds including Viking, Lone Pine, Third Point, and JANA:

(click to enlarge)



and the largest holding of some of these funds (though my research has shown that is not the best way to track their best ideas...):



 

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Download the PDFs here:

Value Investor Insight Nov 2012

Super Investor Insight Nov 2012

Words of Wisdom

Of Sound Mind

Website
http://www.valueinvestorinsight.com

http://www.valueinvestorinsight.com/superinvestorinsight




About

Created by money manager Whitney Tilson and media executive John Heins, Value Investor Insight has a straightforward goal: To deliver the highest-quality investment ideas, analysis and insight to professional and sophisticated investors. 

At the core of Value Investor Insight is the philosophy of the true value investor: buy something only for less than its intrinsic worth. This credo has more than stood the test of time. According to independent investment firm Ibbotson Associates, value investing has out-performed growth investing by nearly 5 percentage points per year since the market bottom of June 1932. As Warren Buffett’s long-time partner Charles Munger puts it, “All intelligent investing is value investing.” 
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