Showing posts with label David Abrams. Show all posts
Showing posts with label David Abrams. Show all posts

Thursday, July 18, 2019

David Abrams on the “Great Illusion of the Stock Market"

From his introduction to Part VII of Security Analysis: Sixth Edition (published in 2008):
I am optimistic about the future of value investing. To be sure, there are many bright and savvy people in the financial markets employing Graham and Dodd’s techniques, but the markets themselves have grown exponentially. The chunk of capital being invested by the value-investing crowd is a small percentage of the overall capitalization of global financial markets. Having observed the markets for more than two decades, my sense is that, rather than a glut of Graham and Dodd acolytes picking through scarce opportunities to find a place for their cash, money is ever more prone to sloshing around in giant waves, flowing from one fad to the next. If anything, it seems that the people controlling these megasums have become less intelligent and less sophisticated over time. The last decade alone has brought incredible extremes in valuation, starting in 1999 and 2000 with the high-altitude Internet bubble that was followed in short order by the utter collapse of the tech market. In the summer of 2002, we witnessed a tremendous corporate debt meltdown. But soon, these excessively low valuations were pushed off the front pages by the most generous and lax lending standards of all time. Now, as I write this introduction, the mortgage market is imploding, creating perhaps yet another new set of opportunities. That we’ve seen the last of these extreme swings seems doubtful. 
What is driving this manic phenomenon? The explanation is something I call the “Great Illusion of the Stock Market.” Investing looks easy, particularly in a world of inexpensive software and online trading. Buying a stock is no more difficult than buying a book on Amazon.com. And because a great many people have gotten wealthy in the stock market, lots of others have come to believe that anyone can get rich with very little effort. They are wrong. All the people I know who’ve built wealth in the stock market have worked very hard at it. Graham and Dodd understood the effort it took to be successful in the market. They wrote: 
Since we have emphasized that analysis will lead to a positive conclusion only in the exceptional case, it follows that many securities must be examined before one is found that has real possibilities for the analyst. By what practical means does he proceed to make his discoveries? Mainly by hard and systematic work. (p. 669) 
So, yes, you can get rich buying and selling stocks, but, as the authors well knew, it takes hard work and patience. Nevertheless, the Great Illusion persists, maybe because, like Woody Allen’s film character Zelig, the market is a chameleon that changes its appearance to suit the times. Sometimes, it shows up as a tech stock bubble. Other times, it manifests itself as a ludicrously overvalued stock market as seen in the late 1980s in Japan. In a current incarnation, a raft of financial institutions across America are trying to emulate the success of David Swensen and his colleagues who manage Yale University’s endowment by allocating large percentages of the capital to “alternative investment managers.” 
But the Great Illusion is just that—an illusion. If you want to get wealthy in the financial markets, you’ll need to engage in “hard and systematic work.” 

Sunday, June 16, 2019

David Abrams on catalysts and growth

We buy things with what we call a hard catalyst; so some kind of event that's going to close the gap between what you bought it at and what it's worth.  
We also buy things where there's no catalyst; so we're just owning businesses.  
In the first category, if there's a catalyst, we don't need that much growth. We need to buy it cheap and get out.  
In the second category, where there's no catalyst, we absolutely need growth. And now the growth can come in all kinds of ways. It doesn't have to come through increased revenues, although a lot of times it does. It can come from running operations more efficiently. It can come from acquisitions. It can come from buying back shares really cheap. But if there's no catalyst, we absolutely need growth.

Friday, June 14, 2019

Links

"If something is too hard to do, we look for something that isn’t too hard to do. What could be more obvious than that?" --Charlie Munger (2006)

Value Investing with Legends Podcast: Applying a Fundamental and Value-Oriented Approach to Investing [with David Abrams] (LINK)

Latticework of Mental Models: The Rashomon Effect (LINK)

Meatless Future or Vegan Delusions? The Beyond Meat Valuation - by Aswath Damodaran (LINK)

Animal Spirits - by Lewis Johnson (LINK)

Freakonomics Radio (podcast): Long-Term Thinking in a Start-Up Town (LINK)

Exponent Podcast: Game of Phones (LINK)

a16z podcast: AI and Your Doctor, Today and Tomorrow (LINK)
Related book: Deep Medicine: How Artificial Intelligence Can Make Healthcare Human Again - by Eric Topol
Wernher von Braun and The American Moonshot (LINK)

The salty ocean of Europa: Table salt found on Jupiter's moon - by Phil Plait (LINK)

Inside the Cultish Dreamworld of Augusta National (LINK)

Monday, December 10, 2018

Links

I'm back after attending the Project Punch Card Conference last week. Congratulations to the organizers for putting together a great inaugural event in pursuit of a great cause. And for those that want to receive future updates about the project, you can join its email list HERE.

Boyar Research was one of the sponsors of the conference, and it's that time of year when they are getting ready to publish The Forgotten Forty, which features one-page reports on the forty companies that they believe have the greatest potential to outperform the leading indices in the year ahead due to a catalyst that they see on the horizon. The report has a successful track record and, once again, they're providing a link to receive three complimentary Forgotten Forty reports from last year’s report for readers of this blog.... Link to: Complimentary 3-report sample of The Forgotten Forty

***

David Abrams, who rarely makes public appearances, lays out his investing strategy — and cautions against being too patient (LINK)
"We make a lot of money from mucking around in the garbage, and we also buy nice shiny things, and we care what we pay for both," he said. 
The firm puts a three- to five-year time horizon on stocks, looking for a minimum return of 15% on its first purchase, he said. 
"There has to be a point sooner than 10 year where you're determining whether you are being successful or not successful," he said.
What You Can Learn From How Warren Buffett's Investment Process Evolved (LINK)

The Housing Boom Is Already Gigantic. How Long Can It Last? - by Robert J. Shiller (LINK)

How Subscriptions Are Remaking Corporate America (LINK)

James Dyson: ‘The Public Wants to Buy Strange Things’ [H/T Collaborative Fund] (LINK)

Elon Musk on 60 Minutes (video) (LINK)

Is there a signal in the noise? Yield Curves, Economic Growth and Stock Prices! - by Aswath Damodaran (LINK)

Lampert's Hedge Fund Makes Bid for Sears Stores and Assets (LINK)

Millennials Didn’t Kill the Economy. The Economy Killed Millennials. - by Derek Thompson (LINK)

Outgrowing Advertising: Multimodal Business Models as a Product Strategy (LINK)

What’s Next in Consumer Startups? (video) (LINK)

Why Small Habits Make a Big Difference (LINK)

Jeremy Grantham on the Masters in Business podcast (LINK)

Brent Beshore on the Capital Allocators Podcast (LINK)
Related book: The Messy Marketplace
How I Built This podcast: Airbnb's Joe Gebbia (LINK)

NPR Planet Money podcast: Why Car Safety Is A Trade Barrier (LINK)

Siddhartha Mukherjee talks with Peter Attia (podcast) (LINK)

Origin Stories: Carl Sagan (podcast) (LINK)
The Leakey Foundation's award-winning Origin Stories podcast has returned for its third season. The latest episode is a never-before-released lecture given by Carl Sagan in 1977. In this talk from The Leakey Foundation's archive, Sagan explores the origins and evolution of human intelligence.
Ebola detectives race to identify hidden sources of infection as outbreak spreads (LINK)

When a Killer Climate Catastrophe Struck the World's Oceans (LINK)

Book of the day: How the Internet Happened: From Netscape to the iPhone

Tuesday, June 3, 2014

Hedge-Fund World's One-Man Wealth Machine

David Abrams Built His Fortune Effectively Going It Alone 
In the Back Bay neighborhood of Boston, one man is building a moneymaking machine that rivals some of the hedge-fund industry's biggest names. 
Calls to his office go unreturned even from those eager to fork over eight-figure sums, potential investors say. One industry veteran referred to him as "a unicorn," as few people have ever seen him. 
The hedge-fund manager, David Abrams, has personally become a billionaire, and earned billions more for his wealthy investors, over the past five years running what is effectively a one-man shop, according to company and investor documents reviewed by The Wall Street Journal and people who have worked with him. His firm, Abrams Capital Management LP, manages nearly $8 billion across three funds and is discussing raising money for a fourth fund that could help push its assets past $10 billion. 
In an era of star investors who appear regularly on television and talk up their ideas at hyped confabs, Mr. Abrams, 53 years old, has never spoken at an event open to the public.

[H/T Corner of Berkshire & Fairfax…..where someone was also kind enough to post THIS transcript from the October 2008 Graham & Dodd Breakfast.]