Grahamian Value Week in Review ― January 22, 2021
“We may have a perfectly adequate way of doing something, but that does not mean there cannot be a better way. So we set out to find an alternative way. This is the basis of any improvement that is not fault correction or problem solving.”
— Edward De Bono
WEEK IN REVIEW
‘CARVE-OUT’ OF GRAHAMIAN VALUE SELECT
In the past week —
No new businesses have been added to the list of Grahamian Value companies.
There have been no material developments at Grahamian Value listed companies.
The co-editors note just two companies remain on the Grahamian Value Classic list: Rubicon Technology, Inc. and Servotronics, Inc. In our view, this dearth of dislocation speaks to a generalized optimism across broad public markets. The co-editors continue to observe opportunity within OTC-listed companies.
Further details are available at GrahamianValue.com/methodology
I. WEEK IN REVIEW
This marks our fifteenth consecutive week with no new additions to the Grahamian Value Classic list of companies. Due to underlying share price movement, Friedman Industries, Inc., Gulf Island Fabrication, Inc. and Hudson Global, Inc. no longer meet the valuation requirement for inclusion on the Grahamian Value Classic list.
II. ‘CARVE-OUT’ OF GRAHAMIAN VALUE SELECT
Momentary tranquility (which is cyclical, in our worldview) affords us the opportunity to pursue an important strategic objective, explained below —
We are excited to redouble our efforts to identify like-quality opportunities (and similarly-qualified thought leaders) within the realm of Graham-inspired intelligent investing — on par with insights on Cresud S.A., courtesy of Nicholas E. Radice, published on January 8, 2020; it’s a high hurdle.
We believe that a “carving out” (into a standalone Grahamian Value Select offering) of this concerted effort to identify exceptional thinking (and exceptional thinkers) will best allow us to effectively execute. Relatedly, this initiative will be augmented by a growing family of Grahamian Value project volunteers — joining forces from around the world.
Going forward, you will receive (via email) —
Grahamian Value Week in Review: monitoring developments in classical Graham-inspired opportunities (with a weekly cadence); and,
Grahamian Value Select: crisp situational perspectives we deem both salient and timely to our sophisticated readership base (on an irregular basis, entirely merit-driven).
Previously, our weekly emails (on occasion) included: (i) featured third-party insights; and/or, (ii) situational review of companies beyond our classical net-net list. Grahamian Value Select reflects a “less is more” evolution of these two components; (far) less frequency, greater quality.
Inspired by OID, we will release Grahamian Value Select only when fully deserving of your attention.
In line with our larger mission, Grahamian Value Select is (and will forever remain) available on a fully-complimentary basis.
We believe this purposeful evolution will improve the experience to both our readers and our contributors, alike.
No further action is required on your part —
Your electronic receipt of Grahamian Value Week in Review will continue uninterrupted.
Please also look forward (on rare occasion) to receiving Grahamian Value Select in your inbox.
III. WEEKEND READING
The Complete Letters of Nomad Investment Partnership: In [FT’s] read-through this afternoon, this one paragraph from a June 30, 2010 letter stood out on the subject of competitive dynamics —
“Take a one-big-thing-firm, such as a drug company, for example. A successful drug firm does not need to be particularly good at marketing, manufacturing, or research and development for that matter if, through a patent, it has a legal monopoly on a drug. But just look, if you will, at how fragile the drug company ecosystem is. A rival could displace it at any time with a better chemical and the firm would be left with little to fall back on, certainly not marketing, R&D, and manufacturing. Its period of exceptional profitability may therefore be quite finite and the big drug firms wrestle with this issue today.
Contrast this with a scale economics business: To better an incumbent’s cost base a rival would have to be superior at, not one thing, but a million little actions – a far harder task. Amazon’s letter to shareholders this year contains the following section:
…We believe that focusing our energy on the controllable inputs to our business is the most effective way to maximize our financial outputs over time…we’ve been using this same annual [goal setting] process for many years. For 2010, we have 452 detailed goals, with owners, deliverables and targeted completion dates.
At Amazon one employee initiative to remove the light bulbs from the vending machines (really!) saves the firm US$20,000 per annum! At the Welsh insurance company the penny dropped: firms that have a process to do many things a little better than their rivals may be less risky than firms that do one thing right because their future success is more predictable. They are simply harder to beat. And if they are harder to beat then they may be very valuable businesses indeed.”
IV. WEEKEND WATCHING
Courtesy of Harvard University: Charlie Munger on The Psychology of Human Misjudgment; Abridged and Animated by Tiny Capital and Thinko Animation Studio. (Recorded June 1995)
Courtesy of Cal Poly Pomona Economics Club: Peter D. Kaufman on The Mulit-Disciplinary Approach to Thinking. (Recorded on March 29, 2018)
Full Transcript (h/t: Richard Lewis)
V. WEEKEND LISTENING
Courtesy of The Memo by Howard Marks: The dichotomy of “value” and “growth” investing has become a sharp stylistic divide. But is it helpful? In his latest memo, Howard Marks discusses how he views the art and science of value investing, especially in the increasingly efficient and complex world we face today. (January 14, 2021 episode date)
ABOUT GRAHAMIAN VALUE
Grahamian Value is a labor of love, centered around our desire to openly share data and perspectives that we find helpful in our pursuit of Benjamin Graham-inspired investment ideas. We appreciate your time, your trust and your readership. Learn more at GrahamianValue.com
Harry Sauers and Shai Dardashti are co-editors of Grahamian Value and, as of the date of this communication, may individually own shares of companies mentioned herein. The publishers do not receive compensation from the companies and people covered in Grahamian Value for such coverage. This communication is for informational purposes only. This is not intended to be investment advice. Seek a duly licensed professional for investment advice.