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Professor Glen Arnold

Operational performance statistics for Company A and Company B

30 Mar 2016 @ 02:07
The starting point for the analysis of Companies A and B, the two dominant UK firms in one sector, was set out in a Newsletter dated 18th March. Over ten years the earnings numbers have been about the same. Company A’s average earnings per share over ten years is 14.9, whereas Company B has achieved […]
 

Some strong evidence of earnings reverting to the mean

24 Mar 2016 @ 19:00
This is the final paper I’ll summarise before continuing the analysis of Company B. Written by Lakonishok, Shleifer and Vishny, henceforth LSV, in 1994, this paper should, together with the last few Newsletters, convince you of the possibility of a human tendency to under-weight the phenomenon of mean reversion – a common cognitive error. The […]
 

The mean reversion tendency

23 Mar 2016 @ 19:00
I posted this Newsletter some time ago. Since then we have a number of people joining our gang and so, given its relevance to what I’m about to discuss for Company B, I thought I’d repeat it. A long time ago thoughtful investors discovered the tendency for companies which were once high-flyers moving into a […]
 

Mean reversion in shares

22 Mar 2016 @ 23:34
It was gratifying to see that Professor Richard Thaler was featured in the film I saw at the weekend, “The Big Short”, because I had scheduled today to write about an important paper he co-wrote in 1987. Richard Thaler is a brilliant behavioural economist – his acting could do with a brush-up though! The paper […]
 

The two company game continues – first some important psychology

19 Mar 2016 @ 19:00
So we saw yesterday that company A has much the same profit in pound terms and earnings per share terms as Company B over a ten year period but stands on a share price of 240p, more than double that of Company B. A possible explanation is that the market sees the recent greater drop […]
 

The two company game

18 Mar 2016 @ 22:54
I’m going to play a game with you today – which share is better value? Presented below are some numbers for the two dominant firms in one industry. You’ll notice that for all intents and purposes the long term performance numbers are close together. However, the first is on a one-year PER of 15.3 and […]
 

Warren Buffett and Blue Chip Stamps – the beginning

12 Mar 2016 @ 19:00
Toward the end of 1969 the Buffett Partnership held a substantial stake in Blue Chip Stamps worth about 6% of the fund. Alongside other holdings he tried to sell the 371,400 shares (7.5% of BCS shares) so he could hand the cash to his partners. He thought he had a deal at about $24. Then […]
 

Buffett’s Partnership breakup

11 Mar 2016 @ 23:17
Despite looking under dozens of rocks in recent weeks I have not found any new gems. I’ll keep looking – particularly for the Modified-PER portfolio (I’m about a quarter of the way through the entire market). In the absence of new bargains to report to you I’ll continue the Warren Buffett story. Today we get […]
 

Arden Partners – An interesting AGM

09 Mar 2016 @ 00:52
Yesterday’s Arden (LSE:ARDN) AGM was most interesting for what was not spoken, than what was laid out in the open. Setting: All the directors were there. They were welcoming and friendly. There were about a dozen other people. But it turns out that I was the only independent shareholder (there may have been one other, […]
 

Holders Technology - Getting value out of this NCAV investment

05 Mar 2016 @ 19:00
Net current asset value investments usually find a way to generate value for shareholders by following one or more of these paths: 1. Industry economics improve? Unlikely in this case. Both industries are very competitive and will remain so. Any exit by rivals is likely to be followed by entry of new competitors 2. Management […]
 
 
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