Two Value Investing experts sound off

Stock Picks from a Berkshire-like Investor (Morningstar)
Tom Gayner discusses some of the methodology behind investment picks at Markel Corp.

Advice from a Buffet-Style Invester (Morningstar)

Wally Weitz on discusses some of the recent subprime debt problems, as well as inherent value seen currently in the large-cap sector.

A Buffett Disciple Shares His Secrets (Morningstar)

Mohnish Pabrai is interviewed by Morningstar and shares some of his investing strategies. Mohnish Pabrai runs the Pabrai Funds, which he has modeled after the Buffett Partnership, and he has done quite well with this model.



In addition to the video interview above, here is another interview with Pabrai on Bloomberg.

I have read Pabrai's two books on investing, and I highly recommend both of them. Mosaic: Perspectives on Investing is his first book, and is a compilation of articles on various topics he has written about related to value investing. The Dhandho Investor: The Low - Risk Value Method to High Returns is his latest book, and is a look into Pabrai's own unique perspective on value investing, as well as some great writing on philanthropy.

CNBC's Million Dollar Portfolio Contest

CNBC.com has an exciting new Million Dollar Portfolio contest that is starting up on March 5th. So of course The Million Dollar Portfolio will have to participate in this new virtual million dollar portfolio contest...

Still analyzing virtual portfolio performance utilizing the creative and fun (and free) Motley Fool CAPS, run by The Motley Fool. As of this post my virtual CAPS portfolio is above the 91st percentile rank (since October 2006), of course with a focus on undervalued stocks, all which happen to be from the healthcare sector.

Will keep y'all posted as more things develop...

Warren Buffett in Israel

In this video clip, Warren Buffett comments on the security of investing in Israel, the nature of his Iscar purchase, and his views on capitalism.



All in all a very revealing video. It is clear that Buffett has left his footprint on the country of Israel - both as a statement of his faith in its long-term security prospects and as a boost to its overall economy.

His purchase of Iscar Metalworking was previously mentioned in the post: Case Study: Tiens Biotech. (By the way, since that post TBV has shot up 13%!)

Jim Cramer Guinness

Jim Cramer on Diageo (DEO) :


Diageo (DEO) has appreciated considerably since my last Case Study: Liquor Stocks and Hair of the Dog, back in January 2006. As of January 9th 2006, the stock price was (adjusted) $57.97. As of market close on Friday, December 8th 2006, the adjusted close was $77.45, for a gain of 33.6% in under a year!

Back then, Warren Buffett had just picked up some shares, the price/earnings ratio was much lower than its current 19.61, and the dividend yield ratio was 4.50%, compared to today's 3.70%. The stock is also near the top of its 52-week range, and has a higher debt/equity ratio than I would normally like, at 1.059. So while I still will enjoy their products - and think they're a great company, I don't see myself dipping into the Diageo liquor stock anytime soon.

Valuable Value Posts

Some recent interesting posts on Value Investing:

Berkshire Hathaway: Almost a screaming buy at more than $100,000 a share
Ask Matt - Matt Krantz - USA Today

For Value Investing, Bittersweet Success
Chet Currier - Bloomberg News

Value Hedge Fund Manager Starts Revolutionary Pay Structure
Blog - Controlled Greed

The Money's in the Scuttlebutt
Greg Guenther - The Sleuth

Buffett, Lynch And Graham Look At Debt
John Reese - Guru Screen - Forbes

Buffett on When to Sell

Buffett on When to Sell

Warren Buffett: The Billionaire Next Door
Airs Monday November 20, 2006
on CNBC, at 8 & 11pm ET

This is a segment of an interview by CNBC's Liz Claman with Warren Buffett, in which they discuss "his gut instincts, his feelings about Wall Street, how he feels when he does a deal, his surprising view about his own tax rate, the music he listens to, the TV he watches."

This particular clip above is brilliant:

"We do not sell good businesses at overvalued prices, we don't get rid of businesses that are mediocre. If they're destined to continuously lose money we get out of them...If they're gonna lose forever."

Buffett seems to be explaining here just how much he stands by his initial convictions: his original decision to buy the stock/company in the first place. And this is how it should be for the value investor. If your initial reasoning was sound, and you bought a good company with a sound business plan, strong financials, and little debt at an undervalued price - you should not be bothered if the price goes down further. In fact - in some instances this is exciting, for it may mean a potential acquisition and/or increased insider buying is in the cards.

Previous related posts:
Bought Buffett's Berkshire Because it's a Bargain

Case Study: Tiens Biotech

Time Travel Investing

End of Summer Reads

Summer Reading, and an MBA

TBV update

Some more news on Tiens Biotech Group USA Inc. (TBV) :

Beacon Equity Research
Kris Goldcross, CFA gave an "outperform" rating and a price target of $12.30 when the current price of TBV was already $6.61, back on May 6, 2006! With the price now at $2.99, and a price/earnings below 8, TBV is really undervalued at the moment.

China Daily
Report from November 3, 2006, by Xiao Wang. The most exciting part of this announcement is TBV's partnership with other strategic clients: "Multinationals such as L'Oreal, Pfizer Pharmaceuticals and Shiseido have hammered out long-term partnerships with Tiens, serving as high-end original equipment manufacturers (OEM) and original design manufacturers (ODM) for Tiens. "

This will raise the company's global standing and goodwill, and only increases the potential for acquisition and/or insider buying if the stock remains this undervalued.

Case Study: Tiens Biotech
The original case study on The Million Dollar Portfolio, a case for value.

Case Study: Aspreva Pharmaceuticals
Another related undervalued healthcare case study, on ASPV.

Case Study: Aspreva Pharmaceuticals

Aspreva Pharmaceuticals Corporation (ASPV) "engages in the identification, development, and commercialization of new indications for approved drugs and late stage drug candidates for patients living with less common diseases." The company is headquartered in Victoria, Canada. The company has 106 employees, and as stated above its focus is on specific niche drugs for patients with uncommon illnesses. Due to the company's location in Canada, an investment in this company is an instant diversification into the Canadian Dollar. In this manner, this is also a form of international diversification, similar to the case study I did on TBV.

Valuable Points
The company has virtually little to no debt.
Price/earnings is very low, at only 5.58.
The short interest as a percentage of public float is 8%, which is extremely high for ASPV, which only has a market capitalization of 642 million.
Its 52-week range is 11.18 - 34.89, which gives this stock some significant potential.
Pre-tax return on capital greater than 100%!!!

Concluding Thoughts
This is an extremely undervalued healthcare company that has relatively little downside due to its very low price earnings and low market capitalization. If the company becomes any more undervalued, it has the potential to be acquired by a larger healthcare company looking to gain snatch up ASPV's expertise in niche disease markets. For example, one could look to Merck's recent $1.1 Billion acquisition of Sirna Therapeutics, whose stock surged 98 percent in after hours trading after the announcement.

Value Investing in a Little Book

Just finished The Little Book of Value Investing by Christopher H. Browne. Not quite as riveting and quick a read as Joel Greenblatt's The Little Book That Beats the Market, but even so, Browne makes a very good case for why sticking to value investing and nothing else will do very well for one's entire lifetime!

Some classic quotes from The Little Book of Value Investing :

Like Watching Grass Grow :

"Value investing also requires the mettle to buy those stocks that the majority of investors don't want to own. They have warts. They are out of favor. Of course, they are. Why else would they be cheap? Whey you go to cocktail parties and the talk turns to recent stock picks, one guy can say, "I bought Ionosphere Communications this morning at 10 and it closed at 12." Instantly, he is a genius. Forget that Ionosphere Communications has no sales and no earnings and is a disaster waiting to happen. You feel a bit foolish saying, "I bought ABC Ice Cream Corporation at half of book and 6 times earnings." You are greeted with a big yawn. Sex sells even in the stock market, and everyone wants to own the latest sexy issue. Value stocks are about as exciting as watching grass grow. But have you ever noticed just how much grass grows in a week?" p.149

A Style for the Long Run :

"Benjamin Graham laid out the basic concepts of the value approach to investing many decades ago. Like Graham, I have no faith in my ability, or in the ability of most others, to predict the direction of stock prices over the short term. I do not believe that many people can detect which technology stock will be the next Microsoft or which ones will bomb. What I do know is that owning a diversified portfolio of stocks that meets the standards of a margin of safety and are cheap, based on one or more valuation methods, has proven to be a sound way to invest my money. I have no reason to believe it will not continue to be so." p.163


The Little Book of Value Investing is definitely an undervalued investment.

Case Study: Tiens Biotech

Tiens Biotech Group USA Inc. (TBV) is a "nutrition supplement and personal care products" company in China. The company has 1,350 employees, and its particular business focus of marketing Chinese nutritional wellness and dietary products seems to be a segment that has not yet reached its full market potential in the United States. An investment in TBV is nice because it is also an instant diversification into foreign currency, something Warren Buffett did with his recent purchase of Iscar Metalworking. According to Barron's, the CEO of TBV has a salary of $145,455. It's refreshing to be able to invest in a healthcare company without CEO financial fiascos like that of Unitedhealth Group (UNH).

Some Statistics
The company has an extremely low debt/equity ratio of 0.094.
Price/earnings is also low at only 8.098.
The short interest as a percentage of public float is 4%, which is extremely high for a small company like TBV, which only has a market capitalization of 208 million.
Its 52-week range is 2.61 - 8.24, which gives this stock some significant potential.
Pre-tax return on capital greater than 50%.

Concluding Thoughts
This is an undervalued healthcare company that has relatively little downside due to its high earnings yield of 16% and low market capitalization. If the company becomes any more undervalued, it has the potential to be acquired by a larger healthcare company looking to gain a foothold in both China and wellness products at the same time. This would be something that I would look to hold for the long-term, expecting high volatility in the short-term but the potential for extremely high appreciation in the long-term.

TBV update
Additional post from November 7, 2006. A stock-price prediction from Beacon Equity, and a news report that makes the case for a potential acquistion down the line.