Hersh Cohen - Value Investor

Here is a video of Hersh Cohen that is a part of Consuelo Mac's excellent Wealthtrack series. This video, which I watched a little while ago, is the first time that I came across Hersh. Hersh has an investment attitude that I really like:

"Not one of my companies cut their dividend today."

Hersh invests for the long term and looks at todays problems in the context of history. We have obvious problems today but previously there have also been obvious problems. Hersh cites the oil crisis, Nixon's resignation, and the US being torn apart by the Vietnam war. The point being that yes there was a huge crisis but it is now history, it was survived and the market recovered and people became far more prosperous. This is a line of reasoning and a sentiment that I agree with.

The way that I, personally, differ slightly from Hersh is that I fear the big tectonic shifts of economic power in the world and a debt chris where the whole of the financial system is interlinked both in debt and by derivatives. My worry is that this time it might really be different. But yes, that said, is he right? Will the sun rise tomorrow? well yes, Will 1.6 billion servings of coke still be sold? I would guess so. Will this number grow in the future? Look at the shift in the tectonics, look at China and India. There is only one company in the world that makes Coke.

Hersh articulates something that I had thought of myself a few times that is that investing is a time arbitrage. It is a way of looking at investments that feels right.

I really like his interview.

The full list of Hersh Cohen's, stolen from here appears below. Enjoy!

“The One Investment...” First rate companies with great balances sheets and attractive dividend yields Stock Symbol Dividend Yield a/o 7/21/10 Abbot Labs (ABT) 3.5% AT&T (T) 6.7% (a/o 7/20) ExxonMobil (XOM) 2.9% Heinz (HNZ) 3.8% Home Depot (HD) 3.4% IBM (IBM) 1.8% (a/o 7/20) Intel (INTC) 2.8% (a/o 7/20) Johnson & Johnson (JNJ) 3.5% Kimberly-Clark Corporation (KMB) 4.0% McDonald’s (MCD) 3.1% Microsoft (MSFT) 2.1% Procter & Gamble (PG) 3.0% The Traveler’s Companies (TRV) 2.7% United Parcel Service (UPS) 3.1% Verizon (VZ) 7.2% Walmart (WMT) 2.3% 3M Company (MMM) 2.5%

Abbot Labs (ABT) 3.5%


AT&T (T) 6.7%


ExxonMobil (XOM) 2.9%


Heinz (HNZ) 3.8%


Home Depot (HD) 3.4%


IBM (IBM) 1.8%


Intel (INTC) 2.8%



Johnson & Johnson (JNJ) 3.5%


Kimberly-Clark Corporation (KMB) 4.0%


McDonald’s (MCD) 3.1%


Procter & Gamble (PG) 3.0%


The Traveler’s Companies (TRV) 2.7%


United Parcel Service (UPS) 3.1%


Verizon (VZ) 7.2%


Walmart (WMT) 2.3%


3M Company (MMM) 2.5%

Ron Hosen - Value Investor III

"If you want to understad the market pretend that the participants are on acid, speed, valium or some combination"

I am delighted to link to another series of videos posted by Ron Hosen. For reference Ron is an amateur value investor who historically managed to compound at 20% a year. In a new move, for me, I have stitched all the videos in this series into a play-list.

Roubini on gold

A short interview with Nouriel Roubini on gold. It is a reasoned considered dismissal of a return to the gold standard.

I spotted it on ZeroHedge (essential reading if you are a doom-junkie).

Seeking Beta - Calculating an Accurate Beta

I am following Aswad Damodaran's Valuation Course online. Mr Damodaran very generously publishes all of his lectures online with supporting materials. His lectures are clear, logical and very interesting. My only complaint is that the sound levels in some of the lectures are a little low which can make them hard to follow on my iPod. Fortunately I can throw technology at the problem and the tiny freestanding speakers at home makes it all possible.

I have just been looking at Betas. Betas are intended to give you an indication of the market risk that your company is exposed to (that is the risk that can not be diversified away from). The basic idea is that you can get a Beta for your company by regression of the stock price over the index as a whole. The problem with this is that what you will calculate will typically contain a huge amount of error - simply because the amount of data to get the error down to a reasonable level is unattainable. Additionally you could want a beta for an unlisted company - here you have no data to look at.

The steps from this are really logical - if you can't get a Beta for your company then the best thing that you could do is get a Beta of a company just like it. Of course to level the playing field you want an unlevered-Beta - that is you want to take away the effect of leverage. That way you can look at like with like. Of course doing this you are stuck with a small sample size, and the possible addition error of the company being different.

The next step is to say, well, what if there are a whole load of similar companies we could use all of those and average them. This means that with care you can get a Beta that is representative of the market into which you sell into by looking at all the players in that market. You have two choices when calculating this - you can either look at the companies that sell in that market, or in some cases, the companies that buy from that market. Your aim is to find as large a representative sample of companies as possible from which to calculate your Beta as this will give you the most accurate Beta as the larger your sample the smaller your statistical error. Calculating a Beta this way can give you a far more accurate Beta than than using the historic share price of your target company. Why? its a far larger sample.

At the end of the day what is Beta? Beta is a measure of the elasticity of your market. Low beta - inelastic market (essentials), high beta elastic market (discretionary purchases). What you are trying to do is calculate the risk that your company faces from the elasticity of the market it sells into. Or so, at least, is my understanding of things.

Don Yacktman - Value Investor

I came accross this interview with Don Yacktman (Yacktman Asset Management Co) on Bloomberg. Don is a value investor with a long time horizon. He has the kind of style that like. Particular favorites of Don are Microsoft, Pepsico and Newscorp. Interestingly some of the same stocks are held by Terry Smith's Fundsmith Fund. For me I am also intrigued that he sees value in Research in Motion (RIM). To me RIM seems to have good cash-flow, seems to be damn cheep, and to be deeply hated. I don't hold RIM as it seems to lack any kind of predictability that I can see - but I do hold the temptation. Temptation is always cheaper than regret. I would also say that I don't hold any Newscorp - it is not a company that I like. It is not a company that treats its shareholders as owners - that does not mean that there is no value there or that it is not a good buy, or that I pretend to know more than Don Yacktman (I certainly don't) it just means that I don't like it and I would rather invest in something else.



If you can fight through the advertising you can find details of his top holdings here.

Charles Maxwell - Energy Analyst

I found this video following the links from somebody who was following Ron Hosen, a value investor that I have a considerable amount of respect for. Charles Maxwell is an energy analyst and in a fascinating interview discusses his views and opinions on oil and energy. One of the things that Charles Maxwell does is to look at the number of barrels of reserves that a company has and the cost (in share price) for those reserves. So $100 dollars will on the one had get you 7 barrels of oil if you buy at Exxon, or 44 barrels if you buy at Suncorp. As time goes on we should see the price of oil rise which makes the extraction costs less important - so you should see a greater uplift in a company like Suncorp. Also being Canadian it is oil in a very stable economic setting. Another company that Charles likes is Cenovus also a Canadian oil sands company but with lower reserves per dollar.

Charles Maxwell covers a lot in the video - and it is well worth listening to.

Tom Gardner - Value Investor

This is an excellent interview with Tom Gardner the founder of the motley fool. Interestingly he stresses, amongst other things, the importance of a good company culture. The interview can be found here.