These Investing Podcasts can make you a Better Investor

Become a Better Investor by Listening to Podcasts

Learning is a critical part of becoming a successful investor. While reading is probably the primary way most of us increase our circle of competence, I find high quality investing podcasts to be a great supplement to my reading. In this blog post I will discuss what I look for in podcasts and suggest a few investing podcasts.

Elements of a Great Investing Podcast

The signal to noise ratio for finance and investing podcasts is not good. There are a ton of finance and investing  podcasts vying for your attention. I subscribe to very few of the investing podcasts I sample because I don’t find them engaging. The best time for me to listen to podcasts is when I am alone in the car or walking my dog. I like listening  in these situations because  I can’t do other things like read so I feel I am maximizing my time. If I like a podcast I will stay engaged and listening intently. However if I find my mind wandering off and not paying attention to the podcast it is usually because the podcast is missing some key elements. Your tastes may vary but I have observed that the above all the following elements are most important to me.

Investing Podcast recording session
Good production quality is important for investing podcasts.

Production quality

The bar for podcast production is high. If your audio quality is poor, the volume not balanced between all participants I am not going to stay focused on what you are saying. Multi person episodes that include choppy and static filled Skype sessions are very hard to follow. There have been a few podcast episodes with poor quality that I endured but only because the content or interviewee was extremely compelling.

Format

I am huge fan of the long form interview format. Most of the podcasts I listen to follow this format. I am a fan of biographies and find I learn best from other people’s real world experiences and lessons. The success of this format is dependent on the next point…

Preparation

To do a high quality interview you need to have a large amount of context about the subject. Preparation is so critical. One common thread I have seen across the podcasts I like is that the hosts do their research and due diligence before the interview.

Thought provoking

I love podcasts that teach me something or really challenge me to think differently. Walking away from a podcast episode thinking “I never considered that or Maybe I was looking at this the wrong way” is an incredibly rewarding payback for the time invested in listening.

A big part of this is high quality guests with unique ideas. Some of the characteristics of podcast guests I like are:

  • Skilled at explaining complex ideas to lay people.
  • Unconventional or contrarian viewpoints that are backed up with research.
  • Good story tellers.

My Favorite Investing Podcasts

Invest Like the Best

Patrick O’Shaughnessy is CEO of O’Shaughnessy Asset Management. OSAM is a well known quant/factor shop started by Patrick’s father James O’Shaughnessy.  James O’Shaughnessy is a pioneer in quantitative investing and author of many books including What works on Wall Street.

Patrick O’Shaughnessy’s podcast Invest Like the Best is a long form interview and discussion format podcast. Patrick finds some of the most interesting people inside and outside of finance to discuss investing and life. The guests are wide ranging and sometimes the episodes may appear to drift away from investing and finance. But that is actually one of the great things about this podcast and its mission. Life, investing and the world around us are so intertwined. Patrick really goes out of his way to try explore how becoming better at life makes us better investors and how becoming better investors makes us better humans.

Suggested episode: Pat Dorsey – Buying Companies with Economic Moats

The Meb Faber Show

Meb Faber is co-founder, CEO and CIO of Cambria Investments and Cambria Funds. Among other things Cambria offers ETFs based on their quant strategies. Meb’s format is also long form interview with some question and answer and one off episodes on a topic. I really like the laid back vibe Meb has, it makes you feel like you are in the room with him and his guests.

Suggested episode: Dan Rasmussen “The Crown Jewel of the Alternative Universe is Private Equity”

Superinvestors and the Art of Worldly Wisdom

Superinvestors and the Art of Worldly Wisdom comes from Jesse Felder of the of The Felder Report. This is another long from interview format podcast.  I just started listening to it and I have been impressed with all the episodes so far. As someone who has been a value investor for over 10 years it is refreshing to hear interviews with people I have never heard of before. So far I have listened to 5 episodes and the production quality is decent but not as good as other podcasts I listen to regularly. But it has not detracted as much because the quality and uniqueness of the guests so far has been great.

Suggested episode: Fred Hickey On Trusting in Your Own Research and Experience

Business Wars

Business Wars by Wonderly is a departure from my preferred podcast format. It is  a podcast that tells the stories of the greatest business battles of our lifetime. Nike vs Adidas, Coke vs Pepsi and Paypal vs Ebay are a few of the stories I have listened to so far and I have enjoyed them all. Each battle is a multi episode series. Unlike previous podcasts I suggested Business Wars keeps each episode fairly short which it makes it nice for short trips and walks.

Suggested episodes: Ebay vs Paypal

Conclusion

In conclusion I hope you find some of these podcasts valuable. I will be keeping a list of investing podcasts I discover  on my site at this page.

Sequant Re to Liquidate, PDH – Premier Diversified Holdings Writes Downs Investment

Sequant Re & Premier Diversified Holdings

Sequant Re Logo
Sequant Re

Sequant Re sounded like a very compelling opportunity for Premier (PDH) shareholders. The company focused on the ILS (Insurance Linked Securities) market. By securitizing the financial burden of insurance ILS allows re-insurance to be easily distributed among many investors. Typically before ILS re-insurance was handled by a few specialty insurers. ILS also offer investors a product with low correlation to other assets such as bonds and equity.

Sequant aimed to underwrite re-insurance through ILS and provide easy access to ILS portfolios for investors. Guy Cloutier an insurance industry veteran started Sequant Re. He was formerly of American Safety Re. There is an interesting connection here because American Safety Re’s parent company American Safety was purchased by Fairfax Financial and Premier’s CEO Sanjeev Parsad has a long standing relationship with the folks at Fairfax. Fairfax eventually sold of the reinsurance business of the American Safety.

Sequant Re Liquidation

After three years the board of Sequant Re has decided to throw in the towel. Premier Diversified Holdings (PDH) owns almost 50% of Sequant’s equity and will be writing it down from 2.5M to zero.

According to Sanjeev’s message on the COBF board, Sequant failed to recruit any large institutional partners. That ultimately lead to stopping  the bleeding and calling it quits. Given Guy Cloutier’s history in the re-insurance biz and the connection Sanjeev has at Fairfax it seems like finding a partner for a good idea would not be so hard. Or maybe the idea was not compelling enough? It will be an interesting story to hear if we ever do.

In this Artemis article Guy was quoted as saying that their partner backed out due to US tax implications.

“We spent a considerable amount of time and resources in discussions with a potential significant strategic partner. At the end of the day, they did not proceed due to their perceived US tax implications.”

Conclusion

This is a big blow to Premier. The loss is a massive amount of money for a business of their size. On the plus side they have stopped the bleeding and will not need to fund Sequant any longer. Insurance Linked Securities are continuing to experience growth. It is an interesting area of insurance and finance that I will continue to keep an eye on.

 

ValueAshram Premier Diversified Holdings (PDH) Page

Can Vanguard REIT funds boost American Tower and Crown Castle?

Vanguard announced a change to their REIT Index fund’s investment objective. The fund has historically tracked the MSCI US REIT Index. Starting mid 2018 the fund will track the MSCI US IMI Real Estate 25/50 Index. Is it possible these upcoming changes present an opportunity?

REIT stock price chart
What will the price chart of these REITs look like with the heavy buying volume from Vanguard?

 

What are the major differences?

There are some big differences between the two indexes. Lets take a look at the top 10 weighted companies of each index:

US REIT (OLD INDEX)Weight %US IMI REAL ESTATE 25/50 (NEW INDEX)Weight %
SIMON PROPERTY GROUP5.87AMERICAN TOWER CORP5.71
EQUINIX4.20SIMON PROPERTY GROUP4.72
PROLOGIS4.08CROWN CASTLE INTL CORP4.25
PUBLIC STORAGE3.87EQUINIX 3.38
AVALONBAY COMMUNITIES2.90PROLOGIS3.28
WELLTOWER INC2.87PUBLIC STORAGE3.11
EQUITY RESIDENTIAL2.85WEYERHAEUSER CO2.48
DIGITAL REALTY TRUST2.78AVALONBAY COMMUNITIES2.33
VENTAS2.64WELLTOWER INC2.31
BOSTON PROPERTIES2.24EQUITY RESIDENTIAL2.29

Let’s take a look at the big changes in top 10 positions. As a result of these changes Vanguard will be making American Tower ($AMT) and Crown Castle ($CCI)  top 10 positions in their fund. American Tower and Crown Castle are highly correlated.  Combined they will account for 10% of the fund. A typical passive index investor would probably prefer to avoid this level of concentration. For our purposes one thing matters. Vanguard will be buying a bunch of stock in $AMT and $CCI.

Can index changes create a trading opportunity?

Yes they can.  Here are some examples:

Let’s try this again

Back in 2008 I started an investing blog called compoundinglife.com. I knew almost nothing about investing and the financial world was crumbling all around us.

When I started buying stocks in the summer of 2008 I considered it a short term opportunistic trade. There was panic everywhere and it seemed like the perfect time to get in and then get out a few years later. Little did I know at the time that I would fall in love with investing. Learning about markets, businesses, valuation and a pile of other things got me very excited.

10 years later I am still investing, still learning and still loving it. With that I will kick off the new blog and see it where it takes me.

The Capitalism Distribution – Returns in stocks of the Russell 3000

At CGI Las Vegas I listened to a presentation by John Del Vecchio from Ranger Alternatives. John manages the Ranger short book and has a strong background in accounting forensics. Specifically finding stocks with low earnings quality before the market does and building short positions based on that information.

John referenced some stats from a Blackstar Funds paper on the return distribution of the Russell 3000 index between years 1983-2006. The paper calls this non-normal distribution the The Capitalism Distribution.

Russell 3000 stats 1983-2006

39% of stocks were unprofitable investments

18.5% of stocks lost at least 75% of their value

64% of stocks underperformed the Russell 3000

25% of stocks were responsible for all of the market’s gains

An enterprising investor after reading this might be diligently researching the 25% responsible for all the markets gains. Surely these are the cream of the crop.

What a difference a day makes

The paper also gives us a sampling of some of the best performing stocks during that time period and their performance after the peak:

Best performing stocks after this period.
Russell 3000 best performing stocks.

Thoughts

It would be interesting to see out of the 25% that made up 100% of the gain in 1983-2006, how many companies would still be worth owning today. Looking at that list there are a couple. Of course there are some that would have resulted in a permanent loss of capital and some that are not permanent losses yet but for which the immediate future is not bright. Lets take a quick look at a couple…

GE

If you had bought GE on 01/03/83 at its closing price of 91.75, split adjusted (48:1) each share would be worth around $670 today. I figure thats about 8.3% compounded annual gain. If you had sold that share before the market drop you would have approximately 3x that amount somewhere around 12.5% compounded annually. Not including dividend payments. While GE is a mess today, its fair to say you could of done worse things than buying a share of GE in 1983.

MSFT

If you had bought MSFT when they went public on 03/13/86 at $28, split adjusted (288:1) each share would be worth around $8000 today. Around %29.3 compounded annually. Not including dividend payments.

Conclusion

This data reinforces a couple of points that I need to remind myself of.

1. Don’t fall in love with cigar butts. Size the positions appropriately, sell them when they reaches intrinsic value and take your profit. 

2. Paying a fair price or reasonable premium for a great business with a great moat and management can pay off big over long periods of time. Identifying those companies is extremely hard to do well.

This post was written in November 2009 for my old blog compoundinglife.com. I am working my way through importing the old posts.