Learnings From Mistake (#1)

A few years back I bought a company in the communications services sector. That was a mistake. I stumbled in evaluating either the fidelity or the ability of incumbent managers and, I was wrong in my evaluation of the competitive position of the company. Last year, I lost confidence in the initial investment thesis and decided to sell all my shares at a loss. Perhaps, by reflecting on what went wrong, I am hoping to avoid similar mistakes in the future.

Intrinsic Value: What Doesn't Count? Some Interesting Phenomena.

Intuitively, the concept behind intrinsic value is well understood. However, I repeatedly observe various unrelated factors get into its definition. This post will highlight two of those.

Amortization Accounting

Blindly following conventions is the enemy of reality. When companies or investment professionals add back certain expenses such as stock-based compensation they want you to accept concepts that are dangerously defective.

Insurance Float's Underappreciated Value

It is no longer a secret that upfront premiums collected by insurance companies, called float, help their profitability. The additional investment income adds to the earnings. But the degree to which an insurance company's worth increases during a high-interest rate period, like now, is still imperfectly understood.

The Power of Favorable Odds

The American Gaming Association reports that, in 2022, 84 million people, or 34% of the adult population visited casinos in the United States alone. That resulted in U.S. casino revenues of almost $60 billion. The latter figure has moderately increased every year for more than two decades with small declines during economic crises. Ever wondered what led to this outcome and its relation to investing?