Back in November 2012 we invested in Maxygen (MAXY) based on a simple premise. The company was in the process of liquidating and returning capital to the shareholders, and had no ongoing operations. Since they had more cash sitting on the books than the market value of the company, some return was guaranteed. Without any ongoing operations, the downside was protected too. There was a kicker as well. The company owns MAXY-G34 product candidate that it was trying to market and sell. If the patent sale went through, there was significant upside to the stock.

In short, almost 0 downside and possibility of a significant upside.

These are mighty favorable odds and it made sense to take a position. It was essentially a call option on its patent sale guaranteed to stay in the money (ignoring daily trading noise)

The company has now decided to stop its marketing and liquidate the company and expects to return between $2.45 and $2.50 per share to the shareholders. There might be additional return of up to $0.09/share as contingency reserves are released. We took a position at an average cost of $2.46/share on Nov 12, 2012 and sold our position on Jun 4, 2014 for $2.50/share, netting us a return of 1.27% (net of commissions).

We had positioned about 3% of the portfolio in this stock.

Working Through Special Situations

This was a special situation investment in the sense that the investment was not made based on future revenues in the traditional sense. The company had no operating business. These kind of situations are rare but whenever one can find an opportunity where the risk is close to zero and there is a possibility of significant upside, it is imperative to take a position. Many of these may not work out but all you would have lost is some time. We took care to not allocate too much of the portfolio in this opportunity so less money was committed. However, even a small percentage of these investments when they work out can make an appreciable difference in the overall portfolio return.

Here is the original recommendation I made to the members.

The post Exited MAXY as Board Approved Liquidation–1.27% Risk Free Return in Approx. 6 Months by Shailesh Kumar appeared first on Value Stock Guide.

A well run insurance company generates a predictable cash flow with an appropriate level of risk management in place. Insurance stocks can therefore be a solid core holding for any portfolio. Picking insurance stocks that pay good dividends will help create a dividend based cash flow in your portfolio, that you can use to make more strategic investments. [Read my discussion on mixing cash cows with question marks in your portfolio].

The 3 stocks listed below have been picked for great dividend yields. At the same time, I have been careful to make sure the stocks may represent a good value. For example, the following screen was used

• Dividend Yield = Top 20% in the industry
• Dividend Growth Rate (5 yr Average) = Highest 60%
• P/E = Lowest 60%
• Book Value Growth (5 yr avg) = Highest 60%

As it so happens, all 3 of these stocks are Property and Casualty insurers. These stocks do not give you the most undervalued insurance companies. They also do not give you the fastest growing insurance companies. Rather, these insurance companies are great performers with high yields that can become a core that you can build your portfolio around. As the companies do well, the stock should do well as well, since at the current prices you are likely NOT overpaying for the stock.

1. Validus Holdings, Ltd (VR)

The company started in 2005 and has been profitable every year since. As a P&C insurer, it insures an eclectic mix of risk, including crop insurance, terrorism, marine, war, aviation, etc. It also has extensive reinsurance operations and strong focus on risk and active capital management, returning $2 Billion to the shareholders between 2007 and 2013 through dividends and share repurchases. Since 2006, the company has achieved a 13.2% compounded growth in Diluted Book Value per Share.

Currently the stock values the company at $3.75 B in market capitalization. Currently the stock yields 3.3% in dividends and the dividend has grown at a 25% average over the last 5 years. A 7.7 P/E ratio indicates the stock can be bought at a reasonable valuation today, at roughly 1 times the book value. Overall, this stock looks very attractive and a definite candidate for the VSG Watch List.

2. Safety Insurance Group Inc (SAFT)

Safety Insurance Group provides auto insurance in Massachusetts and New Hampshire. It also provides homeowner’s policies and limited inland marine insurance (water crafts). The stock is slightly more expensive at around 15 P/E and 1.16 times the book value, however it pays a 4.6% dividend and carries no debt on the books. It has also grown its dividend an average of 8.45% over the last 5 years and its book value by 5.18% on average in the same period.

3. Baldwin and Lyons Inc (BWINB)

Founded in 1930, Baldwin & Lyons specializes in marketing and underwriting insurance for the transportation industry. They operate three domestic property and casualty insurance companies that provide both admitted and excess and surplus lines platforms, a Bermuda-based captive solution (reinsurance), a fully licensed Canadian branch and two brokerage firms.

The stock is reasonably undervalued at 10 times earnings and 1 time book. A 4.2% dividend yield adds to the attractiveness.

Tips to Value an Insurance Company

Take these ideas and do your research to determine if any of these are good investments for your portfolio. When valuing an insurance company, you need to review certain profitability metrics that are unique to the industry. Essentially, you break down the overall profitability in 2 parts – one that measures the underwriting discipline and the other one measures the operational costs in the company. The Combined Ratio under 1 indicates a profitable insurance operation. This is made up of Loss Ratio which measures insurance payouts versus premiums earned and Expense Ratio which measures operational expenses in underwriting and payout administration versus the premiums earned. There are other unique considerations that you need to keep in mind. Ultimately, traditional valuation techniques such as P/E or Book Value Growth can only take you close, but are not sufficient to make a reasonable valuation judgment. Also keep in mind that most insurance companies manage their risk by re-insuring a portion of their policies (which has an expense as well).

To learn more about analyzing and valuing insurance companies, refer to this paper by Doron Nissim at Columbia Business School

Analysis and Valuation of Insurance Companies (pdf – will open in a new window or tab)

The post 3 High Yielding Insurance Stocks That May Be a Great Value Right Now by Shailesh Kumar appeared first on Value Stock Guide.

Macro changes to economic circumstances are a significant driver of the flow of money throughout the globe. As economic information is released to market participants and investors absorb new information their wiliness to commit capital to specific areas changes. Global macro changes can cause specific influences to certain securities such as currency pairs, sovereign debt, commodities and equities indices.

World Economic Data

The most common economic changes are those released by governments throughout the globe. Most governments release data on growth, unemployment, retail sales, as well as manufacturing. For example, on Thursday’s the US releases its weekly jobless claims report. Investors look at this weekly release as a gauge of employment activity within the United States. As the number of initial jobless claims declines, the employment situation theoretically becomes more sustainable as fewer individuals are requiring employment benefits from their country.

US Economic Data and Impact on the Markets

Equity markets in the US generally benefit when stronger than expected data is release, causing riskier assets such as stocks to rise when unemployment, as reflected by the jobless claims numbers, decreases. On Thursday May 9, the U.S. Department of Labor released jobless claims which declined by 4,000 to 323,000 in the latest week. Expectations were for a small rise to 335,000. The surprise release buoyed stocks generating additional positive sentiment. Additionally the four-week moving average for jobless claims fell by 6,250 to 336,750.

As seen from the chart, jobless claims are at their lowest levels seen in the past year, and with an unemployment rate at 7.5%, investors might believe there are further gains to be made to the US employment situation.

After the release of this employment data point, the S&P 500 index climbed to new all-time highs (as the above chart, (courtesy of Bullion Vault)). Investors used this new piece of information to purchase a global index, in the hopes that better economic data will continue to drive capital into US equities.

Another type of macro data point that investors evaluate are changes or the lack of changes to monetary policy. For example, changes to monetary policy can occur when a central bank meets to determine the fate of interest rates. On Thursday May 9, the Bank of England finished its two day meeting in which the MPC discussed changes to interest rates based on the current economic situation.

Although a couple of member of the central bank’s policy committee believe that the Bank of England should reduce rates and increase their quantitative easing program, the majority of the group did not want to make any changes to rates, as they believed economic conditions did not warrant such as change.

After the interest rate decision which showed now change in interest rate, the short end of the UK sovereign debt curve sold off. This area of the interest rate curve is referred to as short sterling and measures market participants estimate for future short term interest rates. A selloff reflects an increase in future estimate of short term interest rates.

Economic data provides investors with new information on a daily basis. This type of data can quickly alter the movement of financial securities that are sensitive to changes in economic conditions.

Guest post by Marcus Holland, editor of options trading education website – options-trading.com.

The post Economic Data Often Drives Capital Markets by Guest appeared first on Value Stock Guide.

This interview dates back to 2011. As you know, Klarman generally does not appear with media, so any interview you can find with him is pure gold. In this interview, Klarman talks about his philanthropic cause and spends a lot of time imparting his experience and wisdom on value investing.

(For those who do not know Seth Klarman, he manages Baupost Group fund and is a legend on the Wall Street. His book Margin of Safety cannot be bought, except on ebay (or if you know someone who knows someone …) and regularly commands more than $1000/used copy. I have read the book and it is well worth the cost.)

I am not going to provide a subtext – you just need to watch the interview. Do yourself a favor and watch the whole thing. It is 46 minutes long and well worth your time.

Courtesy

The post Rare Interview With Seth Klarman and Charlie Rose by Shailesh Kumar appeared first on Value Stock Guide.

It might appear that I am raising cash because I believe that the market is frothy. There might be some of it but in reality the investment process I follow makes me buy when the stocks are low and sell when they are high. Disciplined investing with the right strategy automatically makes you cash heavy at market highs and fully invested at the bottoms. By focusing on individual businesses and their valuations, I generally do not have to worry about the overall market or the economy.

I have had great success in investing in the Florida home insurance companies. UVE is the stock I bought (and recommended) just after I took profits in HCI. It is a way of getting exposed to multiple catalysts:

1. Rising home values and ownership in Florida
2. State approved double digit growth in insurance premiums
3. Many of these companies have suffered quite a bit during the downturn

In addition, UVE has been diversifying into states outside Florida to mitigate hurricane risk.

Here are the details:

Please note that TR was earlier incorrectly reported as 76.14%. It is now fixed. All other data is correct

Here is the original investment thesis

Subsequently, the sell targets were revised upwards, as the company entered into an agreement to repurchase shares from its ex-CEO at below market prices.

After this sale, my cash position is now around 28% and I am looking to put it to work.

Thanks once again for UVE.

This is getting better and better. Buffett may have to take a back seat if things carry on like this.

- Email dated May 6, 2013

Addressing a Few Newsletter Subscribers’ Concerns

There have been a couple of feedback sent my way from the free newsletter subscribers and I want to address them below.

1. The best picks are reserved for the Premium members, which I have to pay for

Ah yes, that is true. That is life!

However, most of my premium picks come from the screens I publish for free that my newsletter subscribers get. Subscribing to my screens/newsletter gives you a leg up in your research. For example, UVE initially showed up in one of my screens here, published on Oct 8, 2012. This also happens to be the most popular screen on the site, going by the number of people who have visited this page. Mere 10 days later, it was a premium pick and part of my portfolio.

You had the information. The question is how many of you acted on it.

The problem is, as always, what ever is given out of free is generally considered to be of low value. So even if I give out all my premium picks for free, you will never use it and it will be useless to you.

2. You should try to be more like Street.com and sites like that where everything is free

There are 2 major objections I have to this statement

• I am not about to turn this site’s focus to generating as many page views I can to sell as many ads I can. I care about stocks and investing, not ad revenues. Besides, if my livelihood depends on a large company renewing their ads on my site, I am not going to be objective in my recommendations. It is just common sense.
• You will never get rich following Street.com or Motley Fool. You are better off following real investors, not journalists or freelance writers. Case in point (scroll down for comments, including mine), also

To be even more pedantic than is necessary, the newsletters offered at Street.com are NOT free.

Whether you subscribe to the Premium program or not is your choice and depends on what you want out of your portfolio. It works for many but it is obviously not meant to be a mass market service churning out 100s of recommendations a day.

This is likely to be the last sale for many weeks/months, unless there is a new acquisition or other corporate action with one of the companies in the portfolio. Normal service resumes now.

The post Exited $UVE: 73.14% Total Return in 6 Months by Shailesh Kumar appeared first on Value Stock Guide.

Last Friday we exited our best performing investment.

The warrants have tripled one time before as Andrew Tobias points out. With this triple, the warrants have returned 9 times the original investment in the last 3.5 years. We got in a little later than Andrew (He is the author of The Only Investment Guide You Will Ever Need, one of the first investment books I read, oh, about 20 years ago), but it has been a great investment.

ROICW is a warrant with a strike price of $12/share on the underlying stock (ROIC). The warrants expire in Oct 2014.

Warrant Premium is no Longer There

When we made the purchase, the underlying stock was trading at $12/share and the warrants were trading at around $1/warrant. With zero intrinsic value, the price of the warrants was purely the premium due to the time left to expiry.

Last Friday when we sold the investment, the underlying stock was priced at $15/share and the warrants were priced at $3/warrant. There is zero premium in the warrants today, despite the fact that there is still close to 1.5 years left for expiry.

What is even more interesting is that about 58% of the outstanding warrants have been exercised this year. If you have used warrants in the past, you know that warrants are SELDOM exercised as long as they are trading at a premium, however slight. Investors are always better off just selling the warrants in the market. So why are the investors making this sub-optimal decision to exercise the warrants?

The Company is Actively Working to Retire the Warrants

The company has bought back some of the warrants in the open market and I believe they have worked behind the scenes to get large blocks of warrants exercised. This is beneficial to the company as it flows $12 for every warrant exercised to the company. The exercises are dilutive to the common holders when they are done, but with the cash received, the company can take on new projects, retire debt, and/or increase the dividend paid to the shareholders.

They have been doing all 3.

The risk for the warrant holders going forward is an increase in the dividend on the common stock as it keeps a lid on the common stock price and the warrant holders do not benefit from the dividend.

Callback Feature – Too Much Appreciation Too Fast is Bad

Any time the common stock exceeds $18.75/share and stays above that for 30 days (on average), the company is allowed to callback all the outstanding warrants for a consideration of $0.01/warrant. Normally companies choose not to do this, but since it can be done, it is a risk.

Ideally the common stock does not exceed this price until the warrants expire to give the warrant holders the most benefit, however, now that the stock has run up, the media has started its hype machine and too much gain in the common stock too quickly can potentially leave the warrant holders with zilch.

This and the dividend risk (and not to forget another 42% of the warrants waiting to be exercised – which will dilute and pressure the stock) in my estimation will cap the appreciation in the warrants going forward. It also explains why the time premium has disappeared already (normally the time premium decays until the expiry, but in this case there is still 1.5 yrs left on the life of the warrants and the time premium is already gone).

Valuation of the Common Stock

When we purchased the warrants, I believed the common stock to be undervalued. If I am confident in the stock, and there is an instrument like a warrant that just levers up the returns (during this period, common stock has returned 25% while the warrants have returned 200%), it makes sense to choose to buy the warrants.

Today I am not so confident that at these prices the common stock presents a compelling value.

Bottomline

It has been a great investment and it is very likely that I am leaving money on the table by exiting. However, looking at the risks and the reduced conviction, it makes sense to exit. Discipline has served me well over the years and it is important to stick to it.

What do you think? Would you have stayed with the investment or would you have gotten out? Let me know in the comments.

The post Exited $ROICW: 199.11% Return in 1 Year by Shailesh Kumar appeared first on Value Stock Guide.

Ebix Inc has entered into an agreement to be acquired by Goldman Sachs for $20/share. After the news broke (May 1, 2013), I recommended members to sell all EBIX stock and sold my position at $20.50/share.

We were able to sell the shares at prices ABOVE the acquisition price for two reasons:

1. The market believes a new suitor will emerge, and,
2. 44% of EBIX outstanding shares were shorted, so there is going to be a lot of churn above the acquisition price, as the scramble to buy increasingly small float to cover ensues

Opportunistic Investment

Ebix as a company has been a fast grower in the recent years through acquisitions and has generated tremendous amounts of cash flow. However, it has had no shortage of skeptics. I recommended EBIX on Mar 15 and purchased the stock on Mar 18, 2013 at an average cost of $15.14/share, which was a very good value. As recently as February, the stock was selling for $19+/share. On Feb 21, there was an article in Seeking Alpha claiming accounting irregularities at the company causing the stock to plunge to the $13/share level. It took me some time to go through the accusations and the financial statements of the company at the end of which I concluded that the article made false and misleading claims to support their short positions, and the author has actually offered us an incredible short term opportunity on a platter.

So we bought and profited.

In the end, due diligence by Goldman Sachs (for this acquisition) should command more credibility than that by anonymous poster on Seeking Alpha going by the moniker “Gotham Research” with no known track record.

What is Next for the Company (and EBIX Stock)

The company has 45 days to solicit other bids and it is entirely possible that a better offer will come along. This deal does not do justice to the real value of the company although I will accept that the complexity of the business structure may be a drag on the stock price anyway. Many value investors wait to lock in the last drop of return from a position, but normally I prefer to take the big gains upfront and exit, even if I leave a little bit on the table. I operate from a very simple truth:

The risk in a stock is more when the price is high and less when the price is low

Besides, a 34% return in 44 days is better than 45% return in 90 days as long as capital can be redeployed.

At this time I expect the stock to settle down below $20/share in the next few days, after which it is anybody’s guess. Investing in this stock today is pure speculation for new bids to materialize and I do not wish to speculate.

PS. I waited for the buyout price to improve in case of American Greetings, but the particulars of the deal were different.

Also read: Original recommendation to the members, now public

The post Exited EBIX: 34.41% Return in 44 Days by Shailesh Kumar appeared first on Value Stock Guide.

Gold exchange traded fund prices rallied for the third consecutive day, moving out of oversold levels as investors moved back into precious metals. The strong performance led gold minors higher which helped the broader equity indexes gain traction. Overall sentiment remain negative, and it will likely take a while before bullish sentiment in the precious metals complex is able to assist in a sustained rally.

The most prominent gold ETF (NYSE:GLD), mostly holds exchange traded futures contracts, which helps the ETF emulate the returns of both spot and deferred gold futures prices. Fitch’s downgrade of the UK economy, help boost gold ETF prices, as capital flows turned toward hard assets. The UK government is expected to release its first look at first quarter Growth Domestic Product data which is expected to show a flat reading. This leave scope for a slight negative print in GDP which would dip the country into recession.

Gold interest rate differentials contracted over the past few trading session which made borrowing of physical gold less expensive. The contango which is the difference between holding gold today and gold in three months also contracted, which helps reduce the costs of leveraging gold contracts.

Moving forward, there are a number of data points that could alter the GLD ETF during the balance of the current week. US GDP is scheduled to be released on Friday and is likely to produce a growth rate of approximately 3%. Growth is expected to be driven by a strong increase in inventories, as consumer spending remains robust.

Technically, the GLD has bounced from severe oversold territory as reflected by the Relative Strength Index (RSI), which climbed back from a reading of 12 in the middle of April. The RSI is an oscillator which measures the closing prices of a security over a specific period and rates the changes in the prices in an index format. The reading on the RSI at the beginning of the week was close to 32, which is slightly above the trigger level for an oversold condition which is an index reading of 30. The chart above as used courtesy of Banc De Binary.

Short term support on the GLD is seen near the 5-day moving average near 134.50. Medium tern support is the Bollinger band low (which is measured as 2-standard deviations below a 20-day moving average) near 129. Price action on the GLD is likely to test the top end of a gap created by the slide in prices from 144 to 135.

As the GLD has been rebounding over the past few trading session volume has been declining. Volume peaked during the prior week during the two days of the powerful liquidation of gold prices.

The trajectory of momentum is slowing with the MACD (moving average convergence divergence index) making a higher low for three consecutive trading sessions. The MACD is still printing in negative territory, but the potential for a buy signal can be achieved with a few higher GLD closes.

By Marcus Holland from Day Trading Guide.

The post Gold Holds Gains after the UK is Downgraded by Guest appeared first on Value Stock Guide.

As you probably know, American Greetings (AM) is going private. A group of the founding family members (Weiss) have offered $18.20/share and the board has accepted the offer. The deal is expected to close in Jul 2013. I recommended and bought the stock first in Dec 2011. Over the last 15 months, I have added to my initial purchase a few times and as the Weiss family made the first offer to take the company private, I advised my members to continue to hold the stock.

The following is the chronology (links lead to the exclusive premium content that I am now making public):

1. Dec 15, 2011: Initial recommendation with a target of $30/share
2. Dec 23, 2011: Target reduced to $23/share. Stock still a buy
3. Dec 23, 2011: First purchase of stock at $13.02/share
4. Jan 04, 2012: Increased position at $12.65/share
5. May 10, 2012: American Greetings assumes Senior Secured Debt from the struggling Clinton Cards in UK out of receivership, ultimately giving it ownership of half of Clinton Cards’ 750 stores. For a mere $56 m in investment, American Greetings acquired $300 million in revenues. A fire-sale acquisition, that in my understanding was the key reason why the Weiss family started to entertain the thought of taking the company private. If I acquire $1 for 16 cents, I know I would try to keep all the upside for myself – so really can’t blame them
6. Sep 26, 2012: The Weiss family makes the first offer to take the company private at $17.18/share. I recommend my members to NOT sell and keep holding the stock.
7. Jan 17, 2013: Increased position in AM, bought additional shares at $15.37/share
8. Jan 18, 2013: The Weiss family raises their offer to $17.50/share. We are still not selling
9. Apr 01, 2013: The Weiss family raises their offer to $18.20/share + a dividend of $0.15/share to be paid in June. The Board accepts the offer
10. Apr 02, 2013: The stock is sold from the Value Stock Guide Premium Portfolio at $18.15/share

My average cost across the 3 purchases was $13.82/share, after adjusting for the commissions paid.

Come July, the stock will cease to exist. However, there is still an opportunity to buy the shares today and collect a dividend of $0.15/share, giving you a pretty much risk-free ~1% return in 3 months. If you have money parked in a CD or a money market account, this is a much better deal with very little risk. There is also a possibility of some capital appreciation.

The company is selling at less than its intrinsic value so long term shareholders are right to feel aggrieved. However, for me this is especially good timing to shore up my cash position as with the latest purchase in March we were down to 5% cash in the portfolio.

Besides, it is often wise to just take your gains and move on.

The post Exited American Greetings: 36.62% Total Return in 15 Months by Shailesh Kumar appeared first on Value Stock Guide.

There is a significant difference between patience and indecision. When recommending or buying a stock, I will often wait patiently until the time and the price is just right. However, once the purchase decision is made, the execution is quick. Same holds for selling the stock.

For example, if a stock is within my buy range, I do not dither hoping that the price will fall another few points. Or when a stock hits my sell target price, it is sold without regard to the 100 posts being written in Seeking Alpha and Motley Fool claiming the stock being the greatest thing since sliced bread.

Over the years, I have been mostly right.

However, this post is not only about buying or selling a stock!

I spent this morning conversing with one of my valued members at Value Stock Guide premium. He reiterated something that I have heard from many other members over the last year. You can see his exact statement at the bottom of this post right here [opens in a new window/tab].

But there were further email exchanges between me and him.

Essentially the point that stood out for me was “people do not want to part with a dollar even if they make 2 in return”

Every one I know denies that this statement will ever apply to them. Still, study after study has shown that the psychological phenomenon called “loss aversion” is pretty much a universal human condition. I mentioned this as 1 of the 5 ways your brain is wired to force you into making bad decisions [opens in new window/tab].

Even when the benefits greatly outweigh the cost, you worry about cost. Given the choice between losing $1 in exchange of 75% probability of winning $2, you will chose to keep your dollar (curiously, playing a lottery exhibits a completely different phenomenon where the players willingly choose the option of a 99.99% loss of their dollar, but I digress).

Clarity of your decisions determine how much success you will have in investing

You do not have to be right on every stock. But you have to be decisive. This requires confidence that only comes from doing your homework. So take time to make up your mind but once you do, execute.

And if you are wrong, decide to exit and do it quickly.

The next step is to figure out where you went wrong, and use that as a learning experience so you do not make that mistake again.

But, if your decisions give more weight to right now (the $1 you lose) versus tomorrow (the $2 you gain), you will either refuse to make a decision or make the wrong one.

Fortunately, even in cases where you make a wrong decision, you can usually get back on course.

Iterative Learning: Why humans are better at investing then computers

Humans process information much faster and while self learning algorithms are in use today for trading, they still require a level of predictive inputs and instructions and often find themselves placed in situations not previously anticipated. The result could be a disaster (ala Knight Capital Group)

Last week at Starbucks I struck up a conversation with a certifiable genius who creates computational models for genomics. It is all very complex stuff and as he described the level of analytical rigor that goes into his work, he also expressed his fear of “a butterfly flapping its wings in China and setting off a series of events that grows into a raging hurricane in the Atlantic few months later”. His point: when we design genetic treatments to various diseases, it is usually important to understand that we may be causing an adverse effect months, years or decades down the line that we may not be able to tie back to the actual cause.

Something like this happens with all algorithmic models. Round off at the 10th decimal place instead of 12th, and your rocket might miss the moon landing. You might never know why, since all your models are correct.

Humans on the other hand are better at operating with fuzzy logic and can do mid way course corrections more efficiently. When we are catching a ball, our brain does not compute the speed of the incoming projectile, neither gives instructions to your hands to move at a certain angle. All it does is “a little bit left” “jump” stuff like that depending on the continuous feedback it receives from the eyes, and it does it efficiently because your body has a memory of doing this thing many times in the past (experience).

If you trust the management to do something, and they don’t, either there is a good reason for it that you understand, or there is not. You can review this information and decide what to do with your stock much better and faster than any computer can, or probably ever will. It is not merely intuition, you also have experiences you can call upon and a better understanding of motivations and impulses (sometimes called common sense).

It is important to step back from the financial ratios and models and make sure you understand yourself enough to invest properly. Common sense investing is hard and very few do it. I figured a weekend is a good time for reflection.

(I have friends who run high frequency trading models and also friends who create those models. I will probably get some flak from them for writing this, but as they say, why not)

Please enjoy the following articles from around the net that will inform your investment decisions

• Is the Yale Model Past It? – Pragmatic Capitalism
• As S&P Hits Record, Investors Find Dirth of Value – Value Walk
• Buffett’s Career in Less Than 1000 Words – Aleph Blog
• Consensus Theory and Contrarian Investing – Arbor Investment Planner
• Still Due for a Pullback – Market Folly
• Are any of your Stocks Members of Triple Digit Club? – Bespoke Investment Group
• Visualizing 193 Years of Currency Regimes and Crises – Zero Hedge
• Robot Reality: Service Jobs Next to Go – Mish’s Global Economic Trend Analysis
• Due Diligence Disasters – Barry Ritholtz
• Economic Schedule for the Week of Mar 31 – Calculated Risk

And finally, to complement the topic of this post,

• How to Make Better Choices in Life and Work – Farnam Street

So what do you think? How do you handle your own decisions? How has that helped or hindered your investing?

The post Choices, Decisions & Common Sense and a Few Investing Stories You Very Likely Missed by Shailesh Kumar appeared first on Value Stock Guide.