C&B Notes

Investing is a discipline built on cumulative knowledge, and it requires a continuous evaluation and assessment of new information. The purpose of C&B Notes is to pass along the ideas, concepts, stories, and information that are informing, influencing, and updating our worldview. We use them to build on our “latticework of mental models” that help us make better decisions.

151 articles in list

All in the Family

The presence of a controlling family in a company’s ownership table is not, on its own, a sufficient marker of strong governance.  It does include a good place to look, however, especially among the types of companies that meet our business quality standards. …

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EBITDA Definition Danger

EBITDA calculations vary widely across businesses and industries, and loosey-goosey “adjusted” EBITDA definitions exacerbate risk for lenders who are already offering covenant-lite terms.  As this recent study reveals, 5.0x debt-to-EBITDA ratios are not all created equal when the denominator is…

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Patience as a Precursor to Prosperity

In GMO’s most recent quarterly letter, Ben Inker revisited his and the firm’s experience leading up to and following the bursting of the internet bubble in the early 2000’s.  Inker notes that the current extremes are the greatest since the…

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India’s Shadowy Lending

Borrowing short and lending long are typically ingredients for a financial disaster.  India’s shadow banking system, which gets its name because participants are more lightly regulated, is creating problems in the country’s formal banking sector.  The tone of this piece…

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2019 Daily Journal Meeting

We traveled to Los Angeles earlier this month for one of our favorite events — the Daily Journal Annual Meeting, which provides Charlie Munger with a 2-hour forum to share what is on his mind.  Among a number of other topics, he had a few…

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No Simpler

Einstein (supposedly) said, “Everything should be made as simple as possible, but not simpler.”  Trying to capture complex concepts in a single variable can lead to enormous mistakes.  This story about the Gaussian copula model dates back to the Financial…

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Some Perspective on Private Equity

Dan Rasmussen and his team at Verdad Capital took a hard look at the performance of private equity and what its investors can expect in the future.  Their findings suggest leverage and rising exit multiples have driven much of the…

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The Psychology Behind Unloved

In our latest quarterly letter, we wrote about the two types of businesses that tend to yield opportunities for us — undiscovered and unloved.  A recent article in MOI Global explores the behavioral economics (neuroeconomics) that support the search for…

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Details, Details, Details

A requirement of a concentrated portfolio like ours is that the rule of law is sufficient (i.e. we feel like outside capital will be treated fairly) in the places in which we invest. The typical developed, emerging, and frontier market…

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Peering Into The Future

The usefulness of CAPE as a valuation metric for broader markets has become a religious argument.  CAPE clearly cannot be used to market time (what can?) and this time could always be different, but this EconompicData chart illustrates what we…

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Bargain Hunting

While a portion of a recent article by Jason Zweig is excerpted here, the entire article is well worth the 10 minutes it takes to read the whole story.  Zweig draws on a few memories from his (unique) childhood to…

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Kelly Optimal

The Kelly Criterion provides a framework for how an investor should think about position sizes within a portfolio. We have written about the concept in the past and its importance to us in long-term portfolio construction. The formula he developed…

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