Net Nets : a Value strategy


Well, a lot of us would like to be financially independent within the next 10 years, so I would say that the horizon is indeed an issue, and yes, we care.


my “who cares” refers to the long term horizon and the passive investor’s disinterest into stock valuations. with long term reffering to multiple economic cycles i wont try to not-invest because prices are high [known as market timing].
I’d also rather have 4% in returns than having cash idling around.

check out this:'but-right-now-the-market-is-at-an-all-time-high-'/

that’s of course an entirely different story which i am explicitly not referring to :slight_smile:

please go ahead and find some nice non-market-cap weighted funds that are as interesting as the big vanguard funds and report here!

  • This ETF tracks S&P 500 companies in an equally weighted manner (TER of 0.2%). According to Joel Greenblatt (in this book) it has overperformed the S&P500 by 1-2% annually. Stockcharts website seems to confirm that. since 2004 the performance is the double of the S&P500.


Did I talk about market capped funds? You can easily wander into “faires”-territory with VWO (Vanguard Emerging Markets ETF).

You are talking about anything but value investing.


Today I sold my position on Richardson Electronics (RELL) at a price of 9.4 USD/share. I had opened the position in July 2016 at 5.25 USD. That makes a performance of 80% in two years, or 34% per year.


What motivated you to sell and not to hodl? :smiley:


First and main reason :
The stock price has reached the Net Tangible Asset Value of the company (i.e : tangible assets minus liabilities) so there is no more margin of safety.

Second reason :
Sometimes if the stock price has a positive momentum I will wait a little more to profit from the momemtum with a trailing stop order, but here it was not the case. The momentum seems to have stopped and the price becomes volatile. Without any collateral in the net tangible assets of the company, i think it is risky to hold the stock (i.e more downside than upside).

Third reason :
The company does not have a great record of earning power, so ciao.


Let’s us know if you find a new bargain! I’d like to allocate small percentage of my portfolio to get such nice returns. :slight_smile:


Maybe he will open a fund “Berkshire Julianek” and for a mere 1% he will do it for you :wink:


1% is bit high, but sure, why not, I’m ok with allocating small proportion of my portfolio in @Julianek’s hands. :slight_smile:


As I said in my journal, currently markets are quite expensive and it is getting more difficult to find cheap assets. That is why i have 40% of my portfolio sitting in cash waiting for occasions. On the other hand, most of the companies listed previously here are still in my portfolio, except Velcan(sold at 11,15 EUR) and Sanshin Electronics (sold at 2049 JPY). This does not mean that I still consider them cheap nowadays.

Wow I wasn’t expecting this kind of compliment, that is nice to hear :slight_smile:
Although let’s be realistic : If i ever was to manage someone else money, I would like the fees structure to reflect what investors are expecting from me: beating the market! (else, indexing is the way to go).
Therefore, I think that a structure like the Buffett parterships in the 50s is the fairest to everyone:

  • No fixed yearly management fee (so the manager is not paid to do nothing)
  • A performance fee that would look like the following :
  1. Since the market return historically on the long term around 6% per year, the manager would not be paid if he does not return at least 6% every year. This hurdle is of course compounded every year.
  2. However, as soon as the hurdle is reached, the manager would take 25% of the over-performance. This looks like a lot for mustachians, but it aligns the incentives of everybody :
    1. The investor does beat the market. A guy like Buffett did 19% during 50 years. Sure, after his cut there is only 15,75% left for the final investor, but that his still way better than what an index fund can historically provide.
    2. The manager is fairly compensated for a skill that very few can provide; if he fails to beat the market he is not paid at all.

Buffett, Mohnish Pabrai and Guy Spier are good example of fund managers having this structure and providing excellent results.

But this was a digression. I am currently nowhere near the place where I would have the legal infrastructure to manage other people’s money. Of course if enough people were interested i would start looking into it, but so far it is only a very very remote hypothesis. :slight_smile:


I’d be comfortable with investing in your fund few percent of my portfolio. :slight_smile:


sure, a fee like this is fair, because then the goals of the investor and the fund manager are aligned.


So, just a follow up :slight_smile:
I have been researching what would be the legal business structure to adapt if I was to manage other people’s money, and it is not very encouraging…

  • As mentioned somewhere else on the forum, the lightest structure is the “investment club” (up to 20 members), but investors have to make investment decisions together (i.e, there is no manager managing other people’s money)
  • then there is the equivalent of the Limited Partnership (i.e Kommanditgesellschaften für kollektive Kapitalanlagen), but it is very quickly regulated by FINMA. Moreover, it has big fixed costs (i.e compliance, regulatory and accounting) that are very unlikely to be covered by my fees if I only manage money on a small scale.
  • or if I want to be shielded from personal liability I could as well create an AG or a GmBH, but fixed costs increase a lot as well. :frowning:

I found as well this document from Guy Spier (Aquamarine Fund) making a study on which funds do not charge management fees, and the underlying reality even with the best intentions, a fund still has a lot of operational overhead costs to cover.

So in conclusion, if you want to manage money for others :

  1. You need to manage a lot of assets
  2. If you charge management fees, you should be able to survive; but if you do not, pray to have a very good first year and no bear market, or your costs are likely to make you close the shop.

TLDR : Managing a small amount of money for friends and acquaintances does not look like a good idea from a legal point of view…


Let’s open then a value investing club. :wink:

Value Investment Club in Zürich/Zug

That might be interesting… who else would be interested?


:raising_hand_man: <-


Think about it. I think there might be some people here interested in allocating part of their portfolio in high-quality small/micro-cap value stocks. We could structure the club to make you CIO of the club formally (if the law allows for that) or informally (by for example naming it “Julianek’s value investing club”). :slight_smile:


isn’t enough to create a category of the forum which is invite only?


I thought a lot about it and I have created another thread on the forum where I expose what I have in mind. @1000000CHF, @nugget, @bojack, @ma0, if you are still interested by the concept feel free to apply!