10 Poor Investment Theses

Brattle St Capital is one of my favorite follows on Twitter. He’s constantly sharing interesting data, quotes and other valuable investing insights. The fact that he’s doing so anonymously, in which he receives no personal recognition, makes it that much more awesome.  Yesterday, he offered some lousy investment theses, learned through experience, which I wanted to share.

  1. “After subbing out the present value of NOL’s, the stock really trades at ___” –you’re probably not the only guy to factor those in.
  2. “On a sum-of-the-parts basis, you get X segment for free!” –it’s probably not free.
  3. “Ex-cash, the stock actually trades at ___ multiple” –sadly, that cash isn’t yours until they tell you it is.
  4. “We view this selloff as unjustified” –sell-side analyst who is missing something; it’s probably justified.
  5. “We think fundamentals have finally troughed” –as they say…picking bottoms only leads to smelly fingers.
  6. “I’m short XYZ because it has no earnings” –you’re missing something; the buyer has a far longer time horizon or prefers cash flow to EPS.
  7. “I’m short XYZ because it has shitty ROIC”–there are entire industries with shitty returns (airlines), some buyers prefer earnings growth.
  8. “I’m not short XYZ cause its crowded” –added volatility sucks, but if a stock continually misses estimates, the short ratio doesn’t matter.
  9. “I was going to buy XYZ, but it’s had a huge run” –the very best companies are on “huge runs”… and they generally tend to continue them.
  10. “Paid to wait” –enough said

How long have we heard that Amazon has no earnings? That buyers at “these levels” need their heads examined. Many of the investment theses we constantly hear just don’t work as advertised.  Thanks to Brattle St. Capital for reminding us.

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