Happy New Year! I have been on vacation for the past few weeks but am back and looking forward to 2011. I’ll have a few posts to recap the year shortly.
As usual, here are a some value investing links from the past few weeks:
Long. Going back to the last Weekend Values post, Netflix was featured as a short thesis from noted investor Whitney Tilson.
If you haven’t seen it already, Reed Hastings, Netflix’s CEO, responded with an open letter to Tilson defending the company’s stock and business model.
The back-and-forth has caused quite an uproar. While I don’t have a horse in the race, I think it is very interesting to watch.
Workout. Reverse stock splits and going private transactions can be a great source of profits for small-time investors. PXG is undergoing a reverse stock split in order to reduce its shareholder count below 300 – allowing them to cut the costly burden of SEC compliance.
Assuming the plan is approved in January, stockholders holding less than 200 shares will be cashed out at $0.75, far above the current market price.
Most major players will shy away from such a small absolute dollar gain, but it might be a nice (and nearly risk free return) for small portfolios. If nothing else, it is a good case study for future special situations investments.
General. In 1994, a landmark study was published investigating the returns of ‘value’ stocks against their growth (or glamour) cousins. The original study covered a 26-yr period and determined that value stocks trounced the competition by a wide margin.
This new report by the Brandes Institute updates the original study through June 2010, while also broadening the scope to include non-US based stocks.
The findings are once-again consistent: value stocks consistently outperform.
I also found the closing quote from Benjamin Graham to be very appopriate, not only for the study but my general strategy as we enter 2011:
“If we assume that it is the habit of the market to overvalue common stocks which have been showing excellent growth or are glamorous for some other reason, it is logical to expect that it will undervalue – relatively, at least – companies that are out of favor because of unsatisfactory developments of a temporary nature. This may be set down as a fundamental law of the stock market…“
If you have links or suggestions to detailed analysis from other value investors, please drop me a line using the Contact Form.
I’m always open to ideas from other investors, especially for a thoughtful and well-researched investment articles.