Value Investing in a Volatile Environment - Panel Discussion Held on May 4, 2019 in Omaha, NE

Steven Kiel participated in a panel discussion hosted by Willow Oak Asset Management following the Berkshire Hathaway Annual Shareholder Meeting in Omaha, NE on May 4, 2019.

The event included remarks from Scott Miller of Greenhaven Road Capital, as well as insights from panelists David Waters (Alluvial Capital), Steven Kiel (Arquitos Capital), Keith Smith (Bonhoeffer Capital), Dan Roller (Maran Capital), Matt Sweeney (Laughing Water Capital), Bill Chen (Rhizome Partners), and Jessica Greer (Willow Oak Fund Management Services).

The panel discussion can be viewed below:

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GuruFocus Speech - Given on May 3, 2019 in Omaha, NE

Steven Kiel spoke at the annual GuruFocus Value Conference in Omaha, NE on May 3, 2019. View the transcript here.

On perception:

The price of a stock is based on perception. Sometimes that perception is right. Sometimes it isn’t. Our job is to attempt to determine what reality is. If reality is different than the perception, then we have an opportunity to profit.

This is the fundamental question of investing: Is our perception correct?”

On biases:

We could spend years listing and discussing biases, and it may not make any difference unless we implement effective tools. In fact, some studies have even shown that the more you know about a particular bias, the more prone you are to be affected by it. The mind plays dirty tricks on us because as we gain more knowledge, we become more susceptible to overconfidence.

Consider it the hedonistic treadmill of confidence.

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Willow Oak Asset Management Roundtable Interview

Steven Kiel participated in a Roundtable discussion featuring the managers from four Willow Oak Asset Management platform funds. The participants shared their thoughts on the current investing environment, as well as a few stock ideas that have them excited for 2019.

The full discussion can be viewed here: Willow Oak Roundtable Discussion.

On the volatility in the fourth quarter:

We’ve seen a pretty dramatic snap back. In December, Ben Carlson on his “A Wealth of Common Sense” blog discussed forward performance for certain indices after sharp downturns. Prior to last quarter, there had been ten instances where the Russell 2000 was down at least 13%. The average decline in those ten instances was 21%. It always proved to be a great buying opportunity. Over the next year, the average gain was 32% with a positive return nine out of the ten times. For the next three and five years, the index was always up significantly.

There is never any guarantee, but the odds are very much in favor of investors in the short and intermediate term. If history holds up, the first few months of this year is just the start of it.

A stock idea:

MMAC has attracted a group of smart investors. It trades for 20% below its book value. The company continues to buy back 10% of outstanding shares each year. They have simplified their business tremendously and are recycling proceeds from their bond portfolio into the solar lending fund they manage. This has been a great business for them. And oh, by the way, even with the current cheap valuation, the stock has still returned 35% annually over the past five years.

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MOI Global Best Ideas 2019 - Arquitos Presentation on Westaim

Steven Kiel presented his in-depth investment thesis on Westaim (WED.V) at MOI Global’s Best Ideas 2019.

The presentation can be viewed here: Westaim: Access to Shareholder-Friendly Allocators at Low Price

Westaim is an investment company with two subsidiaries: Houston International Insurance Group (HIIG), a specialty property and casualty insurance company that is up for sale, and Arena Group, a growing credit fund. Westaim as a whole currently trades for 20% below book value. They have a shareholder friendly culture, led by investment veterans originally from the Canadian investment company, Goodwood. In addition to its two current subsidiaries, Westaim is pursuing strategic investments in the financial services industry, providing upside optionality. An investment in Westaim gives you access to good capital allocators at a cheap price with low risk.

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Case Study: Spinoff, Tender, Acquisitions, NOLs, and Uplisting at ALJ Regional Holdings

Steven Kiel contributed a case study on ALJ Regional Holdings to “How to Profit from Special Situations in the Stock Market” by Maurece Schiller, a reprint of the original 1959 classic that was updated by Tom Jacobs and re-released in December 2017. View the case study here.

An excerpt:

ALJ investors had multiple opportunities over a four-year period to employ special situation strategies—they didn’t have to be early or first. The CEO—the largest shareholder—was aligned with us, and the existence of substantial NOLs helped to telegraph the direction the company was headed. Purchasing shares for less than net cash prior to ALJ’s first acquisition was among the least risky opportunities I have come across in my career.

From there, cheap income statement valuations and additional company-specific items gave investors several chances to get involved, or re-involved, in the stock.

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The Wall Street Journal: Annotating the Oracle of Omaha

Steven Kiel joined three dozen experts weighing in on Berkshire Hathaway's annual letter. Read the article here: Annotating the Oracle of Omaha.

On the right multiple for Berkshire:

The purchase price of a stock is the most important thing. Here, Buffett is saying that it is risky to purchase a stock near fair value or above, no matter whether it is Berkshire Hathaway or any other company. The higher the multiple paid, the higher the chance of not earning an acceptable return (or worse). Enjoy a company’s products. Respect their leadership. But don’t let an emotional attachment cause you to overpay for its stock. 

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