Analysis: ALJ Regional Holdings, Inc. (NASDAQ: ALJJ)

ALJ Regional Holdings, Inc (NASDAQ: ALJJ) is a private-equity-style holding company, with a solid history of operations, that currently trades at a 15% free cash flow yield. The stock has suffered a 50% drawdown over the past year, mainly due to a stream of bad news, including ugly quarterly results, fears of a debt covenant breach, NOL’s taking a hit from the tax bill, and a sexual harassment lawsuit filed against the firm’s CEO and key capital allocator, Jess Ravich (in his role at TCW). The main question is does this negative sentiment match reality?

This document contains an independent analysis of the company. Information on my investment philosophy can be found here. On a side note, I haven’t written much lately as I’ve been busy studying for the CFA Level III exam and interviewing for jobs.

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Investment Theory #19: Berkshire Hathaway’s 1980 Letter

This post continues our series on Berkshire Hathaway’s annual letters. Original letters can be found here.

Links to past years: 1977, 1978, 1979

Links to Buffett’s partnership years: 1957, 1958, 1959, 1960, 1961, 1962, 1963, 1964, 1965, 1966, 1967, 1968

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Analysis: Pendrell Corporation (OTCMKTS: PCOA)

Pendrell Corporation (OTCMKTS: PCOA) is an illiquid, closely held microcap which is currently trading below its net cash position. This document contains an independent analysis of the company. Information on my investment philosophy can be found here.

Disclaimer: The author is currently long PCOA. All of the views expressed in this document are solely those of the author and do not reflect the view of any other person or company. I am not receiving compensation for it. I have no business relationship with the company whose stock is mentioned in this document. All investments involve the risk of permanent capital loss. I encourage everyone to do their own due diligence and to reach their own conclusions. Under no circumstances should this document be considered an offer to buy or sell any securities mentioned within.

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Year in Review: 2017

As each year ends, I try to pause and reflect on some of the year’s themes and how poorly I predicted them. The goal of this exercise is to relearn some of the lessons we relearn every year: Mainly that nobody, including myself, has any idea how macroeconomic and sociopolitical events will play out, nor how they will affect the markets. The best we can do is predict that past inertia will continue into the future – e.g. the stock market will return about 7.0%. We know this is an illusion since, within any chaotic, complex system, inertia is ephemeral at best, but it’s a nice illusion.

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Investment Theory #18: Berkshire Hathaway’s 1979 Letter

This post continues our series on Berkshire Hathaway’s performance from 1977 to today. Shareholder letters can be found here.

Links to previous posts: 1977, 1978

Links to Buffett’s partnership years: 1957, 1958, 1959, 1960, 1961, 1962, 1963, 1964, 1965, 1966, 1967, 1968

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Investment Theory #17: Berkshire Hathaway’s 1978 Letter

In 1962, Warren Buffett began purchasing shares of Berkshire Hathaway – a downsizing textile manufacturing company. In 1965, after feeling slighted by management, Buffett acquired control of Berkshire. Shortly after, Berkshire purchased an insurance company and began using its float to fund investments and acquisitions. Using this as a launching pad, Berkshire’s share price rose from $8 in 1962 to $276,800 in 2017 (20% annualized).

This post continues our series on that performance. Our goal is to gain some insight into one of the most successful investment vehicles in history. Warren Buffett’s shareholder letters can be found here.

Links to Berkshire’s past years: 1977

Links to Buffett’s partnership years: 1957, 1958, 1959, 1960, 1961, 1962, 1963, 1964, 1965, 1966, 1967, 1968

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Investment Theory #16: Berkshire Hathaway’s 1977 Letter

In 1962, Warren Buffett began purchasing shares of Berkshire Hathaway – a textile manufacturing company in the process of downsizing. In 1965, after feeling slighted by management, Buffett acquired control of Berkshire. In 1967, Berkshire purchased an insurance company and began using its float to fund investments. Through acquisitions and investments, Berkshire’s share prices would appreciate from $8 in 1962 to $276,800 in 2017 (20% annualized).

This post begins my series on Berkshire Hathaway. The goal is to gain some insight into one of the most successful companies in modern history. We will be looking at Warren Buffett’s shareholder letters which can be found here.

Links to Buffett’s partnership years: 1957, 1958, 1959, 1960, 1961, 1962, 1963, 1964, 1965, 1966, 1967, 1968

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Book Review: Competition Demystified

In Competition Demystified, Bruce Greenwald and Judd Kahn simplify Michael Porter’s five forces framework (threat of new entrants, threat of substitutes, customer bargaining power, supplier bargaining power, industry rivalry) into a single force from which all others derive: barriers to entry. According to the authors, there are three sources of this competitive advantage:

  1. Supply Advantages: Lower input costs, proprietary technology, complicated processes, etc.
  2. Demand Advantages: Captive customers, habitual products, high switching costs, high search costs, network effects.
  3. Economies of Scale: High fixed costs spread across high market share.

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Investment Theory #21: Klarman’s 1999 Letter

I’ve been awol while studying for the CFA. With level 3 hopefully behind me, I’m going to get back into the habit of writing. Let’s jump back into our series on the 1990’s with Seth Klarman’s letters as our guide to the period.

Klarman is a well-respected value investor who founded the Baupost Group in 1982. Since then he has generated an average annual return of 19%. Klarman’s investing philosophy can be summed up by the title of his book Margin of Safety: Risk-Averse Value Investing Strategies for the Thoughtful Investor.

This series of posts will reflect on Klarman’s activity during the period 1995 to 2001. Links to past posts: 1995, 1996, 1997, 1998

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