Steve Clapham
Financial Training for Serious Investors
I am a former hedge fund equity analyst. I now train professional equity analysts, credit analysts and protfolio managers in forensic accounting and in depth analysis. And this training is now available to private investors.
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My interview with Kyle Bass on the Chinese tech companies and their aggressive accounting has now been published on YouTube. Kyle Bass is well known for having a negative stance on China and the tech stocks are no exception, but it's worth watching.
I don't know that that is their worst vulnerability to be honest - it looks like the US are not going to ban domestic investors from owning these stocks so the potential adverse technical position will not arise. The issue now is nationalisation etc and hard to predict how that plays out, but I suspect no disaster.
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The Money Maze podcast is relatively new and Will Campion, a former colleague is one of the co-founders. They have had an excellent roster of guests, in spite of their novelty. I enjoyed this episode with Peter Harrison, CEO of Schroders. Full disclosure: Peter is an old friend and former client and Schroders continue to be one of my clients in my institutional business.
The reason to listen to this podcast is that Peter gives his views on the future of fund management and if you are going to invest in equities, you need to understand the disposition of one of the largest market constituents. Passive vs active is obviously the key debate here, but Harrison made this astonishing prediction:
The reason to listen to this podcast is that Peter gives his views on the future of fund management and if you are going to invest in equities, you need to understand the disposition of one of the largest market constituents. Passive vs active is obviously the key debate here, but Harrison made this astonishing prediction:
ESG will not be around in 5 years
He continued that ESG will cease to exist as it will be a given for every fund manager and will simply be a part of the process. I agree with the direction but his timescale is shorter than I expect.
There are 29,000 finanical advisers in the UK (servicing a population of 65m peopel) and their average age is 59.
This was new to me and an astonishing statistic - I think I read that Schroders now owns a controlling stake in Nutmeg, a modern fund manager targeted at the Millennial generation with passive investing based on your computerised preferences. Harrison foresees a future in which you dial in your UN 19 goals preference and the system allocates your assets to a very different mix. Clearly, 60:40 is a thing of the past but he envisages investment in real assets, with blockchain employed and a division of private equity vehicles for the private investor.
A short and enjoyable podcast.
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In November, 2020, we published a blog about the performance of President Trump’s two Scottish golf resorts. The companies had been consistently unprofitable and we showed that they were underperforming peers on most financial parameters. Companies House extended filing deadlines for UK corporates because of Covid, but Trump’s Scottish companies have now filed their 2019 performance – it shows little change.
The Aberdeenshire resort showed a creditable 18% increase in revenues, but gross margins fell and pretax profits actually declined, in spite of lower depreciation and a fall in interest paid to Trump – his debt due rose, again.
At Turnberry, there was a smaller, 6% increase in revenue, and gross margins were stable (+0.1%) , while losses at the underlying EBIT and at the pretax level were reduced, the main contributor being a lower depreciation charge – this looks odd, as the company has continued to invest and assets have increased. Assets at cost have increased from £81.8m to £84.5m, yet the depreciation charge has fallen from £4.4m to 3.8m. The explanation is either more fully depreciated assets (although average asset age is quite young) or that the depreciation charge has been tweaked with a change in life assumption on some assets.
Debt owed to Trump increased by over £1m at Aberdeenshire, but oddly at Turnberry, the debt was lower at this year-end in spite of the £2.3m loss and ongoing investments. It’s not clear how this has arisen from the accounts, the logical explanation being some write off but the company takes advantage of an exemption which allows it not to disclose transactions with wholly owned companies in the group.
2018 2019 % Chg
Sales
Aberdeen 2.8 3.3 18%
Turnberry 18.5 19.7 6%
21.3 22.9 8%
Sales
Aberdeen 2.8 3.3 18%
Turnberry 18.5 19.7 6%
21.3 22.9 8%
Gross Margins
Aberdeen 7.8% 6.8% -1.0%
Turnberry 37.6% 37.7% 0.1%
Tangible Assets
Aberdeen 31.9 32.1 0.2
Turnberry 64.2 63.1 -1.1
96.1 95.2 -0.9
Aberdeen 7.8% 6.8% -1.0%
Turnberry 37.6% 37.7% 0.1%
Tangible Assets
Aberdeen 31.9 32.1 0.2
Turnberry 64.2 63.1 -1.1
96.1 95.2 -0.9
The impact of Covid is mentioned in the directors’ reports of both companies – The resort in Aberdeen was noted to have closed for 16 weeks from March to July while Turnberry was also closed for 3 weeks in November and December. The directors note that the impact of Covid-19 on the results is highly uncertain – presumably, they are concerned about 2021 as the accounts were both signed off on 21 December 2020, so the results for last year would surely have been known.
Publication of the 2020 results will likely be delayed by Covid and companies will again be allowed some latitude in reporting deadlines, but they will not make for pleasant reading. Now that Trump is scheduled to leave office, interest will again focus more on his business interests, and it’s highly likely that we shall hear more of the problems encountered in the Scottish operations. I the performance here is mirrored elsewhere in his enterprises’ operations, this is likely to be an ongoing story.
There is nothing here that alters the story we previously published – the losses continue and they will have increased sharply in 2020. If Trump can continue to finance these businesses, they can continue to lose money indefinitely, but we shall likely learn more about the true state of Trump’s finances in the coming months.
May be Trump can bundle these loss making operations into a SPAC and raise lot of cash? 😄
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I have not attended this conference before so I can't vouch for it, but if you would like to attend ($249 for 3 stock ideas), the promo code " balancesheet" at checkout will give you 15% off.
Please note that I operate the club as an educational resource and the training school as a business and I don't make money from any recommendations. If there is an affiliate arrangement, I pass this on to my students and members, except for Amazon where if I recommend a book (for example my own), I may have an affiliate link. It would be impractical to pass this on, but better to collect it (I actually donate this to charity) than leave it in Jeff's bank account. Other than that, my recommendations are genuine endorsements or as in this case simply allowing you the opportunity to benefit from a discount.
Please note that I operate the club as an educational resource and the training school as a business and I don't make money from any recommendations. If there is an affiliate arrangement, I pass this on to my students and members, except for Amazon where if I recommend a book (for example my own), I may have an affiliate link. It would be impractical to pass this on, but better to collect it (I actually donate this to charity) than leave it in Jeff's bank account. Other than that, my recommendations are genuine endorsements or as in this case simply allowing you the opportunity to benefit from a discount.
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We are about to begin advertising on Jooble - if anyone has any experience of this, we would love to get your input. If people are looking for a job in investment management, they presumably should be positively disposed to investing in a course to improve their chances?
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Another in the excellent Market Wizards series by Schwager, this time with a group of people that you will not have heard of, yet have truly astonishing performance. These books are full of wisdom, and while these people are generally not running institutional money, they possibly have even more wisdom to impart. As ever, Schwager does a great job of summarising the lessons.
This is a book for traders with an emphasis on short term trading rather than equity analysts but you can still learn a huge amount, at least I did. And some of these traders work in the equity markets and some hold stocks for longer periods. Some of my favourite takeaways were
This is a book for traders with an emphasis on short term trading rather than equity analysts but you can still learn a huge amount, at least I did. And some of these traders work in the equity markets and some hold stocks for longer periods. Some of my favourite takeaways were
- close losing trades on a Friday - the Friday close is the most critical of the week as you have to hold over a weekend.
- you become much more likely to lose money after a winning streak, because you believe in yourself, you become complacent and you abandon discipline. This can apply to analysts as well!
- when a stock responds to news in a counter-intuitive fashion, it is often a major signal of a change in trend - pay particular attention to a stock that fails to make new highs on market beating results.
- Look for more asymmetric trades. Often the obvious trade does not offer the bets risk-reward. One trader on Brexit night was concerned about the high volatility in sterling and decided that simple long Treasury position would offer very little downside and the opportunity for significant gain - perhaps not at first sight the obvious trade but it offered an opportunity for a leveraged bet with less downside than many more obvious opportunities.
- a number of the traders interviewed attributed their success to having a rigid system and strict controls on their trading - without these, if they relied on their emotions, they would be lost.
What emerges clearly from the book is that for the most successful traders,
- trading is hard work,
- that the market does not owe you a living
- and even if you are good, you have to wait patiently for the big opportunities and be prepared to bet in size.
I really enjoyed the book and I loved the book cover without the dust jacket in the picture.
You can buy on Amazon here:
Amazon.com link
Amazon.co.uk link
or the nice folks at our shared publisher (sheer coincidence) Harriman House have kindly given my investment book club members a 35% off voucher – use the code CLAPHAM35 at their checkout.
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My friend Steen Jakobsen, Saxo Bank strategist, rather than forecasting the S&P at end of the following year, instead publishes his outrageous predictions for the coming year. Much more interesting and usually quite amusing. I have no idea what his accuracy rate is, but like Byron Wien, this is an exercise in thought provocation more than prediction, and hence is probably a lot more valuable.
This year he talks about China's new digital currency, silver's day in the sun, and the impact of universal basic income. This is holiday reading for me, but if you cannot wait, it's in the library under Markets and Outlook/2021 outlook, or attached here.
This year he talks about China's new digital currency, silver's day in the sun, and the impact of universal basic income. This is holiday reading for me, but if you cannot wait, it's in the library under Markets and Outlook/2021 outlook, or attached here.
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This is a great essay by Paul Graham on the need to cultivate curiosity to maintain independence of mind - this is a factor critical to investment success.
The three components of independent-mindedness work in concert: fastidiousness about truth and resistance to being told what to think leave space in your brain, and curiosity finds new ideas to fill it.
I really enjoyed this short read.
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This is a great essay by Paul Graham on the need to cultivate curiosity to maintain independence of mind - this is a factor critical to investment success.
The three components of independent-mindedness work in concert: fastidiousness about truth and resistance to being told what to think leave space in your brain, and curiosity finds new ideas to fill it.
I really enjoyed this short read.
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I was very flattered to be asked to be the first guest presenter on Carson Block's new TV channel Zer0es TV, where I explained the story behind Patisserie Valerie. I just discovered a new blog which has summarised the lessons so far on the new channel. Worth a read.