My 2 lists of US Stocks

I recently read this article on the internet (read here). Brian Spector, the departing partner of hugely successful and secretive hedge fund Baupost Group mentioned that there’s two types of investing: “needle in a haystack investing” and “tide comes in and tide goes out investing.”

“Most of the time we are in periods of haystack investing,” he explained. “We sift through lots of investment ideas to find a few decent opportunities. We sell more securities than we buy and our cash reserves begin to build.

1

Investing in tide markets takes chutzpah. To do so effectively, you need to fly in the face of public opinion, you have to fight normal human emotions, and you have to be prepared to double down on your bets when your conviction is most in question.”

oceans-tide

Recently I have been thinking about the listed stocks in the US market – wanted to create a US stock portfolio.

Consequently, I have been collating a list of companies to invest during market crashes. These are companies with strong financial fundamentals, with good balance sheet, good ROE, good operating margin or profit margin. A couple have strong moats. They showed consistent good ROE or ROIC over the years. However, I would have much prefer to invest in them when their stock prices are cheaper eg. during market crashes. I reckon this is the “tide comes in and tide goes out investing” list.

On the other hand, I have come across a few companies which don’t really fall in the traditional classifications of companies with strong financial fundamentals. Often their stock price has recently plunged and earnings been bad but has recently been better – eg, turnarounds with strong growth story. Here the narratives play a bigger part. There isn’t much historical financial history (with strong consistent upward trending ROE, Free Cash Flow etc). It may also be beyond my circle of competence. I reckon this is the “needle in a haystack investing” list.

See below for the 2 list of stocks. I have not invested in any of the stocks in the 2 lists.

Study

Study1

In the  “tide comes in and tide goes out investing” list, I did a quick study on their trailing PEG and Intrinsic Value. And read up on the company business. I have my eyes on T. Rowe Price Group, Inc. as it has solid financial fundamentals as well as high dividend yield (consistently up-trending yield over 20+ years).

In the “needle in a haystack investing” list, I have my eyes on Keryx Biopharmaceuticals Inc. I initially found about this stock via tracking the buying activity of Seth Klarman (using the cloning method mentioned by Monish Prabai). I read further into the past history of this company and their recent patented product (Auryxia), and felt that there is potential for the fortune of this company to change for the better. After all we should not bet against Seth Klarman. And if there is one company / person who can find a needle in the haystack, it would likely be the Baupost Group / Seth Klarman.

 

 

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About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat.
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